-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VECxYyg1BrPOEd7sHOaGsZ9+5Sb7eSV7SaNZgm+Fo9e9GPMj9WXsl0Zw3aW44Qh0 YE6iWu7fOcHwXDny4xCDzg== /in/edgar/work/0001065949-00-000204/0001065949-00-000204.txt : 20001107 0001065949-00-000204.hdr.sgml : 20001107 ACCESSION NUMBER: 0001065949-00-000204 CONFORMED SUBMISSION TYPE: 8-K12G3 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001103 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DNAPRINT GENOMICS INC CENTRAL INDEX KEY: 0001127354 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K12G3 SEC ACT: SEC FILE NUMBER: 000-31905 FILM NUMBER: 753292 BUSINESS ADDRESS: STREET 1: 1748 INDEPENDENCE BLVD STREET 2: SUITE D1 CITY: SARASOTA STATE: FL ZIP: 34234 BUSINESS PHONE: 9413514543 MAIL ADDRESS: STREET 1: 1748 INDEPENDENCE BLVD STREET 2: SUITE D1 CITY: SARASOTA STATE: FL ZIP: 34234 8-K12G3 1 0001.txt 8K12(G)3 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K-12(g)3 CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report: November 3, 2000 DNAPRINT GENOMICS, INC. -------------- (New name of registrant as specified in its charter) (successor registrant under Sec. 12(g)3 of the Securities Exchange Act of 1934) S.D.E. HOLDINGS 1 INC. -------------------- (Prior name of corporation pre-merger) NEVADA 0-30119 84-1529311 - ---------------- ------------- ------------ (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No. incorporation pre-merger) pre-merger) Utah 59-2780520 - ----------------- ------------- ------------------ (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No. incorporation post-merger) post-merger) 1748 Independence Blvd., Suite D1, Sarasota, FL 34234 ---------------------------------------------------------- (NEW ADDRESS) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 941-351-4543 1 ITEM 1. CHANGES IN CONTROL OF REGISTRANT The Company is a successor registrant pursuant to Section 12(g) 3 of the Securities Exchange Act of 1934, by virtue of a statutory merger of the Parent, DNAPrint genomics, Inc. a Utah corporation, and its wholly owned subsidiary, S.D.E. Holdings 1 Inc., a Nevada corporation, with DNAPrint genomics, Inc. being the survivor. There was no change to the issued and outstanding shares of DNAPrint genomics, Inc. and all shares of S.D.E. Holdings 1 Inc. were retired by virtue of the merger. On October 12, 2000, DNAPrint genomics, Inc. completed a Share Purchase Agreement with shareholders of S.D.E. Holdings 1 Inc. in which DNAPrint genomics, Inc., a Utah corporation, acquired all 500,000 shares outstanding of the Registrant for the purposes of accomplishing a Merger of S.D.E. Holdings 1 Inc. and DNAPrint genomics, Inc. The Merger was subsequently completed on October 13, 2000. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On October 17, 2000, DNAPrint genomics, Inc. executed its Plan of Merger and Articles of Merger with S.D.E. Holdings 1 Inc. whereby it acquired 100% of the outstanding stock of S.D.E. Holdings 1 Inc. and merged with S.D.E. Holdings 1 Inc. All outstanding shares of S.D.E. Holdings 1 Inc. were retired in the merger. DNAPrint genomics, Inc. is the surviving company, and will carry out its business plan as set forth hereinbelow in Item 5. ITEM 3. BANKRUPTCY OR RECEIVERSHIP None. ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT None. 2 ITEM 5. OTHER EVENTS MISSION STATEMENT - BUSINESS AND BUSINESS PLAN OF DNAPRINT GENOMICS, INC. DNAPrint genomics intends to be a national provider of analytical tools and knowledge based solutions for personalized medicine, using DNA related products and procedures. BACKGROUND ON SNP TECHNOLOGY. SNP technology has just now been enabled by the completion of the Human Genome Project, a multi-billion dollar, multi-year international effort funded by the Wellcome Trust and the National Institutes of Health. It has also been enabled by recent advancements in hardware technology (i.e. Sequenom Inc. of San Diego, CA and Orchid Biosciences of Princeton NJ). Today, for the first time in history, it is possible to create microchips of SNP data for any population or any person, and analyze thousands and thousands of genes that contribute to the biological and psychological make-up of a person. For Pharmacogenomic studies, the genes focused on are those that are involved in the metabolism of xenobiotic compounds. How does it work? Hundreds of DNA sequences are isolated from a patient, amplified and sprayed onto a tiny microchip using a special machine. This DNA is then read using a machine called a mass spectromoter or a genetic bit analyzer. Until now, sequencing involved multiple steps and reagents, but now with the new genomics tools, it takes about 3-5 seconds to read a samples sequence, and about 20 minutes to read 384 sequences for a given person. The collection of sequences that results constitutes the persons SNP profile for those markers tested. By building databases of profiles and comparing them to databases of drug sensitivity/side-effect databases, drug companies hope to be able to stratify the drug treatment results based on patient genetic profiles. In so doing, a drug that would have failed a trial in the past because it caused a reaction in a specific subset of the population, may now be a success and approved for prescription to everyone else. However, as promising as personalized medicine is, it is still in its infancy. First, all companies performing Pharmacogenomic studies are focusing on new drugs, not drugs that have already been FDA approved. Secondly, no companies have the ability to analyze their data on anything other than a very simple format. Most current SNP testing is performed for patients with specific genetic diseases and simple genetic mutations, which are relatively rare and therefore of limited economic value. The reason is that "solutions" for these cases tend to be simple. However, over 99% of all human traits, including drug response or disease, are the result of complex genetic interactions (interactions between genes, between genes and environment etc.). This is true even though the future of this technology is its power to unravel multi-genic phenotypes and diseases. Complex analytical software will need to be designed, appropriate SNP batteries defined and donors assembled corresponding to the various phenotypes in order to obtain "true" solutions for these problems. Why haven't these things been done yet? The first reason is that SNP technology is still too new, and the simple problems are the first to be addressed. The second reason is that finding complex patterns in genetic data is mathematically and scientifically difficult. There are simply too few people in the world with the combination of mathematical, programming and biological knowledge necessary to effectively work on these problems. 3 DNAPrint genomics intends to be among the first to focus on "mining" SNP data for multi-genic phenotype information. We intend to do this by building a unique informatics platform. How a patient interacts with a drug is a function of multi-genic determinants, and so multi-genic analysis has enormous implications for the development of personalized medicine. Physical characteristics such as height and weight, are determined by multiple genes interacting with each other. So too are drug responses or disease succeptibility (i.e. cancer). There is no drug interaction gene or cancer gene; there are several 10s or even 100s of genes that determine these traits. Thus learning how to mine physical trait information from SNP arrays would have implications for forensic and medical science, and the "solution" for these problems represent a sort of "diagnostic" product for a drug, that operates by preventing a disease or medical problem rather than simply tell a doctor that a person has a disease or medical problem. In this way, they can help prevent disease, not just report that disease exists. They are therefore more valuable than diagnostic products, which generate billions of dollars each year for their discoverers. However, these "solutions" await the development of highly advanced informatics approaches to the difficult problem of understanding data on a genomic scale. Science has shown that over 99% of known phenotypes (physical traits) are more a function of complex multi-gene interactions within and between genetic pathways than single genes (Voehringer et al., PNAS 2100: 97(6) 2680-2685; Xue et al., Cancer Res 2000 60(4):839-841; Weatherall et al., Philos Trans Soc Lond B Bio Sci 1999 354(1352):1995-2010; Nicholls et al., Acta Paediatr Suppl 88(433):99-104; Bolk et al., PNAS 2000 97(1) 268-273; Bovill et al., Thronm Haemost 82(2):662-666). Most drug response studies, for example, have nevertheless considered only simple genetic causes - single SNPs not complex patterns of SNPs. Thus, the multigenic analysis platform technology we are attempting to construct may have significant implications for making personalized medicine (and even make "smart forensics" a reality). Our first mission is to develop sophisticated software analytical tools. If developed, we hope to sell to every hospital. Research institutes and biotech companies using human genomic information may also have need for our product. During the course of our work, we will be "training" our system to recognize patterns by applying it to several human trait "problems", such as drug side-effects or disease states. The "solutions" obtained from these applications constitute a separate but valuable product. The "solutions" can be used to match patients with drugs and identify the disease succeptible. As such, we hope they will be among the very first personalized medical products on the market. Our analytical tools, which constitute our informatics platform, will enable us to recognize the "solution" in the data. Our company is designing systems to generate these "solutions" using proprietary mathematics and programming strategies. 4 Several types of personalized genetic markets are identified: PERSONALIZED MEDICINE. The public market ultimately represents the greatest single source of revenue for our products. There is an opportunity here, for the first time in history, to "solve" drug interaction problems that have been vexing to doctors and patients for years. Most pharmaceutical companies are focusing their "simpilistic" analytical tools on new drugs so that they can help them pass through the FDA approval process. Logistically, they do not have the time, money or motivation to address already FDA approved drugs with existing markets. Though "problems" represent a huge potential market for personalized medical products or "solutions", this market is largely ignored at present because the focus of big Pharma is to push new drugs through clinical trials to generate new revenue producing products. We have forged relationships with local diagnostic clinics whereby these clinics are supplying us with a) blood samples from elderly patients taking a variety of drugs in South Florida and b) hepatocellular toxicity test results for each sample. These labs actually perform the "liver tests" for local hospitals. Rather than pay for biohazard disposal of excess blood, they ship the samples to us and we perform our own pharmacogenomics testing on them to find their "solutions". Each drug "solution" that we hope to generate may be a separate, viable diagnostic product for a new, more responsible and safer personalized medicine. Further, we believe there is a market for our product in new drug discovery. Our tools and datasets may help pharmaceutical companies obtain genetic "solutions" for their new drugs. As genetic "solutions" are produced and publicized, we believe the demand for individual people to have their SNP profiles produced will increase. Why take a drug that may damage your liver and lead to immune system depression - even cancer - when a simple blood or saliva test exists for determining this possibility before-hand? Hospitals of the future will have high-throughput genotyping equipment, and we feel that our informatics product and trait "solutions" will form a platform and knowledge base for analyzing the results produced with such equipment. FORENSIC SCIENCE SOLUTIONS. We can use DNA for more than simple plus/minus human identification to expand the scope of forensic analysis. Our platform may enable law enforcement to define the probability of race, hair color, eye color and weight based on the SNP profile obtained from the evidence. To do this, we will have to define SNP batteries for genes involved in certain genetic pathways for biological characteristics unique to different populations of human beings. Examples include pigment production and metabolism - only humans can respond to sunlight exposure by upregulating melanin synthesis and the mechanism of this is SNPs within genes that function in regulating human pigment steady state levels and deposition. Decades of publicly funded work have defined these genes. How their variation among different populations relate to the differences between these populations has not yet been determined, and the new tools of the human genome project enable this for the first time. How will we assemble this data into a forensic test? We intend to accumulate this data through emperical experimentation on SNPs selected through reference to decades of scientific literature. This will bring us to suitable genetic pathways suitable for study. For example, we might select SNPs associated with proteins that are known to function during the process of human fat production and metabolism to create a battery of SNPs that may have predictive value for the weight of the donor. The "solutions" to this problem can be used to classify an unknown DNA sample as belonging to one human subgroup or another. 5 THE PLATFORM ITSELF The key to each of these applications is to tease complex genetic information from empirical genetic data sets with artificial intelligence. Likely genetic players for a trait can be predicted using decades of publicly funded and available genetic research. The goal is to prove association of genes with traits by studying the genetic variation within the human population using human genomics technology. We hope to construct extensive intra-genic SNP maps directly from the blood or saliva of phenotypically similar patients (patients with similar symptoms, diseases or drug reaction groups). The heuristic software algorithms we plan to develop will employ numerical and conceptual clustering tools, using neural net technology, to find patterns and overlapping genotype/environmental circuits, which may be associated with the target phenotype. SHORT TERM REVENUE POTENTIAL We have described how as we develop our platform technology, we will produce "solutions" for some of the most dangerous drugs on the current market as well as future markets. By virtue of our blood sample supplier relationship, we will naturally receive samples for drug "problems" that are the most frequent in the South Florida population. The rationale for choosing to locate the company in South Florida is based on the large number of seniors in the area. Statistics show that 1 in 5 seniors is on an average of 5 different medications. The drug portfolio of these seniors turns over on average every 5 years. Simply put, there is a wealth of biological specimen resources in this area. In addition to providing a great source of starting material, these patients also form a customer base for our genetic "solutions". For example, if we could "solve" Lamisil hepatocellular toxicity, the "solution" can be sold to each Lamasil patient prior to prescription. Alternatively, the "solution" can be sold or licensed to the pharmaceutical company that makes the drug, so they can market the drug more responsibly. Insurance companies have repeatedly stated that such tests are fundable, because they reduce their financial exposure at a later date when dealing with costly side-effects. In other words, they are expected to be cost-effective. Aside from this, there is a moral issue. It is not responsible or ethical to prescribe a drug based on a population mean when a test exists to determine compatibility before-hand. We hope to generate near-term revenue is through the provision of our technology to pharmaceutical companies engaged in clinical trials. We plan to partner with companies performing pre-clinical and clinical studies, to provide them with SNP profiling services and analysis using our proprietary informatics platform. Aside from serving as a good way to "prove" our system to these future customers, who may wish to license it from us, we can ask for downstream revenues that our "solutions" enable. In this model, we would enable them to stratify their results based on the genetics of the patient population, without investing in expensive capital (hardware or software) equipment. Such a service would potentially enable companies to identify a drug that had, say, a 10% success rate, which is too low for FDA approval, as a drug that had a 99% success rate on individuals of certain SNP profiles that comprise about 10% of the human population. Thus, the drug can be approved for use with this specific genetic subset of the patient population. For the company, this means the difference between trial failure and success. 6 This technology is new and UNPROVEN. Companies in this field are just now coming onto the scene (Sequenom Corp. and Orchid Biocomputer for example). Their commercialization of high-throughput SNP mapping technology, combined with the completion of the publicly funded Human Genome Project (HGP) opens the study of genetic variation up to the world for the first time in history. For about five thousand dollars, anyone can set up the hardware necessary to study genetic variation through the analysis of SNP profiles. The problem is analyzing it. Companies may have little expertise with the complex mathematics of this endeavor, and instead look to license-in this technology from specialty companies like ours. With new genomic technology and database information, 100 individual maps can be analyzed in about 5 seconds, and building comprehensive genetic databases is now just a question of time, money, expertise and vision. Analyzing the data is more problematic. Innovative mathematical modeling is needed. Smart programmers and experienced bioinformaticists are needed. Over 4 decades of publicly and privately funded biological research has gone into the creation of the data and equipment necessary to begin the work. However, the work cannot be done yet because the sophisticated tools have not yet been developed. Companies are just now starting to address this problem, and most are doing a poor job. The genetic data that we will use on our chips to "score" each patient is public domain and cost the Government of the United States and the Wellcome Trust of Britain over 3 Billion dollars. The hardware technology that enables efficient study of this information has came from this same project, and has taken decades to assemble. The two have co-existed in time for only a couple of months now (since January of 2000). Simply put, the technology is very new and the window of opportunity to develop "solution" finding algorithms and "solutions" themselves has just opened. Many genomics laboratories are preoccupied with finding genes and promoters in the sequence. Others attempt to predict gene product function using sophisticated programming tools. Relatively few have begun to build analytical algorithms for the study of human genetic variation, which is our aim. The application of DNA to everyday life is even further behind at present. At this time DNA analysis is currently only performed by genetic testing facilities for very simple diseases or problems, which we already mentioned constitute less than 1% of those that humans experience, because they are easy and do not require smart genomics approaches. In other words, from development to application takes several years. 7 DNA analysis is also performed by scientific specialists in the field of forensics and paternity. This is called STR analysis. STR analysis is based on a much less sensitive and more primitive approach to reading DNA. The STR approach "sequences" only 13 regions of a persons DNA, and this DNA is so-called "junk" DNA because it resides between that DNA which comprises a persons "genes". Since genes make the body parts of a human, only gene sequences can be used to say anything about a humans physical and psychological characteristics. Thus, STR data is useful only for individual identification, and except in rare cases of genetic linkage, cannot be used for predictive or medical functions. This limitation of STR data is why some big pharmaceutical companies are spending so much money to develop SNP databases for disease diagnosis and drug reactivity prediction. Analytical projects are down the road for them, if they can find the rare mathematicians that are needed. By the time they reach this point, we will have already produced a world-class product and licensure will be a more economical alternative - just as it currently is for the hardware used for this purpose. In other words, first to develop wins because of the cost of re-inventing the wheel and most of these companies are currently pre-occupied with simple analytical tools for new drugs they are pushing through their pipelines. Our Company's basis for entry into this area is proprietary chemistry combined with a mathematical approach. We are one of a few companies in the world using mathematics to address the difficult task of building complex genetic analysis tools. The other 3 companies (Genomica, Corp., Rosetta Inpharmatics, PPGx) are currently working on database tools for genomic data management, not analytical tools for drawing genetic associations. The fact that neither Sequenom nor Orchid, the purveyors of the only two high-throughput genotyping hardware platforms on the market, have a coordinated effort in the analytical space for this industry speaks to how difficult it is to find the talent for this endeavor. We are one of the first companies to offer STR services to the general public. This was accomplished by the patenting of a proprietary enzyme reagent called TruSeq(tm) that enables mass-scale DNA analysis for a fraction of the cost. In so doing, DNAPrint genomics was able to offer DNA services at an economical price for the first time. Since our patent pending reagent is compatible with SNP applications, or any application that uses thermostable enzymes, it confers to us a distinct economic advantage over any competition in the field (which is still largely unformed due to the novelty of the technology). We are developing unique analytical tools to process genomic data, and we hope to be able to build genomic data matricies more economically than any one else. REVENUE ACTIVITIES The platform technology we develop will be comprised of proprietary SNP databases for certain important genes and genetic pathways, proprietary neural net algorithms that can mine complex genetic information from huge genetic data sets and the genetic "solutions" that arise from the application of the latter to the former. The platform technology- which we call the PHENOME(tm) system, will enable the generation of diagnostic/prognostic systems which can be applied to virtually any human phenotype or disease. We hope to generate revenues and profits from three main application areas for our informatics platform: a) personalized drug prescription b) the identification of disease determinants c) forensic science 8 We hope to generate revenues through the: 1) License of our informatics platform, patented and extensive SNP location databases and population genotype databases (the "solutions") derived from analyzing the latter with the former for important human genes involved in human drug response and disease susceptibility (a license model). Each drug that we discover a "solution" for represents a sort of new diagnostic product, with economic potential rivaling a traditional diagnostic product. It enables us to skip from "problem" to "problem" and build an entire portfolio of valuable "solutions". 2) License and use of heuristic, artificial intelligence software applications capable of mining complex human genotype information from genetic SNP arrays for the purpose of pharmaceutical target identification (another license model). This may generate revenue from the discoveries that the system enables. 3) Service fees for production and storage of SNP data for third parties using the proprietary platform that we develop (a service model). 4) Licensing and use of our patent pending DNA analysis products (i.e. TruSeq(tm)) and platform tools to pharmaceutical and biotechnology partners. Other minor sources of revenue: 5) Sale of DNA specimen collection kits used to provide the material to construct each profile. 6) Through internet-based DNA sequencing and STR analysis services offered to the public. These services rely on internet capable RDMS systems, are unique to the industry, and will provide positive cash flow during our investment period required to ramp up this business plan. This service is already being phased out so that we can focus on personalized medicine. DIRECTIONS AND CONSIDERATIONS Our goals are, in order, to: 1) Develop complex SNP databases for the discovery of predictive SNP arrays for multi-genic traits. 2) Build our informatics platform, work already in progress using artificial data sets. 3) Discover the genetic "solutions" for selected economically important drug "problems". 4) Extend this process to find "solutions" to selected disease trait "problems", such as sporadic breast cancer, a relatively common disease with high heritibility. 5) Enable personalized medicine from the patient side of the equation by licensing and/or using our system for SNP analysis via a direct-to-patient model. 6) Enable new disease trait discovery by licensing the informatics system and disease "solutions" we generate to pharmaceutical companies for new drug development. 9 It is important to point out that a successful "solution" does not need to solve the entire problem. Although we will strive to generate "solutions" that offer 100% power of prediction, if a "solution" offers a prediction power of 80%, (in other words, explains 80% of the variation in the population), it is easily cost effect from a statistical standpoint and could have real economic impact because they are preventative tools, not simply tools of detection an already manifest problem. In order to do these six things, there are several issues to be addressed: 1. the feasibility of the empirical approach. True multi-genic trait analysis has never been performed for most traits in humans. The determinants for most multi-genic phenotypes or traits is unknown, mostly because of the complexities of genetic pathways involved and the here-to-fore lack of genomic information, genomic hardware and analytical software. For example, hepatocellular cytotoxcicity for Lipitor may be caused by a pattern of variation for overlapping clusters of SNPs within the CYP2A, NAD2 and CYP1A genes that follows a multinomial distribution. Population studies necessary to reveal this kind of "solution" have not been possible up until now. Empirical study of intelligently selected SNPs for these genes means "guessing" which genes contain SNPs that are useful for solving the problem. This is where biological expertise comes into play. In the future, when the price per genome comes down (and it will), systematic study of markers distributed throughout the human genome will be possible, but for now, intelligent or "educated" guesses are necessary when building databases. Fortunately, many of the genes that might participate in certain traits such as drug response or cancer are reasonably predicted. Over 40 years of basic research has taught us a great deal about the biological basis for certain cellular processes, and the goal of genomics research is to prove, or demonstrate which of the hundreds of candidate genes actually play a role, and through which mutations or SNPs. 2. our ability to develop new software tools. This is perhaps the most challenging aspect of our business plan. One of our founders, Myung Ho Kim, is a seasoned mathematician and software developer. Another, Kondragunta Venkateswarlu, is an accomplished biostatistician and programmer. The third is a proven molecular biologist and the fourth an experienced database manager. The first three are Ph.D. level scientists, and uniquely qualified for the project. Several members of our board of directors have valuable and rare expertise with this heuristic logic development. We have already made inroads into estimating complicated genetic parameters using maximum liklihood methods, and our people have a proven track record for innovation in the field of complex pattern discovery in voice recognition, signal processing and genetics. 10 3. public perception of DNA. The president has recently enacted legislation to safeguard the privacy and accessibility of genetic information. Since SNP analysis yields qualitative information, the public concern will be especially acute in this area. Nevertheless, this issue is one of public education and effective marketing, for SNP analysis is just like any technology - it can be misused. We intend to allay public perception problems by focusing on the fact that our databases will enhance the quality of everyday life for the average person. We will focus on the benefits of personalized medicine of safeguarding individual health. One thing is certain - medicine of the future will use genomic technology. This is simply not debatable. Therefore, fear of DNA is something the public will simply have to "get over" if that public wants to eliminate debilitating drug side effects and cure diseases like cancer. For the marketing of each of our genetic "solutions", we will rely on professional public relations and marketing consultants to help us shape our public image. Licensure of our products to more established companies in the SNP arena, such as Sequenom Inc., or Orchid Biosciences, or large diagnostic laboratories such as LabCorp, may be helpful in this area because of their public relations and marketing machinery. We will be sure to communicate that SNP data we use will be stored without cross-reference to identity, and using a key system, in which access is highly restricted. Names will never be coupled with data, and names are not even asked for from our suppliers. 4. How will we acquire our test materials to build our databases and develop our algorithms? We have addressed this problem with agreements with several local diagnostic clinics/labs which serve the medical community of South Florida. Affiliations with cancer centers are currently being negotiated. 5. How would we process tests for public customers if we choose to operate via a service model? Blood draws can be cumbersome and frightful for people. When we collect specimens ourselves, we will obtain a specimen from saliva and deposit it on a special preservative (FTA(tm)) card. (Tiny cheek cells with DNA naturally populate human saliva). This is part of our DNAPRINT(tm) specimen collection kit (see below). The application will cover an area about the size of a 384 well microtiter dish and will be adequate for several hundred samplings or "punches". An automated punch machine can be used to deposit punches into a 96-well or 384-well format, compatible with our high-throughput and semi-automated genotyping routine. 11 NEED FOR ADDITIONAL FUNDING Specifically, we will be seeking funding to accomplish the following: 1) convert our STR/DNA testing facility into a high-throughput SNP profiling facility for the creation of proprietary predictive SNP databases, proprietary neural net algorithms to mine complex phenotype-genotype data and proprietary information management tools and systems. Later, we hope to become the worlds first, or licensor to the worlds first, public service SNP profiling laboratory with a legitimate scientific foundation. This will require the purchase of commercially available high-throughput genotyping hardware which sells for approximately $500,000, and consumables which will cost another $250,000. 2) Develop software tools and applications to enable us to deposit our SNP data and its accompanying personal questionnaire data into a relational database system. This will cost about $100,000 in consultation salary, in-house effort and equipment. 3) Develop software tools called "classification tools" to enable the matching of SNP profiles with our "solutions" over an inter/internet. This will cost about $120,000 in consultation salary and equipment, excluding partnering costs associated with obtaining access to these databases. 4) Build a more complex and responsive client-server network. This will cost about $150,000 in hardware, software and labor. 5) Advertise and present our unique service to the world through the actual production of "solutions" and the placement of beta systems. This will require about $500,000 in meeting presentation/exhibitor fees, advertising fees and R and D over the course of two years. 6) Employ three more scientific staff (a bioinformaticist/biostatistician, a software engineer and a laboratory technician) for a period of two years. At $160,000 per year for two staff, including benefits, this amounts to $320,000. 7) Provide two years worth of salary for the two scientific and one administrative staff already employed. This will require $242,000 per year and $484,000 for two years. 8) Mass-produce our home DNA collection kits for distribution to subjects. This will require $30,000 for each 5,000 produced and will be accomplished through partnership with Life Technologies Inc. of Rockville, MD. 9) Develop a more sophisticated e-commerce presence on the internet. We will use this presence to process our own work, as well as to provide trials for future customers. This will require licensing professional e-commerce software, building a better web site and integrating our information management system with the site. The contractors for this endeavor, Gecko Media of Tampa, Florida have already been identified. TOTAL REQUIREMENTS: We are seeking a total of $2,379,000 for an equity investment in our company. This would fund the execution of this business plan for two years. 12
OPERATIONS BUDGET July August Sept. Oct. Nov. Dec. Jan. Feb. March April May June - ------------------------------------------------------------------------------------------------------------------------------------ Salaries 19,416 19,416 26,082 26,082 26,082 26,082 26,082 26,082 26,082 26,082 26,082 26,082 Benefits & Payroll Taxes 2,753 2,753 3,686 3,686 3,686 3,686 3,686 3,686 3,686 3,686 3,686 3,686 Consultant Fees 11,480 11,330 8,595 1,745 1,595 1,745 1,595 1,745 1,595 1,745 595 745 Collaborations 2,295 300 300 300 300 300 300 300 300 300 300 300 Services 2,530 2,530 330 330 330 24,730 14,730 4,730 4,730 4,730 4,730 4,730 Advertising 3,450 3,450 3,450 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 Equipment 37,057 25,857 25,257 24,507 24,507 25,707 24,507 26,007 26,757 26,007 26,007 26,757 Lease 1,000 1,000 1,000 1,000 1,450 1,450 1,450 1,450 1,450 1,450 1,450 1,450 Power 300 500 500 500 500 500 500 500 500 500 500 500 Disposal 350 350 350 350 350 350 350 350 350 350 350 350 Consumables 27,900 2,450 2,450 2,700 2,700 2,800 2,700 2,700 2,800 2,700 2,700 2,800 Miscellaneous 4,450 2,450 2,100 0 2,000 0 2,000 0 2,000 1,000 2,200 2,200 - ------------------------------------------------------------------------------------------------------------------------------------ SubTotal 219,762 140,372 144,150 125,950 128,100 177,500 153,900 135,200 138,600 136,200 135,100 137,100 5% Buffer 5,627 3,597 3,700 3,195 3,310 4,502 4,030 3,512 3,648 3,562 3,565 3,615 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL 225,389 143,969 147,850 129,145 131,410 182,002 157,930 138,712 142,248 139,762 138,665 140,715
TRADEMARKS The company owns the url address DNAPrint genomics, the trademarks DNAPrint(tm), TruSeq(tm), SnipScan(tm) and TruSpin(tm). The company has patented the TruSeq(tm), SnipScan(tm) and TruSpin(tm) products and applied for the trademarks SnipDoc(tm), DNACorporate(tm), DNAGenealogy(tm) and DNADating(tm). The company began with the discovery and development of the truline of products - - TruSeq(tm), SnipScan(tm) and TruSpin(tm). This product enables cost-effective high-throughput DNA testing for the first time. As such, it brings DNA analysis into the economic reach of the common person. Dr. Tony Frudakis developed this product and filed the patent application for these products which serve as the foundation for our start-up company. 13 CURRENT INVENTORY OF PROPRIETARY PRODUCTS 1. TRUSEQ(tm).This patent-pending product was developed at GAFF biologic (the Company's predecessor). It is a molecular biology reagent that is added to thermocycle enzyme reactions which form the basis for automated DNA cycle sequencing reactions, STR profiling reactions and SNP profiling extension reactions. The product enables a scientist to dilute expensive analytical reagents used during these processes and perform their reactions in a much more economical manner. For example, a DNA researcher currently adds 8 microliters of BigDye Terminator (BDT) Sequencing Mix (containing DNA sequencing enzyme) to each sequencing reaction, which costs $8 per reaction (each BDT kit costs $800 and is good for 100 reactions). If the researcher attempts to use less, the quality of the DNA sequencing results are generally unacceptable (low peak height, short read length or no read at all). However, TruSeq(tm) allows kit reagent dilution by stabilizing the main ingredient of the BDT Sequencing Mix (AmpliTaq DNA Polymerase FS's) in the reaction tube. The sequencer can dilute the bdt sequencing mix 0.5/ 4.4 in TruSeq(tm), and get the same results as if they used undiluted BDT Sequencing Mix. In essence, the DNA sequencer can add one half a microliter of sequencing chemicals to the reaction instead of 8 microliters, saving $7.50 per reaction. Extensive study at our laboratory show that the sequencing results obtained by using TruSeq(tm) are indistinguishable from the undiluted and more expensive reaction set up in every way. A specific cycling protocol is required for use of TruSeq(tm). The product has been independently validated by scientists at Life Technologies of Rockville MD, a company currently negotiating with the Company for the worldwide marketing and distribution rights to the product for non-STR and non-SNP applications. Market research has revealed a 10% market share in the DNA sequencing community would translate into over 2 million dollars of net profit for the company. The product is a purple liquid, encapsulated in a sterile sample vial. It is packaged in a moisture proof bag and sold in aliquots good for 100 reactions per vial. The offering price will be $100 per vial, and each vial will cost the company 5 cents each to produce. The company has applied for the trademark designation and the patent process for this discovery is ongoing. 2. SNIPScan(tm) - is a patent-pending variation of TruSeq(tm) that is optimized for application to DNA testing (STR and SNP profiling). DNA testing is accomplished using the same enzyme and basic reagents as DNA sequencing, but a different amplification strategy (geometric vs. linear) and primers. DNA testing is more expensive than DNA sequencing, and as DNA testing increases in the future, this product has even more potential than TruSeq(tm). 14 3. TRUSpin(tm) - a patent-pending, multi-well, reusable spin column tool by which to purify DNA sequencing reactions and DNA profiles. TruSpin(tm) eliminates the primer and unincorporated nucleotide peaks which commonly disrupt data analysis during DNA sequencing or STR profiling. Current tools available on the market use disposable plastic parts and resin bed heights that are unsuitable for efficient DNA purification. The TruSpin(tm) product enable superior purification in a reusable format through patent-pending design parameters and protocol development. This product will be used to reduce the overhead costs associated with producing an SNP profile. It will also be licensed out for use in non-SNP and non-STR applications to bring annual revenues to the company. 4. FEMS. The company has developed a Front-End Management System (FEMS) software product to manage the workflow of DNA through automated DNA analysis equipment. The work load going into this equipment (front-end to the machine) is a rate-limiting step for high-throughput operation. Before the development of FEMS, many hours were wasted by DNA technicians as they program the equipment for operation. Our software automates this tedious process. FEMS enables the auto-generation of DNA template identification numbers, establishes a DNA template physical archive system, creates a database for the archival of template annotation data, enables bar-code retrieval of DNA from an archive database, and enables the automated loading of DNA template annotation into the operating software of DNA sequencing and DNA profiling machines. It will be easily adaptable to the MassArray or GBA SNP genotyping systems. These tasks are critical to managing the tremendous amount of data that is inherent to DNA work. 5. Home DNA specimen Collection Kit. We manufacture, through a license agreement with Life Technologies of Rockville MD, a home DNA specimen collection kit called the DNAPrint(tm) kit. The kit enables the collection of DNA for indefinite storage. A foam tipped swab is used to rub the inside of the subjects cheek, and the DNA collected on the swab (from tiny cells on the surface of the cheek) is then deposited by contact to a preservative card. The card is sealed in a tamper resistant pouch with a desiccant pack and can be stored in a filing cabinet or safe indefinitely. The product is attractive to parents of children who wish to be able to identify their child at a later date through forensic DNA testing (i.e. run-away or kidnapping victim - a replacement for the outdated and ineffective infant footprint). Others are interested in establishing an archive of their DNA for estate planning purposes (to refute illegitimate claims of relation and will challenging after death without exhumation) or are interested in establishing a DNA archive for insurance purposes (for positive post-mortem identification for the life insured after traumatic accident to replace dental records). We sell these kits for $19.95 each, and each costs $5.00 to produce. 6. Phenome(tm) Snip database. We have mined SNP data from publicly available human genome data and our own private experiments. Our work here has focused on expounding on the complexity of genetic variation within certain key genes across entire populations as opposed to cataloguing variance for virtually all genes (including unimportant and unconserved genes) of a few people. (In case you are wondering, expounding on variation within all genes across entire populations is economically infeasible). Our Phenome database is focused on the genes that decades of literature have shown are important for those traits of most viable economical status (such as drug metabolism or developmental relevance for cancer predisposition). The database is stratified for over 30 qualitative and quantitative phenotypic variables to enable us to design intelligent SNP arrays well-suited for the particular questions we are asking. Only two other companies possess a database like ours, but neither is searchable like ours. 15 ANCILLARY REVENUE SOURCES: The company has performed services on a fee per use basis to fund basic company operations during the generation of the DNAPrint genomics business plan. The services are commonly used by academic and private laboratories for genetic research and forensic science. This outline is given so that a basic understanding of the current company can be had - we do not intend to continue operating these services if our business plan is executed and their elimination will be in the form of a ramp-down over the first year of operation. CURRENT SERVICES OFFERED BY THE COMPANY 1. DNA sequencing. During the course of basic laboratory research in the biological sciences, researchers frequently determine the sequence of DNA, called "DNA sequencing". The machinery that enables this process is very expensive. For labs that do not sequence a great deal, it is economically impractical to buy and maintain these machines. To these labs, we offer an out-sourcing solution. What separates our service from others is the fact that we deposit our data into an internet capable relational database management system. In short, our system is a complete system used to collect sequencing requests though a web-based interface. The system is used to build request "sample sheets" for sequencing and organize chromatogram files by customer, project and library. Our customers will use the system, through web-pages, to make their orders and retrieve their data. All chromatogram files are processed through the phred basecalling algorithm to give reads and quality values. The resulting reads are then compared to a set of vector sequences (UniVec from NCBI) and the E. coli genome. Customers can retrieve chromatogram files and sequences and the sequences can be retrieved as quality trimmed or vector masked. E. coli sequences can be excluded. We use the Finch-Server to create sample sheets from requests, monitor data quality and throughput and track orders for billing. The result of this is that the can access, store and manipulate their data from remote locations. In the future, we will enable the use proprietary and state-of-the-art bioinformatics tools on a fee for service basis, and implement a system by which customers can store BLAST submission chronology data in our server. Links are provided to download PE Applied Biosystems Sequence Analysis software for electropherogram viewing. Text files constitute a separate file for each order. We are sequencing about 200 templates per month at the current time. 2. Forensic DNA testing (forensic DNA "fingerprinting"). DNA testing is commonly used by law enforcement to match suspects with microscopic evidence such as blood stains or other body fluids left at crime scenes. Several states are building DNA fingerprint databases for convicted felons. However, many of the organizations who want to conduct these analyses have short term budgets that do not allow great capital and labor expenditure. For them, a DNA testing out-source facility is an attractive option to meet their near-term goals. 16 MARKET ANALYSIS There are clearly defined needs in the DNA testing community, including: 1. Genome informatics tools that enable multi-genic trait analysis through SNP profiling. 2. Front-end and back-end software tools for high-throughput SNP profile analysis and data manipulation. 3. Economical SNP profile service providers. 4. High-throughput genotyping facilities are starting to pop up all over the company. LabCorp has recently invested in a system, and GeneScreen - a well known DNA laboratory - was recently acquired by Orchid Biosciences. As personalized medicine ramps up, this kind of activity will intensify. 5. 15-20 high-throughput genotyping machines have been placed in the pharmaceutical industry as of early this year. Lower cost machines are in development and promise to occupy space in the clinic in the near future. These machines need analytical "operating systems" such as that we are producing. TRUSEQ(tm) AND TRUSPIN(tm) LICENSE AGREEMENTS: - - 1 tube TruSeq(tm) - good for 100 DNA sequencing reactions- company nets $100 profit for each sold since production cost is only a nickel per tube. - - 10% of the market = 1,600 customers per month = $160,000 per month in TruSeq(tm) sales = $2M per year in net margin. The target market for DNAPrint genomics has been studied and ranked according to potential. COMPETITORS. There are only a handful of commercial DNA testing laboratories in the world. SNP profiling is practiced by a handful of pharmaceutical companies to accelerate gene discover and product evaluation. To our knowledge, there are no other companies whose goals resemble those which we have outlined here. The SNP consortium is "a collaborative effort to create a public database of gene markers that will enhance understanding of the biological basis for disease." Rather than representing a competitor, this consortium will provide us with the necessary SNP data upon which to build our experiments. From a recent press release, "The Consortium intends to identify a minimum of 300,000 and map at least 150,000 SNPs by April 2001. As SNPs are mapped, they will be placed in the public domain, providing biomedical researchers worldwide with free and unrestricted access. Since November, the Consortium has deposited approximately 7,200 newly identified and characterized SNPs into public databases accessible via the Internet". The Consortium's members include the Wellcome Trust; 10 pharmaceutical companies including AstraZeneca PLC, Aventis Pharma, Bayer AG, Bristol-Myers Squibb Company, F. Hoffman-La Roche, Glaxo Wellcome PLC, Novartis, Pfizer Inc, Searle, and SmithKline Beecham PLC; Motorola, Inc.; and IBM. Academic centers including the Whitehead Institute for Biomedical Research, Washington University School of Medicine in St. Louis, the Wellcome Trust's Sanger Centre, Stanford Human Genome Center, and Cold Spring Harbor Laboratory, are involved in SNP identification and analysis. The data they produce is mandated by law to be freely accessible to scientists all over the world. 17 About ten pharmaceutical companies are engaged in the pharmacogenomic field (the study of genetic variation through SNP analysis). None are devoted to complex trait determination through SNP profiling and all are focused on single gene disorders and phenotypes. Examples include Curagen and Type II diabetes, Millinium and artherosclerosis and heart disease, Warner-lambert, GenSet and Parke Davis as well as Glaxo Wellcome for drug interactivity. Rosetta Inpharmatics develops informatics solutions like us, however they are focused on gene expression data rather than genetype data. By definition, only the latter can be applied to personalized medicine. PPGx is a pharmacogenomics company that is developing software tools, but discussions I have had with their scientists have revealed that they have not yet begun to develop complex genetic analysis tools and do not have the mathematical horse power to get this job done currently. Celera genomics is entering the field of human genetic variation, but does not have a coordinated effort within the complex genetic sector. Like most companies, they focus on easy problems almost exclusively. Genomica of Boulder Colorado is entering the field of complex genetic analysis but intends to produce a product aimed at academic laboratories for basic R and D, rather than the personalized medicine market like us. Orchid and Sequenom, the two providers of genotyping hardware machinery, do not have coordinated efforts in complex genetics. Most other current DNA testing facilities focus on paternity determination using the STR technique. These are LabCorp, the market leader, IdentiGene Corp., ReliaGene Corp., LifeCodes Corp., GeneLex Corp., GeneScreen Corp. the Bode Technology Group and DNA Identification Services. None of these companies target their services for other than the paternity market and none could be considered an e-business. Only one uses the FTA DNA preservative card manufactured by Life Technologies Inc. Non-commercial leaders in the field of DNA testing include the Armed Forces DNA Identification Laboratory (AFDIL), The FBI Laboratory and the Lawrence Livermore National Laboratory. These labs do not accept private orders. MARKETING PLAN Our marketing needs will be handled by a professional marketing firm. Our DNAPrint(tm) forensic tools that we develop will be introduced to the medical community through presentation and solicitation at human genetics and medical conferences, as well as strategic personal contact with leaders in the field of genetic testing. SnipDoc(tm)- advertising for our public services will be handled by a professional marketing firm. Concepts such as DNACorporate(tm) explained below, would appeal to small pharmaceutical companies who do not wish to set up their own complex genotyping system through direct mail and word of mouth. Partnering Intellectual properties - select intellectual properties that we develop (such as SNP databases, parts of our informatics system and software) will be partnered with leading pharmaceutical and biotech companies around the world in such a way as to not to negatively impact our business model. Rather, these partnerships will likely enable us to generate profit from our work in a highly efficient manner. Our goal is to focus on discovery and development, and let others who are better market our products for us. In this way we can more quickly establish a footprint in the industry and reward near-term as well as long-term investors. 18 MARKETING STRATEGY An aggressive marketing and sales campaign will be launched in 2001. It will be managed by our marketing consultant and consist of, but not be limited to: - - A sales force, with a regional and national sales director coordinating the efforts and direction of the team. - - A marketing and PR director who plans, devises and implements a national marketing campaign, targeting diagnostic clinics, hospitals, HMOs and other medical insurance providers. Advertising will be performed on television, radio, in medical journals, at medical meetings and conferences, directly to health care providers and insurers, hospitals, health care organizations, pharmaceutical/biotech companies. ITEM 6. RESIGNATION AND APPOINTMENT OF OFFICERS AND DIRECTORS Directors from DNAPrint genomics now form the Board after the Merger of companies. Scott A. Deitler and Wesley F. Whiting have resigned as President and Secretary/Treasurer, respectively. The business experience of the Directors and Officers is disclosed herein. CARL L. SMITH, President and Director, is 58 years of age. Mr. Smith is an entrepreneur in venture capital marketing, sales and business development. Mr. Smith has served as the CEO of DNAPrint genomics, Inc. f/k/a Catalyst Communications, Inc. from 1994 to the present and has served on the board of directors of Diversified Resources Group, Inc. from 1994 to 1996 and from April 1999 to the present. Mr. Smith has served as a director of GRG, Inc. from September 1998 to October 2000, and also serves on the Board of Directors of Penn-Akron Corporation from June 2000 to the present. Mr. Smith has also been chairman of Tampa Bay Financial, Inc. from 1994 to the present, a Florida based consulting company and became President of American Communications Enterprises in October 2000. Catalyst Communications, Inc. filed a Chapter 11 Bankruptcy in 1998 for which a Plan was confirmed in 1999. MATTHEW A. VEAL, Chief Financial Officer, Secretary and Director is 41 years old. Mr. Veal, a CPA, is currently CFO for the following entities (including DNAPrint genomics, Inc.): Tampa Bay Financial, Inc. (since 1995), Diversified Resources Group, Inc. (since 1999), Global Resources Group, Inc. (since 1998), and American Communications Enterprises, Inc. (since 2000). Diversified Resources Group, Inc. filed Bankruptcy, Chapter 11, in 1997, the Plan was confirmed in 1998 and it was closed in 1999. From 1997 to 1998 he was Chief Accounting Officer for Kosmas Group International. From 1995 to 1997 he was CFO for Catalyst and from 1994 to 1995 he was CFO for ComCentral Corp. Mr. Veal served on the Board of Directors of ComCentral through 1995 and Data 1, Inc. and American Communications Enterprises, Inc. Mr. Veal is a graduate of the University of Florida School of Accounting. Catalyst Communications, Inc. filed a Chapter 11 Bankruptcy in 1998 for which a Plan was confirmed in 1999. 19 DR. TONY FRUDAKIS, Chief Scientific Officer, received his doctorate degree in molecular and cell biology from the University of California Berkeley in 1992. He has 11 total years of experience as a molecular biologist. Since September 1998, Dr. Frudakis worked to develop and manage high-throughput DNA analysis products, services and genotyping systems for application which form the basis of the DNAPrint genomics business plan. Dr. Frudakis has worked on implementing the FEMS software application to handle the companies high-throughput electrophoresis needs, developed automated routines and managed laboratory accreditation and promotion. He has developed several new molecular biology products developing TruSeq(tm) into an off-the-shelf product. From 1995 to 1999, Dr. Frudakis served as a scientist at Corixa Corporation in Seattle, WA where he managed and executed high-throughput gene discovery programs. At Corixa, Dr. Frudakis directed a differential display and subtractive library based program of genetic discovery for genes that are over-expressed in various cancers, resulting in a patent application for over 350 unique genes. For this work, Dr. Frudakis used gene chip technology (Synteni). During the course of the last 5 1/2 years, Dr. Frudakis has worked in the development and management of high-throughput gene discovery routines based on DNA sequencing. Dr. Frudakis' work has resulted in the authorship of several patents for over 350 different novel expressed sequence tags (EST's) and 12 full-length sequences which will be used by Corixa to develop novel Cancer Vaccines. Dr. Frudakis is also a co-inventor of patents associated with the DNA sequencing reagents and the software product described here. GEORGE FRUDAKIS, Vice President of Business Operations, started a multi-component company called GAFF group in 1998. During his life's work as a self-employed entrepreneur, he made the initial seed investment for the DNAPrint genomics business plan. O. HOWARD DAVIDSMEYER, Director, is 76 years old. Mr. Davidsmeyer has been the chairman of Diversified Resources Group, Inc., formerly known as Data 1, Inc., from 1994 to 1996 and again from 1997 to present. He also served as CEO from 1994 to 1995 and again June 1999 to present. He has also served as chairman of DNAPrint genomics, Inc. f/k/a Catalyst Communications, Inc. from 1994 to present. Mr. Davidsmeyer's career extends many years and includes a variety of business and civic accomplishments. Catalyst Communications, Inc. filed a Chapter 11 Bankruptcy in 1998 for which a Plan was confirmed in 1999. MYUNG HO KIM, PH.D. MATHEMATICS. Myung obtained his Ph.D. from the University of Michigan. Myung has scores of publications in mathematical texts and journals as well as previous professorships and fellowships. His job function is generating and adapting mathematical ideas into computer code for pattern recognition and other types of sophisticated analysis. He has built information retrieval systems for a variety of applications. VENKATESWARLU KONDRAGUNTA, PH.D. STATISTICS. He worked in the laboratory of genetic statistician Dr. Ranajit Chakaroborty, at the University of Texas from 1998 to August 2000. Venkateswarlu specializes in the application of population statistics and mathematical expression to high-density datasets such as those that we will be building. He attended the University of Madras, India. 20 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIALS, & EXHIBITS Financial Statements - 1-17 FYE December 31, 1999 of DNAPrint genomics, Inc. (audited) F-1-F-18 Consolidated Financial Statements as of September 30, 2000 for DNAPrint genomics, Inc. (unaudited) PF-1-PF-7 ProForma Financial Statements as of September 30, 2000 (unaudited) F-1-F-8 Financial Statements of S.D.E. Holdings 1 Inc. for the seven months ended September 30, 2000 (audited) Exhibits - 10.1 Plan of Merger 10.2 Articles of Merger 10.3 Articles of Amendment to Articles of Inc. 10.4 Supply & License Agreement 10.5 Agreement & Plan of Exchange between Catalyst Communications, Inc. and DNAPrint genomics, Inc. & Shareholders 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 3, 2000 DNAPrint genomics, Inc. By:/s/Carl L. Smith --------------------------- President 22 DNAPRINT GENOMICS INC. (Formerly Catalyst Communications, Inc & Subsidiaries) (A development stage company) Consolidated Financial Statements December 31, 1999 1 CONTENTS Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . 6 Consolidated Statements of Stockholders' Equity . . . . . . . . . . . . . . 7 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . 8 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . 11-17 2 HOWARD R. WOMELDORPH, JR. C.P.A., P.A. CERTIFIED PUBLIC ACCOUNTANT 7648 Lockwood Ridge Road, Sarasota, Florida 34243 (941) 351-3561 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of DNAPrint genomics, Inc. (Formerly Catalyst Communications, Inc & Subsidiaries) (A development stage company) Sarasota, Florida I have audited the accompanying consolidated balance sheet of DNAPrint genomics, Inc. (formerly Catalyst Communications, Inc & Subsidiaries) as of December 31, 1999 and the related consolidated statements of operation, stockholders' equity and cash flows for the years ended December 31, 1999 and 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of DNAPrint genomics, Inc. (formerly Catalyst Communications, Inc. & Subsidiaries) as of December 31, 1999 and the results of their operations and their cash flows for the years ended December 31, 1999 and 1998 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 5 to the financial statements, the Company's recurring losses from operations and net accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 5. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Howard R. Womeldorph, Jr. September 12, 2000 3 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Consolidated Balance Sheet (A development stage company) ASSETS December 31, 1999 ------------ CURRENT ASSETS Cash on hand & in bank 14,931 ------------ Total Current Assets 14,931 PROPERTY AND EQUIPMENT Furniture and equipment 11,362 ------------ Less accumulated depreciation (9,000) ------------ Total Property and Equipment 2,362 Other Assets Investment in GRG, Inc. - Available for sale 222,443 Total Other Assets 222,443 ------------ TOTAL ASSETS $ 239,736 ============ The accompanying notes are an integral part of these consolidated financial statements. 4 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Consolidated Balance Sheet (A development stage company) LIABILITIES AND STOCKHOLDERS' EQUITY December 31, 1999 --------------- CURRENT LIABILITIES Accounts payable 10,289 Accounts payable - liabilities subject to compromise 190,835 --------------- Total Current Liabilities 201,124 --------------- Total Liabilities 201,124 --------------- STOCKHOLDERS' EQUITY Preferred stock: authorized 10,000,00 shares; $ .01 par value; 0 shares issued and outstanding Common stock: authorized 500,000,000 shares; $0.01 par value; 154,400,986 shares issued and outstanding 1,544,009 Additional paid-in capital 6,664,861 Accumulated other comprehensive income 222,443 Accumulated earnings prior to development stage (7,442,370) Development stage accumulated deficit from December 10, 1998 through December 31, 1999 (950,331) --------------- Total Stockholders' Equity 38,612 --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 239,736 =============== The accompanying notes are an integral part of these consolidated financial statements. 5
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Consolidated Statement of Operations (A development stage company) From Inception of the Development For the Years stage on Ended December 31, December 10, 1998 through 1999 1998 December 31, 1999 ----------------------------------------- -------------------- SALES $ 46,512 $ 192,971 $ 38,762 COST OF SALES 213,911 89,718 ----------------------------------------- -------------------- GROSS PROFIT 46,512 (20,940) (50,956) OPERATING EXPENSES General and administrative Expense 20,117,912 20,958,318 554,079 Depreciation 3,000 3,000 Bad debt expense 8,152 8,152 ----------------------------------------- -------------------- Total Operating Expenses 20,126,064 20,961,318 565,231 ----------------------------------------- -------------------- OTHER INCOME (EXPENSE) Gain on sale of assets 3,090 9,344 3,090 Interest expense (337,234) (337,234) ----------------------------------------- -------------------- Total Other Income (Expense) 3,090 (327,890) (334,144) ----------------------------------------- -------------------- NET INCOME (LOSS) $ (20,076,462) $(21,310,148) $ (950,331) ========================================= ==================== NET INCOME (LOSS) PER SHARE $ (.65) $ (1.46) ========================================= WEIGHTED AVERAGE NUMBER OF SHARES 30,933,002 14,616,358 ========================================= The accompanying notes are an integral part of these consolidated financial statements. 6
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) (Consolidated Statements of Stockholder's Equity (A development stage company) Accumulated Additional Other Common stock Preferred stock Paid-in Accumulated Comprehensive Shares Amount Shares Amount Capital Deficit Income Total ------------------------------------------------------------------------------------------------------ Balance, December 31, 1997 29,400,986 $ 294,009 - $ - $4,375,797 $(30,013,434) $ - $(25,343,628) ------------------------------------------------------------------------------------------------------ Donated Capital from Tampa Bay Financial, Inc. 601,584 601,584 GRG, Inc. Stock acquired in sale of Teleprizes TM Division (348,467) (348,467) Unrealized gains on securities, net of reclassification adjustment 222,443 222,443 Net Income for the year ended December 31, 1998 (21,310,148) (21,310,148) ------------------------------------------------------------------------------------------------------ Balance, December 31, 1998 29,400,986 $ 294,009 - $ - $4,977,381 $(51,672,049) $222,443 $(46,178,216) ------------------------------------------------------------------------------------------------------ Common Stock issued for reorg/ court order at $0.02 per share 125,000,000 1,250,000 1,687,480 2,937,480 Adjustment due to subsidiaries Liquidation in bankruptcy 63,355,810 63,355,810 Net Income for the year ended December 31, 1999 (20,076,462) (20,076,462) ------------------------------------------------------------------------------------------------------ Balance, December 31, 1999 154,400,986 $ 1,544,009 - $ - $6,664,861 $(8,392,701 $222,443 $ 38,612 ------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these consolidated financial statements. 7
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Consolidated Statement of Cash Flows (A development stage company) From Inception of the Development For the Years Stage on Ended December 31, December 10, 1998 Through 1999 1998 December 31, 1999 --------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) Adjustments to reconcile net income (loss) to (20,076,462) (21,310,148) (950,331) Net cash provided by operating activities Depreciation and amortization 3,000 3,000 Common stock issued for reorganization/ court order 343,000 343,000 Changes in Operating Assets and Liabilities: (Increase) Decrease in accounts receivable (240,960) 621,961 318,637 Increase (Decrease) in sponsorship liability (36,024,889) 19,730,000 (35,223,386) Increase (Decrease) in accounts payable 96,114 (215,173) 96,114 Increase (Decrease) in property and payroll taxes payable (15,344) 15,344 (15,344) (Increase) Decrease in garnishment 57,542 (57,542) 57,542 --------------------------------------------------------- Net Cash Provided (Used) by Operating Activities (55,860,999) (1,212,558) (35,370,768) --------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements. 8
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Consolidated Statement of Cash Flows (A development stage company) From Inception of the Development For the Years Stage on Ended December 31, December 10, 1998 Through 1999 1998 December 31, 1999 ---------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Reduction in indebtedness arising from disposal of subsidiaries in bankruptcy 56,160,240 704,668 35,734,660 Interest 337,234 ---------------------------------------------------- Net Cash (Used) by Investing Activities 56,160,240 1,041,902 35,734,660 ---------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Cash received from note payable 149,951 Payments on notes (286,149) (254,651) (350,800) Dividend of GRG, Inc. stock acquired in sale of Teleprizes TM division (348,467) Contribution of capital 601,584 Rounding (1) ---------------------------------------------------- Net Cash Provided by Financing Activities (286,149) 148,416 (350,800) ---------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements. 9
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Consolidated Statement of Cash Flows (A development stage company) From Inception of the Development For the Years Stage on Ended December 31, December 10, 1998 Through 1999 1998 December 31, 1999 -------------------------------------------------------------- (DECREASE) IN CASH AND CASH EQUIVALENTS $ 13,092 $ (22,240) 13,092 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,847 24,087 1,847 -------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 14,939 $ 1,847 14,939 ============================================================== CASH PAID DURING THE YEAR FOR Interest $ - $ - Income taxes $ - $ - NON-CASH FINANCING ACTIVITIES Common stock issued for Reorganization/Court Order $ 2,905,500 $ - Arising from conversion of claim to stock The accompanying notes are an integral part of these consolidated financial statements. 10
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Notes to the Consolidated Financial Statements (A development stage company) NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS DNAPrint genomics, Inc. (formerly Catalyst Communications, Inc., (DNAPrint) was incorporated under the laws of the State of Utah on January 3, 1998 as Lexington Energy, Inc. DNAPrint was organized for the purpose of investing in all forms of investments, but has since changed its purpose to human genome sciences. Until 1999, DNAPrint genomics, Inc. had three subsidiaries: a. Homestyle Harmony, Inc. Homestyle Harmony, Inc. (HHI) was incorporated under the laws of the State of Florida on October 20, 1993. HHI was in the business of operating specialty restaurants located in Sarasota and Clearwater, Florida. On February 5, 1999, Homestyle Harmony, Inc. filed a petition for relief under Chapter 7 of the federal bankruptcy laws of the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, Case No. 99-1654-8P7. The company was discharged from debts and ceased doing business as of that date. b. Catalyst Communications, Inc. Catalyst Communications, Inc. (formerly Jackpot communications, Inc.) (CCIF) was incorporated under the laws of the State of Florida on April 9, 1997. CCIF was incorporated as Jackpot Communications, Inc. and it changed its name to Catalyst Communications, Inc. on May 7, 1997. For purposes of distinguishing the subsidiary from the parent, future references to the subsidiary will be as CCIF. CCIF was incorporated to engage in the promotion and marketing of prepaid phone cards. On February 5, 1999, Catalyst Communications, Inc. filed a petition for relief under Chapter 7 of the federal bankruptcy laws of the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, Case No. 99-1652-8P7. The company was discharged from debts and ceased doing business as of that date. c. Comcash, Inc. Comcash, Inc. (Comcash) was incorporated under the laws of the State of Florida on April 12, 1997. Comcash was incorporated to engage in the promotion and marketing of prepaid phone cards. Comcash is a wholly owned subsidiary of CCIF. CCIF filed a Chapter 7 bankruptcy petition on February 5, 1999, by virtue of CCIF bankruptcy, Comcash, Inc. ceased business as of that date. 11 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Notes to the Consolidated Financial Statements (A development stage company) NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) d. Principles of Consolidation The accounts included here include those of DNAPrint genomics, Inc. (the parent), Catalyst Communications, Inc., Homestyle Harmony, Inc. and Comcash, Inc. Collectively they are referred to herein as "the Company". All significant intercompany accounts have been eliminated in Consolidation. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Accounting Method The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a calendar year end. b. Cash and Cash equivalents Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition. The Company maintains its cash accounts in several bank accounts. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. The Company's cash balance in some of its bank accounts sometimes exceeds the guarantee. c. Accounts Receivable Accounts receivable are shown net of allowance for doubtful accounts at December 31, 1999. All accounts receivable deemed uncollectable have been written off at the balance sheet date. d. Depreciation and Amortization Property and equipment are stated at cost. Depreciation is computed, using primarily the straight-line method, over the estimated useful lives of the assets. Total depreciation expense for the year ended December 31, 1999 was $-0-. e. Revenue Recognition Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. 12 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Notes to the Consolidated Financial Statements (A development stage company) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) f. Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. g. Provision for Taxes At December 31, 1999, the Company had net operating loss carryforwards of approximately $7,000,000 that may be offset against future taxable income through 2014. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforward will expire unused. Accordingly, the potential tax benefits of the loss carryforward will expire unused. Accordingly, the potential tax benefits of the loss carryforward are offset by a valuation account of the same amount. h. Loss Per Share The computations of basic income (loss) per share of common stock are based on the weighted average number of shares outstanding at the date of the financial statements as follows: For the year ended December 31, ----------------------------------- 1999 1998 Numerator Net Loss $(20,076,462) $ (21,310,148) Denominator (weighted average number Of shares outstanding) 30,933,002 14,616,358 Income (loss) per share $ (.65) $ (1.46) Dilutive loss per share is not presented as there are no potentially dilutive items outstanding. i. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 13 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Notes to the Consolidated Financial Statements (A development stage company) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) j. Restated Consolidated Financial Statements Prior period consolidated financial Statements have been restated to conform with current financial statement presentation. k. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which addresses the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 and is not required to be applied retroactively. The adoption of this statement had no material impact on the Company's financial statements. l. Long-Lived Assets All long-lived assets are evaluated yearly for impairment per SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." Any impairment in value is recognized as an expense in the period when the impairment occurs. m. Comprehensive Income Comprehensive income consists of net income and other gains and losses affecting shareholders' equity that, under generally accepted accounting principles, are excluded from net income. For the Company, such items consist primarily of unrealized gains and losses on marketable equity investments. The changes in the components of other comprehensive income (loss) are as follows: Years Ended December 31 1999 1998 Tax Tax Pre-Tax Expense Pre-tax Expense Amount (Credit) Amount (Credit) --------------------------------------------- Unrealized gain on securities $ - $ - $ 222,443 $ - --------------------------------------------- Total other comprehensive income $222,443 $ - $ 222,443 $ - ============================================= 14 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Notes to the Consolidated Financial Statements (A development stage company) NOTE 3 - COMMITMENTS AND CONTINGENCIES a. Leases Effective March 31, 1998, the Company terminated its lease for facilities in Sarasota, Florida it had been leasing on a month-to-month basis. Lease payments were $1,551 per month. The Company has since relocated to a facility leased by an affiliate company and pays rent under a consulting agreement with this company. b. Litigation From time to time, the Company is subject to litigation in the normal course of business. The Company believes that any adverse outcome from litigation would not have a material effect on its financial position or results of operations. NOTE 4 - DEVELOPMENT STAGE COMPANY The Company essentially has reverted to the status of a startup company as it emerged from the bankruptcy proceedings discussed in Note 10 and will be considered to be a development stage company as it commences its planned principal operations of genomics services. NOTE 5 - REORGANIZATION ITEMS On December 10, 1998, Catalyst Communications, Inc. (Utah) now known as DNAPrint (the "Debtor") filed a petition for relief under Chapter 11 of the federal bankruptcy laws of the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, Case No. 98-21641-8P1. Under Chapter 11, certain claims against the Debtor in existence prior to the filing of the petition of relief under the federal bankruptcy laws are stayed while the Debtor continues business operations as debtor-in-possession. These claims are reported in the December 31, 1999 balance sheet as "liabilities subject to compromise." Claims secured against the Debtor's assets (`secured claims") also are stayed. Although the holders of such claims have the right to move the Court for relief from the stay. There are no secured claims. Because holders of existing voting shares immediately before confirmation received more than 50% of voting share of emerging entity, the Company does not qualify for fresh start accounting under SOP 90-7 (See Note 7). NOTE 6 - GOING CONCERN The company's consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The company has incurred losses from its inception. 15 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Notes to the Consolidated Financial Statements (A development stage company) NOTE 6 - GOING CONCERN (continued) The company has sustained recurring losses and negative cash flow from operations. Over the past year the Company's growth has been funded through private equity. On December 10, 1998 the Company filed a petition for relief under Chapter 11 of the federal bankruptcy laws of the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, Case No. 98-21641-8P1. The company received approval to exchange certain debt for equity in the Company. This was done through stock issued in October 1999. The company has terminated the calling card and restaurant business. The company has acquired a new subsidiary in the Human genome sciences and is concentrating its resources to commence operations of this company. The Company has experienced and continues to experience negative operating margins and negative cash flows, from operations as well as an ongoing requirement for substantial additional capital investment to accomplish the business plan over the next several years. The Company expects to seek additional funding through private or public equity. There can be no assurance as to the availability or terms upon which such capital might be available. NOTE 7 - EQUITY TRANSACTIONS a. Sale of Teleprizes Division and Dividend of Proceeds The Company sold Teleprizes TM for 3,150,000 shares of common stock of GRG, Inc. d/b/a Global Resources Group, Inc. a Nevada start up public company, with certain marketing rights associated with providing internet scratch off sweepstakes promotions to internet websites to induce traffic. GRG, Inc. was controlled by the major shareholders of the Company. The Company declared a dividend in May 1998 whereby it issued one share of GRG common stock for every share of Company stock. The remaining 222,443 restricted shares of GRG are classified as available for sale since the company has no present intention to sell the shares. b. Related Party Transactions During 1998 Tampa Bay Financial, Inc., a related party, directly contributed $601,587 to the company. Tampa Bay Financial, Inc. is controlled by the Company's largest shareholder, Carl Smith, Sr. On October 1, 1999, Tampa Bay Financial Holdings, Inc., ("TBFH") a related party controlled by a son of Carl Smith, Sr., acquired the largest claim in the Company's bankruptcy (totaling in excess of $2,500,000) for $1,200,000. The most significant terms of the claims transfer included a provision that TBFH would pay amounts owed in installments as follows: $625,000 At Closing $125,000 Due October 31, 1999 $225,000 Due December 20, 1999 $225,000 Due March 1, 2000 16 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc & Subsidiaries) Notes to the Consolidated Financial Statements (A development stage company) NOTE 7 - EQUITY TRANSACTIONS (continued) As part of the bankruptcy TBFH agreed to convert the claim to 125,000,000 shares; however, the Company, in the event of a default by TBFH, was obligated to buy back shares proportionate to any amounts owed under the claim which were unpaid. As a result the Company was contingent liable to under this agreement in the amount of $1,338,036 at December 31, 1999. TBFH paid all remaining installments in 2000 which resulted in the Company being relieved of this contingent obligation. NOTE 8 - SUBSEQUENT EVENTS a. Land Acquisition On January 31, 2000 the Company acquired a 17 acre tract of undeveloped land in Apex, North Caroline for 30,000,000 restricted common shares. The Company subsequently sold the land to Penn Akron Corporation, a start up Nevada Public Corporation in the internet-based education business for 4,500,000 restricted common shares. b. DNAPrint genomics, Inc. Acquisition DNAPrint genomics, Inc. (a Florida Corporation) (DNA) was incorporated under the laws of the State of Florida in May 2000. DNA specializes in the construction of electronic facilities to assist scientists in researching and assembling data from the human genome and other advances in genetics research. DNA was acquired on July 15, 2000 for 192,000,000 shares of the DNAPrint common stock. The acquisition will be treated as a pooling of interests for accounting purposes. c. Name Change and Increase in Authorized Shares On July 15, 2000 the board of Directors, authorized a name change to DNAPrint genomics, Inc from Catalyst Communications, Inc. The Board approved and amended the Articles of Incorporation to increase the authorized common shares to 500,000,000 shares of common stock and 10,000,000 preferred stock. 17 DNAPRINT GENOMICS, INC. (FORMERLY CATALYST COMMUNICATIONS, INC. & SUBSIDIARIES) (A development stage company) Consolidated Financial Statements September 30, 2000 CONTENTS Auditor's Report..................................................... F-2 Consolidated Balance Sheet.............................................F-3-F-4 Consolidated Statements of Operations................................. F-5 Consolidated Statements of Stockholder's Equity........................F-6 Consolidated Statements of Cash Flows..................................F-7-F-9 Notes to the Consolidated Financial Statements.........................F-10-F-18 HOWARD R. WOMELDORPH, JR. C.P.A., PA Certified Public Accountant 7648 Lockwood Ridge Road, Sarasota, Florida 34243 (941) 351-3561 ================================================================================ INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of DNAPrint genomics, Inc., Subsidiaries I have audited the accompanying consolidated balance sheet of DNAPrint genomics, Inc., and subsidiaries as of December 31, 1999, and the related consolidated statements of loss, stockholders' equity (deficit) and cash flows for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. I have conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of DNAPrint genomics, Inc. and subsidiaries as of December 31, 1999, and the results of its operations and its cash flows for the year ended December 31, 1999, in conformity with generally accepted accounting principles. As more fully discussed in Note 8, the 1999 consolidated financial statements have been restated to reflect the pooling of interests with DNAPrint genomics, Inc., (Florida). The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company's recurring losses from operations and net accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 6. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/Howard R. Womeldorph, Jr. C.P.A., PA HOWARD R. WOMELDORPH, JR. C.P.A., PA Certified Public Accountant F-2
DNAPrint genomics, Inc. (Formerly Catalyst Communications, Inc. & Subsidiaries) Consolidated Balance Sheet (A development stage company) ASSETS September 30, 2000 (UNAUDITED) DECEMBER 31, 1999 ----------- ----------------- CURRENT ASSETS Cash $ 27,103 $ 4,519 Accounts Receivable 4,440 7,054 ------ ----- Total Current Assets $ 31,543 $ 11,573 ------------- ------------- PROPERTY AND EQUIPMENT Furniture and Equipment 74,507 11,362 Less Accumulated Depreciation (10,111) ( 9,000) -------- -------- Total Property and Equipment $ 64,396 $ 2,362 OTHER ASSETS Investment in GRG, Inc. 95,650 222,443 Investment in Globalseer, Inc. 2,000,000 --------- --------------- Total Other Assets $ 2,095,650 $ 222,443 ----------- ---------- TOTAL ASSETS $ 2,191,589 $ 236,378 =========== ========= The accompanying notes are an integral part of these consolidated financial statements. F-3
DNAPrint genomics, Inc. (Formerly Catalyst Communications, Inc. & Subsidiaries) Consolidated Balance Sheet (A development stage company) LIABILITIES AND STOCKHODERS' EQUITY September 30, 2000 (UNAUDITED) DECEMBER 31, 1999 ----------- ----------------- LIABILITIES Accounts Payable $ 290,441 $ 182,817 --------------- ------------ Total Liabilities $ 290,441 $ 182,817 STOCKHOLDERS' EQUITY Preferred stock: authorized 10,000,000 shares; $.01 par value; 0 shares issued and outstanding common stock: authorized 500,000,000 shares; $0.01 par value; 384,400,986 shares issued and outstanding, 115,200,000 of the outstanding shares held in escrow $ 3,844,009 $ 3,464,010 Additional paid-in capital $ 7,524,861 $ 5,744,861 Accumulated other comprehensive income $ 95,650 $ 222,443 Stock Subscriptions Receivable $ (875,000) $ (1,000,000) Accumulated deficit prior to development stage $ (7,442,370) $ (7,442,370) Development stage accumulated deficit from December 10, 1998 through September 30, 2000 and December 31, 1999, respectively $ (1,246,002) $ ( 935,383) ----------- ----------- Total Stockholders' Equity $ 1,901,148 $ 53,561 ---------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,191,589 $ 236,378 ========== ============ The accompanying notes are an integral part of these consolidated financial statements. F- 4
DNAPrint genomics, Inc. (Formerly Catalyst Communications, Inc. & Subsidiaries) Consolidated Statement of Operations (A development stage company) From Inception of the Development Stage on For the December 10, Nine Months Ended For The 1998 Through September 30, Year Ended September 30, (Unaudited) December 31, (Unaudited) ----------------- ----------------- --------------------- -------------------- 2000 1999 1999 2000 ---- ---- ---- ---- REVENUES Sales, net $ 30,001 $119,969 $133,187 $155,438 Cost of sales 4,039 35,059 51,893 145,650 ----- ------ ------ ------- Gross margin 25,962 84,910 81,294 9,788 ------ ------- ------ --------- OPERATING EXPENSES Research and Development Costs 105,434 14,432 19,833 125,267 General and Administrative 230,038 254,846 20,117,912 784,117 Depreciation and Amortization 1,111 4,111 Bad Debt Expense _______ _______ 8,152 8,152 ----- ------- Total Operating Expenses 336,583 296,278 20,145,897 921,647 ------- ------- ---------- ------- LOSS FROM OPERATIONS (310,621) (184,368) (20,064,603) (911,859) OTHER INCOME (EXPENSE) Other income 3,090 3,090 3,090 Other expense ________ ________ ____________ (337,234) --------- Total Other Income (Expense) 3,090 3,090 (334,144) NET (LOSS) INCOME $(310,621) $(181,278) $(20,061,513) $(1,246,003) ========== =========== =============== ========== BASIC LOSS PER SHARE $ (.002) $ ( .001) $ (.125) WEIGHTED AVERAGE SHARES OUTSTANDING 198,222,466 160,494,173 160,484,173 The accompanying notes are an integral part of these consolidated financial statements. F- 5
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Consolidated Statement of Stockholder's Equity (A development stage company) Accumulated Additional Stock Other Common Stock Preferred Stock Paid-In Subscript Accumulated Comprehensive Shares Amount Shares Amount Capital Receivable Deficit Income Total BALANCE, DECEMBER 31, 1998 29,400,986 $ 294,009 - $- $4,977,381 $ - (51,672,049) $222,443 $(46,178,216) - ------------------------------------------------------------------------------------------------------------------------------------ Stock issued for acquisition of DNAPrint genomics, Inc. (FL) 192,000,000 1,920,000 (92,0000) (1,000,000) -0- Common Stock issued for reorganization/court order at $.02 per share 125,000,000 1,250,000 1,687,480 2,937,480 Adjustment due to subsidiaries liquidation in bankruptcy 63,355,810 63,355,810 Rounding (1) (1) Net Income for the year ended December 31, 1999 20,061,513 20,061,513 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, DECEMBER 31, 1999 346,400,986 $3,464,010 - $5,744,861 $(1,000,000) $(8,377,753) $222,443 $ 53,561 - ------------------------------------------------------------------------------------------------------------------------------------ Stock issued for advertising and marketing services 8,000,000 80,000 80,000 160,000 Stock issued for acquisition of land 30,000,000 300,000 1,700,000 2,000,000 Net Income for the period ended September 30, 2000 (310,621) (310,621) Rounding (1) (1) Unrealized Loss on Securities (126,793) (126,793) Subscription receivable payments 125,000 125,000 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, September 30, 2000 (Unaudited) 384,400,986 $3,844,009 - $7,524,861 $(875,000) $(8,688,372) $95,650 $1,901,148 ==================================================================================================================================== The accompanying notes are an integral part of these consolidated financial statements. F- 6
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Consolidated Statement of Cash Flows (A development stage company) From Inception of the Development Stage on For the December 10, Nine Months Ended For the 1998 Through September 30, Year Ended September 30, (UNAUDITED) DECEMBER 31, (UNAUDITED) ----------- ------------ ----------- 2000 1999 1999 2000 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) $(310,621) $(181,278) $(20,061,513) $(1,246,003) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,111 - - 4,111 Common stock issued for reorganization/court order 343,000 343,000 Common stock issued for advertising services 160,000 - - 160,000 Changes in Operating Assets and Liabilities (Increase) Decrease in accounts receivable 2,614 - - 2,614 Increase (Decrease) in sponsorship liability from liquidation of subsidiary in bankruptcy - - (36,024,889) - Increase (Decrease) in accounts payable 97,212 549,985 (63,319) 1,052,325 New Cash Provided (Used) by Operating _________ _________ ___________ ___________ Activities $(49,684) $ 368,707 $(55,812,721) $ 316,047 --------- --------- ------------- ---------- The accompanying notes are an integral part of these consolidated financial statements F- 7
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Consolidated Statement of Cash Flows (A development stage company) From Inception of the Development For the Stage on Nine Months Ended For the December 10, September 30, Year Ended 1998 Through (UNAUDITED) DECEMBER 31, September 30, (UNAUDITED) 2000 1999 1999 2000 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Reduction in indebtedness arising from disposal of subsidiaries in bankruptcy $ - $ - $56,160,240 $ - ----------- Net Cash (Used) by Investing Activities - - 56,160,240 - ---------- CASH FLOWS FROM FINANCING ACTIVITIES Collections from stock subscriptions cash Received from Note Payable 125,000 - - 125,000 Payments on Notes Payable - (343,000) (343,000) (350,800) Net Cash Provided by Financing Activities 125,000 (343,000) (343,000) (225,800) ------- --------- ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Equipment purchase (63,144) - - (63,144) -------- --------- ---------- ------------ Net Cash (Used) by Investing Activities $(63,144) $ - $ - $ (63,144) -------- --------- ---------- ------------ The accompanying notes are an integral part of these consolidated financial statements F- 8
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Consolidated Statement of Cash Flows (A development stage company) From Inception of the Development Stage on For the December 10, Nine Months Ended For the 1998 Through September 30, Year Ended September 30, (Unaudited) December 31, (Unaudited) ----------------------------------- --------------- ---------------- 2000 1999 1999 2000 ---- ---- ---- ---- (DECREASE) IN CASH AND $ $ 25,707 $ 4,519 $27,103 CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,931 4,519 - - CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,103 $ 30,226 $ 4,519 $ 27,103 --------- -------- ------- -------- CASH PAID DURING THE PERIOD FOR: Interest $ - $ 674,469 $674,469 $674,469 Income Taxes $ - $ - $ - $ - NON-CASH FINANCING ACTIVITIES Stock Subscriptions Receivable arising from pooling of interests With DNAPrint genomics, Inc. (Florida) $ - $1,000,000 $ - $1,000,000 Unrealized Income (Loss) On GRG, Inc. $ (126,793) $ - $ - $(126,793) Common stock issued for land subsequently swapped for investment in Globalseer, Inc. $ 2,000,000 $ - $ - $ 2,000,000 The accompanying notes are an integral part of these consolidated financial statements F- 9
DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS DNAPrint genomics, Inc., (formerly Catalyst Communications, Inc.,) (DNAPrint) was incorporated under the laws of the State of Utah on January 3, 1983 as Lexington Energy, Inc. DNAPrint was organized for the purpose of investing in all forms of investments, but has since changed its purpose to human genome sciences. Prior to 2000, DNAPrint genomics, Inc., had three subsidiaries, all of which were liquidated and replaced by a new subsidiary, as indicated below: a. Homestyle Harmony, Inc. Homestyle Harmony, Inc. (HHI) was incorporated under the laws of the State of Florida on October 20, 1993. HHI was in the business of operating specialty restaurants located in Sarasota and Clearwater, Florida. On February 5, 1999, Homestyle Harmony, Inc. filed a petition for relief under Chapter 7 of the federal bankruptcy laws of the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, Case No. 99-1654-8P7. The Company was discharged from debts and ceased doing business as of that date. b. Catalyst Communications, Inc. Catalyst Communications, Inc., (formerly Jackpot Communications, Inc.) (CCIF) was incorporated under the laws of the State of Florida on April 2, 1997. CCIF was incorporated as Jackpot Communications, Inc., and changed its name to Catalyst from the parent, future reference to the subsidiary will be as CCIF. CCIF was incorporated to engage in the promotion and marketing of prepaid phone cards. On February 5, 1999, Catalyst Communications, Inc., filed a petition for relief under the Middle District of Florida, Tampa Division, Case No. 99-1652-8P7. The Company was discharged from debts and ceased doing business as of that date. c. Comcash, Inc. Comcash, Inc., (Comcash) was incorporated under the laws of the State of Florida on April 12, 1997. Comcash was incorporated to engage in the promotion and marketing of prepaid phone cards. Comcash is a wholly owned subsidiary of CCIF. CCIF filed a Chapter 7 bankruptcy petition on February 5, 1999, by virtue of the CCIF bankruptcy, Comcash, Inc., ceased business as of that date. d. DNAPrint genomics, Inc. (Florida) DNAPrint genomics, Inc. (a Florida Corporation) (DNA) was incorporated under the laws of the State of Florida in May 2000. DNA specializes in the construction of electronics facilities to assist scientists in researching and assembling data from the human genome and other advances in genetics research. DNA was acquired on July 15, 2000 for 192,000,000 shares of DNAPrint common stock. The acquisition will be accounted for as a pooling of interests for accounting purposes because the Company and DNA are considered to be under common control. See Note 8 for further discussion. e. Principals of Consolidation The accounts included here include those of DNAPrint genomics, Inc., (the parent), DNAPrint genomics, Inc. (Florida), Catalyst Communications, Inc., Homestyle Harmony, Inc., and Comcash, Inc., collectively they are referred to herein as "the Company". All significant intercompany accounts have been eliminated in consolidation. F- 10 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Accounting Method The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a calendar year end. b. Cash and Cash Equivalents Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition. The Company maintains its cash accounts in several bank accounts. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. The Company's cash balance in some of its bank accounts sometimes exceeds the guarantee. c. Accounts Receivable Accounts receivable is shown net of allowances for doubtful accounts. All accounts receivable deemed uncollectable have been written off at the balance sheet date. d. Depreciation and Amortization Property and equipment are stated at cost. Depreciation is computed, using primarily the straight-line method, over the estimated useful lives of the assets. Total depreciation expense for the nine months ended September 30, 2000 and 1999 was $1,111, and zero respectively, and depreciation expense was zero for the year ended December 31, 1999. e. Revenue Recognition Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returned and allowances, and other adjustments are provided for in the same period the related sales are recorded. f. Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. g. Provision for Taxes At December 31, 1999, the Company had net operating loss carryforwards of approximately $7,000,000 that may be offset against future taxable income through 2014. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforward will expire unused. Accordingly, the potential tax benefits of the loss carryforward will expire unused. Accordingly, the potential tax benefits of the loss carryforward are offset by a valuation account of the same amount. F-11 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) h. Loss Per Share The computations of basic income (loss) per share of common stock are based on the weighted average number of shares outstanding at the date of the financial statements as follows: For nine month For nine month For the Period Ended Period Ended Year Ended September 30, September 30, December 31, 2000 1999 2000 (Unaudited) (Unaudited) ------------------------------------------ Numerator Net Loss $ (310,621)$ (181,278) $(20,061,513) Denominator (weighted average number of shares outstanding) $198,222,466 $160,494,173 $160,494,173 Income (loss) per share $ (.002) $ (.001) $ (.125) Dilutive loss per share is not presented, as there are no potentially dilutive items outstanding. i. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. j. Restated Consolidated Financial Statements Prior period consolidated financial statements have been restated to conform to current financial statement presentation. k. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which addresses the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 and is not required to be applied retroactively. The adoption of this statement had no material impact on the Company's financial statements. F-12 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) l. Long-Lived Assets All long-lived assets are evaluated yearly for impairment per SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." Any impairment in value is recognized as an expense in the period when the impairment occurs. m. Comprehensive Income Comprehensive income consists of net income and other gains and losses affecting shareholders' equity that, under generally accepted accounting principles, are excluded from net income. For the Company, such items consist primarily of unrealized gains and losses on marketable equity investments. Balances of related after-tax components comprising accumulated other comprehensive income included in stockholders equity at December 31, 1999 and September 30, 2000 are as follows: Unrealized Gains (Losses) SECURITIES Balance, January 1, 1999 $ 222,443 Change for the year ended December 31, 1999 (after tax) $ -0- Balance, December 31, 1999 $ 222,443 Unrealized gain (loss) for the nine month period ended SEPTEMBER 30, 2000 (AFTER TAX) $(126,793) ------------- Balance, September 30, 2000 $ 95,630 ============= n. Research and Development Costs The Company expenses research and development costs as incurred. NOTE 3 -COMMITMENTS AND CONTINGENCIES a. Leases DNAPrint genomics, Inc., (Florida) leases office space under terms of a lease executed August 7, 2000. Lease term is six months ending January 31, 2001, the monthly lease payment is $1,660.00. The Company leases equipment under terms of a lease executed September 1999. Lease terms is 48 months, the monthly lease payment is $1,988.45. Rent expense for the nine months ended September 30, 2000 and 1999 was $6,682 and $-0-, respectively. F-13 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 3 -COMMITMENTS AND CONTINGENCIES (continued) a. Leases (continued) Operating lease commitments for the next five years are as follows: Year Ended September 30, 2001 $30,501 2002 $23,861 2003 $23,861 2004 $ - 2005 $ - b. Commitments On September 22, 2000, the Company signed a purchase agreement with Orchid Biosciences, Inc. to acquire $500,000 of equipment. Under this commitment which begins when equipment included in the agreement is installed in the Company's facilities (expected November 2000). The Company also signed a supply and license agreement by which it will be liable to purchase $140,000 of genotypes kits and pay a 15% royalty to Orchid for compensation from the sale or license of any discoveries found from the genomics, not subject to the option (see below). Simultaneously, Orchid purchased an option for $350,000, payable in November 2000, to co-develop and co-commercialize certain existing and future intellectual properties and products of DNAPrint genomics for a twenty-five year period. Under the terms of the agreement, DNAPrint granted Orchid an option to license the rights to co-develop and/or co-commercialize certain DNAPrint genomics products and properties. The option provides Orchid exclusive rights to negotiate partnership terms with DNAPrint for these products and properties. The option covers a broad spectrum of intellectual properties including genetic algorithms, software and information resources such as single nucleotide polymorphism (SNP) and haplotype determinations and multivariate associations with complex human traits and diseases. The option gives Orchid the right of first refusal for the property defined above, if Orchid does not match the price, DNAPrint is free to license to a third party. Properties not subject to the option are subject to a payment of 15% royalty on the amount of profit to Orchid. The Company has also entered into a commitment to lease facilities in an office building being purchased by George Frudakis, a Corporate Officer, to be finalized in November, 2000. c. Litigation From time to time, the Company is subject to litigation in the normal course of business. The Company believes that any adverse outcome from litigation would not have a material effect on its financial position or results of operations. NOTE 4 -DEVELOPMENT STAGE COMPANY The Company essentially has reverted to the status of a startup company as it emerged from the bankruptcy proceedings discussed in Note 5 and will be considered to be a development stage company until it generates significant revenues from its core genomics services business. Development stage presentation does not include subsidiaries which were liquidated in 1999. F-14 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 5 - REORGANIZATION ITEMS On December 10, 1998, Catalyst Communications, Inc. (Utah) now known as DNAPrint (the "Debtor") filed a petition for relief under Chapter 11 of the federal bankruptcy laws of the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, Case No. 98-21641-8P1. Under Chapter 11, certain claims against the Debtor in existence prior to the filing of the petition of relief under the federal bankruptcy laws are stayed while the Debtor continues business operations as debtor-in-possession. These claims are reported in the December 31, 1999 balance sheet as "liabilities subject to compromise." Claims secured against the Debtor's assets ("secured claims") also are stayed. Although the holders of such claims have the right to move the Court for relief from the stay. There are no secured claims. Because holders of existing voting shares immediately before confirmation received more than 50% of voting shares of emerging equity, the Company does not qualify for fresh start accounting under SOP 90-7 (See Note 7). NOTE 6 - GOING CONCERN The Company's consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred losses from its inception. The Company has sustained recurring losses and negative cash flow from operations. Over the past year the Company's growth has been funded through private equity. On December 10, 1998 the Company filed a petition for relief under Chapter 11 of the federal bankruptcy laws of the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, Case No. 98-21641-8P1. The Company received approval to exchange certain debt for equity in the Company. This was done through stock issued in October 1999. The Company has terminated the calling card and restaurant business. The Company has acquired a new subsidiary in the Human genome sciences and is concentrating its resources to commence operations of this company. The Company has experienced and continued to experience negative operating margins and negative cash flows, from operations as well as an ongoing requirements for substantial additional capital investment to accomplish the business plan over the next several years. The Company expects to seek additional funding through private or public equity and receives funding through collections on subscriptions receivable and equipment and facilities leases. There can be no assurance as to the availability or terms upon which such capital might be available. NOTE 7 - EQUITY TRANSACTIONS a. Related Party On October 1, 1999, Tampa Bay Financial Holdings, Inc., ("TBFH") a related party controlled by a son of Carl Smith, Sr., (The Company's CEO) acquired the largest claim in the Company's bankruptcy (totaling in excess of $2,500,000) for $1,200,000. The most significant terms of the claims transfer included a provision that TBFH would pay amounts owed in installments as follows: $625,000 At Closing (October 1, 1999) $125,000 Due October 31, 1999 $225,000 Due December 20, 1999 $225,000 Due March 1, 2000 F- 15 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 7 -EQUITY TRANSACTIONS (continued) As part of the bankruptcy TBFH agreed to convert the claim to 125,000,000 shares; however, the Company, in the event of a default by TBFH, was obligated to buy back share proportions to any amounts owed under the claim which were unpaid. As a result, the Company was contingently liable under this agreement in the amount of $1,338,036 at December 31, 1999. TBFH paid all remaining installments in 2000, which resulted in the Company being relieved of this contingent obligation. On August 18, 2000 the Company acquired DNAPrint genomics, Inc. (A Florida Corporation) (DNA). DNA was incorporated under the laws of the State of Florida in May 2000. DNA specializes in the construction of electronic facilities to assist scientists in researching and assembling data from the human genome and other advances in genetics research. DNA was acquired on July 15, 2000 for 192,000,000 shares of DNAPrint common stock. The acquisition will be treated as a pooling of interests for accounting purposes (See Note 8). b. Other In January, 2000, the Company issued 8,000,000 restricted common shares to an unrelated party as an inducement to enter into a contract to provide advertising, marketing, and consulting services in connection with a Hotel Development the Company was planning. The Company has since abandoned the project and expensed the consideration based on the trading price of $.02 per share at the time of the transaction. On January 31, 2000 the Company acquired a 17-acre tract of undeveloped land in Apex, North Carolina (from an unrelated party) for 30,000,000 restricted common shares. The Company subsequently sold the land to Penn-Akron Corporation, a start up Nevada Public Corporation in the internet-based education business for 4,500,000 restricted common shares. NOTE 8 -BUSINESS ACQUISITION OF DNAPRINT GENOMICS, INC. On July 15, 2000 the Company exchanged 192,000,000 shares of its common stock in a business combination accounted as a pooling of interests because the Company and DNA are considered to be under common control. DNA's principal assets included certain genomics equipment and a stock subscription receivable of $1,000,000 from Tampa Bay Financial, Inc., and affiliates, a common shareholder. This transaction included the Company's assumption of approximately $71,584 in equipment operating lease obligations and operating leases of office space from DNA. DNAPrint genomics, Inc. (Florida) was formed in May 2000 through the combination of the Gaff Biologic division of Pacific Atlantic, Inc., and a stock subscription receivable of $1,000,000 from Tampa Bay Financial, Inc. (a controlling shareholder of both companies). As part of the transaction, 115,200,000 shares of common stock have been placed in escrow to be released upon the achievement of certain performance conditions. The formula for the earnout of escrowed shares is as follows: - One share for every 1.1 cent of gross profit achieved by DNAPrint genomics, Inc. or one share for every 2.56 cents of valuation of DNAPrint genomics, Inc. (Florida) based on the appraisal of a mutually acceptable (to the Company and Chief Scientific Officer Tony Frudakis) independent business valuation firm. F-16 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 8 -BUSINESS ACQUISITION OF DNAPRINT GENOMICS, INC. (continued) Pacific Atlantic continued in existence subsequent to September 30, 1999, as a shareholder of the Company. The assets of Pacific Atlantic not related to the transaction with the Company have not been reflected in these financial statements. Summarized results of operations of the separate companies for the period of January 1, 2000 through September 30, 2000, the date of acquisition, are as follows: DNAPrint genomics, Inc. DNAPrint genomics, Inc. (Utah) (Florida) ------------------------------------------------- Sales $ 7,582 $ 22,419 Net Loss $(191,447) $ (119,174) Following is a reconciliation of the amounts of net sales and net income previously reported with restated amounts: For the Nine Months For the Nine Months Ended September 30, 2000 Ended September 30, 1999 -------------------------------------------------- Sales: DNAPrint genomics, Inc. (Utah), as previously reported $ 7,582 $ 111,817 Dnaprint genomics, Inc. (Florida) $ 22,419 $ 8,152 --------------- --------------- As restated $ 30,001 $ 119,969 =============== =============== For the Nine Months For the Nine Months Ended September 30, 2000 Ended September 30, 1999 -------------------------------------------------- Net Income: DNAPrint genomics, Inc. (Utah), as previously reported $(191,447) $(181,262) Dnaprint genomics, Inc. (Florida) $(119,174) $ (16) --------------- --------------- As restated $ (310,621) $(181,278) =============== =============== F-17 DNAPRINT GENOMICS, INC. (Formerly Catalyst Communications, Inc. & Subsidiaries) Notes to Financial Statements (A development stage company) NOTE 8 - BUSINESS ACQUISITION OF DNAPRINT GENOMICS, INC. (continued) For the Year Ended DECEMBER 31, 1999 Sales: DNAPrint genomics, Inc. (Utah), as previously reported $ 46,512 DNAPrint genomics, Inc. (Florida) $ 86,675 -------------- As restated $ 133,187 ============== Net Income: DNAPrint genomics, Inc. (Utah), as previously reported $(20,076,462) DNAPrint genomics, Inc. (Florida) $ (14,949) -------------- As restated $(20,061,513) ============== NOTE 9 - SUBSEQUENT EVENTS On October 19, 2000 the Company merged with S.D.E. Holdings, 1, Inc., an unrelated Nevada company. S.D.E. Holdings, 1, Inc., is a full reporting company under Rule 12 (g) of the Securities and Exchange Commission. The purpose of the merger was to allow the Company to file a 211 application with the National Association of Security Dealers, Inc., as a successor full reporting company to become listed on the OTC Building Board. S.D.E. Holdings had no substantive assets, liabilities, revenues or expenses since its inception and all equity of S.D.E. Holdings, 1, Inc., was cancelled as part of the transaction. As consideration the DNAPrint genomics Inc., (Utah) paid the principals of S.D.E. Holdings 1, Inc., $150,000, which included the legal expenses to administer the transaction. In October, 2000, the Company dividended its minority interest in Penn-Akron Corporation, Inc., to its shareholders since the Company desired to focus more closely on its genomics related projects. F-18 DNAPRINT GENOMICS, INC. ProForma Financial Statements as of September 30, 2000 (unaudited) The following unaudited pro forma financial statements for DNA Print genomics, Inc. have been prepared based upon certain pro forma adjustments to the historical financial statements of DNA Print genomics, Inc. and subsidiaries, and S.D.E. Holdings 1, Inc. set forth elsewhere in this form 8-K. The pro forma financial statements should be read in conjunction with the notes thereto and the historical financial statements of DNA Print genomics, Inc. and subsidiaries, and S.D.E. Holdings 1, Inc. The accompanying balance sheets and pro forma statements of operations for December 31, 1999 and September 30, 2000 and for the nine months ended September 30, 2000, and the year ended December 31, 1999, have been prepared as if the transactions were consummated as of January 1, 1999. The pro forma financial statements do not purport to be indicative of the results which would actually have been obtained had the transactions been completed on the dates indicated or which may be obtained in the future. PF-1 DNAPRINT genomics, Inc. Balance Sheet December 31, 1999 (unaudited) ASSETS DNAPrint S.D.E. ProForma ProForma genomics, Holdings Adjustments Totals Inc. 1 Inc. -------------------------------------------------- Cash in bank $ 63,353 $ 1,488 $ 1,488(3) $ 63,353 Accounts receivable 7,054 - - 7,054 Property and equipment 11,362 - - 11,362 Accumulated depreciation (9,000) - - (9,000) Investment in GRG, Inc. 222,443 - - 222,443 -------------------------------------------------- TOTAL ASSETS $ 298,212 $ 1,488 $(1,488) $ 295,212 ================================================== LIABILITIES AND STOCKHOLDER'S EQUITY Accounts payable $ 241,651 $ 2,220 $(2,220)(3) $ 241,651 Common stock 3,464,010 1,000 (1,000)(4) 3,464,010 Additional paid in capital 5,744,861 - 150,000 (5) 5,744,861 Acquisition cost of S.D.E. Holdings 1 Inc. - - (150,000)(5) - Accumulated other comprehensive income 222,443 - - 222,443 Stock subscriptions receivable (1,000,000) - - (1,000,000) Accumulated earnings prior to development stage (7,442,370) - - (7,442,370) Development stage accumulated deficit (953,383) (1,732) 1,732(6) (935,383) -------------------------------------------------- $ 295,212 $ 1,488 $(1,488) $ 295,212 ================================================== See accompanying notes to pro forma statements. PF-2 DNAPRINT genomics, Inc. Balance Sheet September 30, 2000 (unaudited) ASSETS DNAPrint S.D.E. ProForma ProForma genomics, Holdings Adjustments Totals Inc. 1 Inc. -------------------------------------------------- Cash in bank $ 27,103 $ 1,488 $ 1,488(3) $ 27,103 Accounts receivable 4,440 - - 4,440 Property and equipment 74,507 - - 74,507 Accumulated depreciation (10,111) - - (10,111) Investment in GRG, Inc. 95,650 - - 95,650 Investment in Penn-Akron Corporation 2,000,000 - - 2,000,000 -------------------------------------------------- TOTAL ASSETS $ 2,191,589 $ 1,488 $(1,488) $2,191,589 ================================================== LIABILITIES AND STOCKHOLDER'S EQUITY Accounts payable $ 290,441 $ 2,220 $(2,220)(3) $ 290,441 Common stock 3,844,009 1,000 (1,000)(4) 3,844,009 Additional paid in capital 7,524,861 - - 7,524,861 Accumulated other comprehensive income 95,650 - - 95,650 Stock subscriptions receivable ( 875,000) - - ( 875,000) Accumulated earnings prior to development stage (7,442,370) - - (7,442,370) Development stage accumulated deficit (1,246,002) (1,732) 1,732 (6) (1,246,002) -------------------------------------------------- $ 2,191,589 $ 1,488 $(1,488) $2,191,589 ================================================== See accompanying notes to pro forma statements. PF-3 DNAPRINT genomics, Inc. ProForma Statement of Operations For the year ended December 31, 1999 (unaudited) DNAPrint S.D.E. ProForma ProForma genomics, Holdings Adjustments Totals Inc. 1 Inc. -------------------------------------------------- Sales $ 133,187 $ - $ - $ 133,187 Cost of sales 51,893 - - 51,893 -------------------------------------------------- Gross profit 81,294 - - 81,294 -------------------------------------------------- Bad debt expense 8,152 - - 8,152 Research & development costs 19,833 - - 19,833 General and administrative expenses 20,117,912 1,732 (1,732)(2) 20,117,912 -------------------------------------------------- 20,145,897 (1,732) 1,732 20,145,897 Loss from operations (20,064,603) (1,732) 1,732 (20,064,603) -------------------------------------------------- Other income (expense) Other income 3,090 - - 3,090 -------------------------------------------------- Total other income (expense) 3,090 - - 3,090 -------------------------------------------------- Net loss $20,061,513 $(1,732) $1,732 $(20,061,513) ================================================== Net loss per common share $ (.125) $ .00 $ .00 $ (.125) ================================================== Weighted average number of Common share equivalents Outstanding used for computing Primary earnings per share 160,484,173 1,000,000 160,484,173 =========== ========= =========== See accompanying notes to pro forma statements. PF-4 DNAPRINT genomics, Inc. ProForma Statement of Operations For the Nine Months Ended September 30, 2000 (unaudited) DNAPrint S.D.E. ProForma ProForma genomics, Holdings Adjustments Totals Inc. 1 Inc. -------------------------------------------------- Sales $ 30,001 $ - $ - $ 30,001 Cost of sales 4,039 - - 4,039 -------------------------------------------------- Gross profit 25,962 - - 25,962 -------------------------------------------------- Research & development costs 105,434 - - 105,434 Depreciation and amortization 1,111 - - 1,111 General and administrative expenses 230,038 1,732 (1,732)(2) 230,038 -------------------------------------------------- 336,583 1,732 (1,732) (336,583) Loss from operations ( 310,621) (1,732) 1,732 ( 310,621) -------------------------------------------------- Other income (expense) Other income - - - - -------------------------------------------------- Total other income (expense) - - - - -------------------------------------------------- Net loss $( 310,621) $(1,732) $1,732 $(310,621) ================================================== Net loss per common share $ (.002) $ .00 $ .00 $ (.002) ================================================== Weighted average number of Common share equivalents Outstanding used for computing Primary earnings per share 198,222,466 1,000,000 198,222,466 =========== ========== =========== See accompanying notes to pro forma statements. PF-5 DNA PRINT GENOMICS, INC. AND SUBSIDIARIES NOTES TO PRO FORMA STATEMENT (UNAUDITED) The accompanying pro forma statements of operation give effect to the merger of DNA Print genomics, Inc. and S.D.E. Holdings 1, Inc., all as if consummated on January 1, 1999. The operations of S.D.E. Holdings 1, Inc. have been accounted for as a purchase with DNA Print genomics, Inc. for all periods represented, whereby the basis for accounting of DNA Print genomics, Inc. The accompanying pro forma statements of operations and balance sheet give effect to the following pro forma adjustments: 1. The S.D.E. Holdings 1, Inc. amounts presented are for the period from inception (January 19, 2000) through September 30, 2000. The Company's management believes the amounts presented are representative of the historical operations of S.D.E. Holdings 1, Inc. for the year ended December 31, 1999. 2. Represents the elimination of S.D.E. Holdings 1, Inc. legal and accounting expenses that are not indicative of the combined operations. The DNA Print genomics, Inc. general and administrative expenses include adequate legal and accounting expenses. The Company has shown the $150,000 paid by DNA Print genomics, Inc. to the shareholders of S.D.E. Holdings 1, Inc. for consulting, legal fees, the facilitation of the merger, the filing of related forms with the Securities and Exchange Commission and to cancel their stock as an offset to paid in capital as a result of the business combination. The amount of capital raised to pay this amount has been shown as an increase to paid in capital. The merger provides that: o S.D.E. Holdings 1, Inc. would be merged into DNA Print genomics, Inc. effective October 19, 2000. o Each share issued and outstanding immediately prior to the effective date would remain as issued and outstanding common stock in DNA Print genomics, Inc. without change. 3. Cash adjustments reflect the following: Purchase price all outstanding shares of S.D.E. Holdings 1, Inc. $150,000 amount allocated to shares, net of cancellation of shares 0 -------- Payment of fees and costs in connection with merger $150,000 ======== Elimination of S.D.E. Holdings 1, Inc. to pay Accounts payable ($1,488) ======== 4. Common stock adjustments reflect the following: Elimination of S.D.E. Holdings 1, Inc. common shares ($1,000) PF-6 DNA PRINT GENOMICS, INC. AND SUBSIDIARIES NOTES TO PRO FORMA STATEMENT (UNAUDITED) 5. Paid in capital adjustments: Capital contributions from Tampa Bay Financial, Inc. $150,000 Fees and costs in connection with the merger ($150,000) ---------- $ 0 ========== 6. Adjustments to deficit accumulated during the development stage include the following: Elimination of S.D.E. Holdings 1, Inc. deficit $1,732 ========== Pro forma earnings per share are based on the number of common and common stock equivalents outstanding as of the end of the periods presented and are computed after giving effect to the zero (0) shares of common stock issued resulting from the merger of S.D.E. Holdings 1, Inc. and DNA Print genomics, Inc. as of the beginning of the period. PF-7 S.D.E. HOLDINGS 1 INC. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS FOR THE PERIOD ENDED FEBRUARY 29, 2000 AND FOR THE SEVEN MONTHS ENDED SEPTEMBER 30, 2000 AND CUMULATIVE FROM INCEPTION INDEX TO FINANCIAL STATEMENTS PAGE Independent Auditors' Report F-2 Financial Statements: Balance Sheet F-3 Statements of Operations F-4 Statement of Changes in Stockholders' Equity (Deficit) F-5 Statements of Cash Flows F-6 Notes to Financial Statements F-7 F-1 A.J. ROBBINS, PC Certified Public Accountants and Consultants INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS S.D.E. HOLDINGS 1 INC. BOULDER, COLORADO We have audited the accompanying balance sheet of S.D.E. Holdings 1 Inc. (a development stage company) as of September 30, 2000, and the related statements of operations, changes in stockholders' equity (deficit), and cash flows for the period from January 19, 2000 (inception) to February 29, 2000 and for the seven months ended September 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of S.D.E. Holdings 1 Inc. as of September 30, 2000, and the results of its operations and its cash flows for the period from January 19, 2000 (inception) to February 29, 2000 and for the seven months ended September 30, 2000, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is in the development stage and has not commenced operations. Its ability to continue as a going concern is dependent upon its ability to develop additional sources of capital, locate and complete a merger with another company and ultimately achieve profitable operations. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/A.J. Robbins DENVER, COLORADO OCTOBER 2, 2000 3033 East 1st Avenue, Suite #201, Denver, CO 80206 - 303-321-1281 Fax 303-321-1288 F-2
S.D.E. HOLDINGS 1 INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET SEPTEMBER 30, 2000 ------------------ ASSETS CURRENT ASSETS, CASH $ 1,488 ================== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES, PAYABLE TO RELATED PARTIES $ 2,220 ------------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $.001 par value, 25,000,000 shares 1,000 authorized, 1,000,000 shares issued and outstanding (Deficit) accumulated during the development stage (1,732) ------------------ Total Stockholders' Equity (Deficit) (732) ------------------ $ 1,488 ================== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-3
S.D.E. HOLDINGS 1 INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS CUMULATIVE FOR THE PERIOD FROM FROM JANUARY 19, JANUARY 19, 2000 FOR THE SEVEN 2000 (INCEPTION) MONTHS ENDED (INCEPTION) TO TO SEPTEMBER 30, FEBRUARY 29, SEPTEMBER 30, 2000 2000 22000 ----------------- ----------------- ----- REVENUE $ - $ - $ - ----------------- ----------------- ----------------- EXPENSES: General and Administrative 1,512 220 1,732 ----------------- ----------------- ----------------- Total Expenses 1,512 220 1,732 ----------------- ----------------- ----------------- NET (LOSS) $ (1,512) $ (220) $ (1,732) ================= ================= ================= NET (LOSS) PER COMMON SHARE - BASIC $ * $ * ================= ================= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,000,000 1,000,000 ================= ================= *Less than $(.01) SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-4
S.D.E. HOLDINGS 1 INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD FROM JANUARY 19, 2000 (INCEPTION) TO FEBRUARY 29, 2000 AND FOR THE SEVEN MONTHS ENDED SEPTEMBER 30, 2000 (DEFICIT) ACCUMULATED STOCK DURING THE COMMON STOCK SUBSCRIPTION DEVELOPMENT SHARES AMOUNT RECEIVABLE STAGE TOTAL ---------------------------------------------------------------------------------------------- BALANCES, JANUARY 19, 2000 - $ - $ - $ - $ - Issuance of stock on February 1,000,000 1,000 (800) - 200 21, 2000, for $.001 per share NET (LOSS) - - - (220) (220) ---------------- ---------------- ---------------- ---------------- ---------------- BALANCES, FEBRUARY 29, 2000 1,000,000 1,000 (800) (220) (20) Satisfaction of subscription - - 800 - 800 receivable NET (LOSS) - - - (1,512) (1,512) ---------------- ---------------- ---------------- ---------------- ---------------- BALANCES, SEPTEMBER 30, 2000 1,000,000 $ 1,000 $ - $ (1,732) $ (732) ================ ================ ================ ================ ================ SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-5
S.D.E. HOLDINGS 1 INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS CUMULATIVE FOR THE PERIOD FROM FROM JANUARY 19, JANUARY 19, 2000 FOR THE SEVEN 2000 (INCEPTION) MONTHS ENDED (INCEPTION) TO TO SEPTEMBER 30, FEBRUARY 29, SEPTEMBER 30, 2000 2000 2000 ----------------- ----------------- ------------ CASH FLOWS FROM (TO) OPERATING ACTIVITIES: Net (loss) from operations $ (1,512) $ (220) $ (1,732) Adjustments to reconcile net (loss) to net cash provided (used) by operating activities: Changes in: Payable to related parties 2,200 20 2,220 ----------------- ----------------- -------------- Net Cash Provided (Used) by Operating Activities 688 (200) 488 ----------------- ----------------- -------------- CASH FLOWS FROM (TO) FINANCING ACTIVITIES: Collection of subscription receivable 800 - 800 Common stock issued for cash - 200 200 ----------------- ----------------- -------------- Net Cash Provided by Financing Activities 800 200 1,000 ----------------- ----------------- -------------- NET INCREASE (DECREASE) IN CASH 1,488 - 1,488 CASH, beginning of period - - - ----------------- ----------------- -------------- CASH, end of period $ 1,488 $ - $ 1,488 ================= ================= ============== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-6
S.D.E. HOLDINGS 1 INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES HISTORY S.D.E. Holdings 1 Inc. (the Company), a development stage company, was organized under the laws of the State of Nevada on January 19, 2000. The Company is in the development stage as defined in Financial Accounting Standards Board Statement No. 7. The fiscal year end is the last day of February. GOING CONCERN AND PLAN OF OPERATION The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is in the development stage and has not earned any revenues from operations to date. The Company is currently devoting its efforts to locating merger candidates. The Company's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital, locate and complete a merger with another company, and ultimately, achieve profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. CASH Cash and cash equivalents consists primarily of cash on hand and cash in banks. INCOME TAXES The Company uses the liability method of accounting for income taxes pursuant to Statement of Financial Accounting Standards No. 109. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year end. For federal income tax purposes, substantially all expenses must be deferred until the Company commences business and then they may be written off over a 60 month period. Therefore, $1,732 of net losses incurred in the period from January 19, 2000 (inception) to September 30, 2000 have not been deducted for tax purposes and represent a deferred tax asset. The Company is providing a valuation allowance in the full amount of the deferred tax asset since there is no assurance of future taxable income. Tax deductible losses can be carried forward for 20 years until utilized. F-7 S.D.E. HOLDINGS 1 INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EARNINGS (LOSS) PER COMMON SHARE During 1997 the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Basic earnings (loss) per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. NOTE 2 - STOCKHOLDERS' EQUITY During February 2000, the Company issued for cash and a stock subscription receivable 500,000 shares of its $.001 par value common stock to a private investor. The Company also issued for cash and a stock subscription receivable 500,000 shares of its $.001 par value common stock to its president and the father of its president. In March 2000 the stock subscription receivables were paid in full. In September 1990 the Company entered into an agreement to sell 100% of the Company's outstanding common stock for $150,000; simultaneously, 500,000 outstanding shares were retired. NOTE 3 - PAYABLE TO RELATED PARTIES The Company received advances of $2,200 from stockholders in March 2000. F-8 EX-10.1 2 0002.txt PLAN OF MERGER PLAN OF MERGER THIS PLAN OF MERGER (this "Plan of Merger"), dated as of ____________________, 2000, is among S.D.E. Holdings 1, Inc., a Nevada corporation, and DNA Print genomics, Inc., a Utah corporation (collectively "Constituent Corporations"). WHEREAS, DNA Print genomics, Inc., a Utah corporation, ("the parent"), as owner of 100% of the issued and outstanding capital (common) stock of S.D.E. Holdings 1, Inc., a Nevada Corporation, and S.D.E. Holdings 1, Inc. ("the subsidiary") have agreed by written consent to the merger of S.D.E. Holdings 1, Inc. with and into DNA Print genomics, Inc; and WHEREAS, the respective Boards of Directors of the Constituent Companies have each approved the merger of DNA Print genomics, Inc. into S.D.E. Holdings 1, Inc. in accordance with Utah Corporation Code and the Nevada Revised Statutes; and WHEREAS, this Plan of Merger shall be filed with Certificate of Ownership with the Secretary of State of Nevada and the Secretary of State of Utah in order to consummate the merger of the S.D.E. Holdings 1, Inc. with and into Parent; and WHEREAS, the Constituent Companies have agreed to execute and file this Plan of Merger as may be required under the Nevada Revised Statutes and the Utah Corporation Code. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, Parent and the Subsidiary hereby agree as follows: 1. THE MERGER. At the Effective Time, in accordance with this Plan of Merger, and the Utah Corporation Code and the Nevada Revised Statutes, S.D.E. Holdings 1, Inc. shall be merged (such merger being herein referred to as the "Merger") with and into DNA Print genomics, Inc., the separate existence of the Subsidiary shall cease, and DNA Print genomics, Inc. shall continue as the surviving corporation. Parent hereinafter sometimes is referred to as the "Surviving Corporation." 2. EFFECT OF THE MERGER. When the Merger has been effected, the Surviving Corporation retain its name DNA Print genomics, Inc. and the Surviving Corporation shall thereupon and thereafter possess all the rights, privileges, powers and franchises of a public as well as of a private nature, and be subject to all the restrictions, disabilities and duties of each of the Corporations; and all and singular, the rights, privileges, powers and franchises of each of the Constituent Corporations and all property, real, personal and mixed, and all debts due to either of the Corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of such corporations shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectually the property of the Surviving Corporation as they were of the Constituent Corporations, and the title to any real estate vested by deed or otherwise, in any of such Constituent Corporations, shall not revert or be in any way impaired by reason of the Merger; but all rights of creditors and all liens upon any property of any of said Constituent Corporations shall be preserved unimpaired, and all debts, liabilities and duties of the respective Constituent Corporations shall thenceforth attach to the Surviving Corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it. 3. CONSUMMATION OF THE MERGER. The parties hereto will cause the Merger to be consummated by filing with the Secretaries of State of Nevada and Utah, Articles of Merger, a Certificate of Ownership, and this Plan of Merger in such form as required by, and executed in accordance with, the relevant provisions of the Nevada Revised Statutes and the Utah Corporation Code (the time of such filing being the "Effective Time" and the date of such filing being the "Effective Date.") 4. ARTICLES OF INCORPORATION: BYLAWS: DIRECTORS AND OFFICERS. The Articles of Incorporation and Bylaws of the Surviving Corporation shall be identical with the Articles of Incorporation and Bylaws of DNA Print genomics, Inc. as in effect immediately prior to the Effective Time until thereafter amended as provided therein and under Nevada Statutes. 5. CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of either Constituent Company or the holder of any of the shares (the "Shares") of common stock, (the "Common Stock") of the Company: a. Each Share of Parent issued and outstanding immediately prior to the Effective Time shall remain as issued and outstanding common stock of the merged companies without change, pro rata. b. Each Share which is held in the treasury of the S.D.E. Holdings 1, Inc. or which is owned by any direct or indirect subsidiary of the Company shall be canceled and retired, and no payment shall be made with respect thereto. c. Each outstanding or authorized subscription, option, warrant, call, right (including any preemptive right), commitment, or other agreement of any character whatsoever which obligates or may obligate the Parent to issue or sell any additional shares of its capital stock or any securities convertible into or evidencing the right to subscribe for any shares of its capital stock or securities convertible into or exchangeable for such shares, if any, shall remain unchanged. d. Each share of Common Stock of DNA Print genomics, Inc. issued and outstanding immediately prior to the Effective Time shall remain as one share, of the Surviving Corporation. e. No Fractional Shares and no certificates or scrip representing such fractional Merger Shares, shall be issued. 6. TAKING OF NECESSARY ACTION: FURTHER ACTIOn. Each of Parent, and the Subsidiary shall use all reasonable efforts to take all such actions as may be necessary or appropriate in order to effectuate the Merger under Nevada Revised Statutes, the Utah Corporation Code, or federal law as promptly as possible. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of the Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of either of the Constituent Corporations, the officers and directors of the Surviving Corporation are fully authorized in the name of their corporation or otherwise to take, and shall take, all such lawful and necessary action. IN WITNESS WHEREOF, the authorized officers of S.D.E. Holdings 1, Inc. and DNA Print genomics, Inc. have caused this Plan of Merger to be executed as of the date first above written and further affirm and certify that the Resolutions authorizing the merger pursuant to the Plan of Merger have been duly adopted by the Boards of Directors of each company and that no vote of shareholders of either constituent company is required under Nevada Revised States or the Utah Code. DNA PRINT GENOMICS, INC. (a Utah corporation) By:/s/Carl L. Smith ________________________ President S.D.E. HOLDINGS 1, INC. (a Nevada corporation) By:/s/Carl L. Smith ________________________ President EX-10.2 3 0003.txt ARTICLES OF MERGER ARTICLES OF MERGER OF S.D.E. HOLDINGS 1, INC. (A Nevada corporation) and DNA Print genomics, Inc. (A Utah corporation) The Undersigned, being President of DNA Print genomics, Inc., a Utah corporation (Parent), and the President of S.D.E. Holdings 1, Inc., a Nevada corporation (subsidiary) (collectively "the constituent entities"), hereby certify as follows: 1. Pursuant to NRS 92A.180(a), a Plan of Merger has been approved by the board of directors of DNA genomics, Inc., a Utah corporation, and S.D.E. Holdings 1, Inc., a Nevada corporation. 2. The approval of shareholders of the Constituent Entities of DNA Print genomics, Inc. and S.D.E. Holdings 1, Inc. is not required under NRS 92A.180(1) or Utah Statutes 16-10-a-1103(7) and 1104 for either company. 3. Pursuant to NRS 92A.180(1), DNA Print genomics, Inc., a Utah corporation, parent corporation and owner of 100% of the issued and outstanding shares of S.D.E. Holdings 1, Inc., a Nevada corporation subsidiary, has adopted a Resolution to merge the subsidiary S.D.E. Holdings 1, Inc. into DNA Print genomics, Inc. 4. No Notice is necessary under NRS 92A.180(3). 5. No share conversion will occur. All outstanding shares of DNA will remain issued and outstanding without change. All shares of SDE are retired in the merger. 6. Parent, DNA, owns 100% of the issued and outstanding stock of subsidiary SDE, immediately prior to this merger. 7. The complete and executed Plan of Merger is on file at the Registered Offices of the corporation at ___________________________________________. 8. The effective date hereof complies with Utah Statutes. 9. There are no amendments to the Articles of Incorporation of Parent, DNA. 1 This merger is pursuant to Utah Statutes 16-10 a-1104. Effective this 13th day of October, 2000. DNA Print Genomics, Inc. S.D.E. Holdings 1, Inc. a Utah corporation a Nevada corporation By:/s/Carl L. Smith By:/s/Carl L. Smith Carl L. Smith, President/Secy Carl L. Smith, President/Secy (Printed Name) (Printed Name) State of ______________________________ ) )ss. County of ____________________________ ) On this ____ day of _______________, 2000, before me, a Notary Public, personally appeared ________________________, President of DNA Print Genomics, Inc. and executed on this date the foregoing instrument for the purposes therein contained, by signing on behalf of the above named corporation as a duly authorized director and officer. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. ------------------------------ Notary Public Residing at __________________ SEAL My Commission Expires: ------------------------ 2 State of ___________________________ ) )ss. County of _________________________ ) On this ____ day of __________________, 2000, before me, a Notary Public, personally appeared ________________________, President of S.D.E. Holdings 1, Inc. and executed on this date the foregoing instrument for the purposes therein contained, by signing on behalf of the above named corporation as a duly authorized director and officer. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. ------------------------------ Notary Public Residing at ________________________ SEAL My Commission Expires: ------------------------ 3 EX-10.3 4 0004.txt ARTICLES OF AMENDMENT ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF CATALYST COMMUNICATIONS, INC. Articles I and IV of the Articles of Incorporation of Catalyst Communications, Inc., a Utah Corporation (the "Corporation"), is hereby further amended and restated in its entirety to read as follows: ARTICLE I The name of this Corporation is DNAPrint genomics, Inc., formerly known as Catalyst Communications, Inc., and prior to December 26, 1996 known as Homestyle Harmony, Inc., and prior to 1996 known as Aire Wrap Systems International, Inc., and originally incorporated as Lexington Energy, Inc. ARTICLE IV AUTHORIZED SHARES. The Company shall have two (2) classes of shares, that being common stock and preferred stock. The Company shall have the authority to issue five hundred million (500,000,000) shares of common stock with a par value of one cent ($0.01) per share. The Company shall have the authority to issue ten million (10,000,000) shares of preferred stock with a par value of one cent ($0.01) per share. All stock will be fully paid and nonassessable, and the stock of this Corporation shall not be liable for further call or assessment. The authorized shares shall be issued at the discretion of the Directors. The foregoing amendment (the "Amendment") was adopted and approved by the written consent, dated and effective July 17, 2000, of the holders of more than a majority of the Corporation's 192,360,986 shares of $0.01 (one tenth) par value voting common stock then outstanding in accordance with the provisions of Section 16-10a-704 of the Utah Revised Business Corporation Act. The holders of the 192,360,986 shares of $0.01 (one tenth) par value voting common stock were the only voting group entitled to vote on the Amendment, and each of these shares was entitled to one vote. The total number of undisputed votes cast for the Amendment by this voting group was 100,667,772, and the number of votes cast for the Amendment by such voting group was sufficient for approval by that voting group. IN WITNESS WHEREOF, these Articles of Amendment are executed on July 17, 2000. CATALYST COMMUNICATIONS, INC. By: /s/Carl L. Smith Carl L. Smith Chairman and Chief Executive Officer EX-10.4 5 0005.txt SUPPLY & LICENSE AGREEMENT SUPPLY AND LICENSE AGREEMENT FOR AUTOMATED SNP ANALYSIS THIS AGREEMENT, made this 15th day of September 2000 (the "Effective Date"), is between Orchid Biosciences, Inc., a Delaware corporation, having a principal place of business at 303 College Road East, Princeton, New Jersey 08543 ("Orchid"), and DNAPrint Genomics, Inc., a Florida corporation, having a principal place of business at 1748 Independence Boulevard, Suite D1, Sarasota, Florida 34234 ("DNAPrint"). The parties agree as follows: 1 Definitions In this Agreement: 1.1 "Formatting" means the custom design of PCR and SNP-IT primers and quality control of the primers for amplification and subsequent SNP-IT functionality. 1.2 "Genotyping Services" means the practice of Primer Extension on behalf of a third party and the compilation and reporting of the results to the third party. 1.3 "Improvements" means any and all new and useful processes, manufactures, compositions of matter or methods of use, first conceived, reduced to practice or developed during the term of this Agreement, by DNAPrint or its employees, consultants or contractors. 1.4 "Know-How" means Orchid's proprietary information as of the Effective Date for performing automated SNP-IT. 1.5 "Orchid Trademarks" means the marks listed in attached Schedule 1.5 and any stylized version or variation thereof. 1.6 "Primer Extension" means a nucleic acid template-dependent primer extension reaction to determine the identity of a single nucleotide base at a specific position in a nucleic acid of interest. 1.7 "DNAPrint's SNPstream Instrument" means the SNPstream Instrument DNAPrint is purchasing from Orchid to be located at ________. 1.8 "SNP Assay Kit" means the SNPware(TM) preformatted consumable assay kits containing validated and quality controlled reagents or similar kits for genotyping. 1.9 "SNP Identification Technology" or "SNP-IT" means an assay that identifies one and only one base position of a target nucleic acid. 1 2 Supply Of SNP Assay Kits 2.1 During the term of this Agreement, Orchid will sell to DNAPrint, and DNAPrint will purchase from Orchid, all of DNAPrint's requirements of SNP Assay Kits. 2.2 Orchid will provide Formatting with its supply of SNP Assay Kits to DNAPrint in accordance with section 3. DNAPrint may not order any SNP Assay Kit until Orchid completes Formatting for the particular SNP(s) which the SNP Assay Kit is intended to identify. 2.3 DNAPrint will issue written purchase orders to Orchid for SNP Assay Kits. The purchase orders are subject to the terms and provisions of this Agreement which, if other or different than those of the purchase order, will be controlling even if the purchase order is accepted and filled by Orchid. 2.4 Orchid will use all commercially reasonable efforts to supply DNAPrint's reasonable requirements of forecast SNP Assay Kits. 2.5 All purchase orders will be accepted unless Orchid notifies DNAPrint within ten (10) business days of receipt of the purchase order that Orchid cannot fill the purchase order. 2.6 DNAPrint may defer or cancel delivery of SNP Assay Kits specified in a purchase order by notifying Orchid at least twenty (20) business days prior to the requested delivery date. All permitted SNP Assay Kit cancellations are subject to cancellation charges of ten percent (10%) of the purchase price. A request by DNAPrint to defer delivery of SNP Assay Kits for more than sixty (60) days after the date provided on the purchase order is considered a cancellation for the purposes of this paragraph. 3 Formatting 3.1 SNP Assay Kits supplied under this Agreement will be Formatted for particular SNPs of interest to DNAPrint. 3.2 Accordingly, prior to submitting a purchase order for a SNP Assay Kit, DNAPrint will describe to Orchid the SNP of interest for which the SNP Assay Kit will be Formatted. 3.3 With respect to a submitted SNP sequence which (i) includes at least fifty (50) flanking bases both upstream and downstream of the SNP of interest (e.g. greater than 100 base pairs of interest), (ii) is at least fifty (50%) known (e.g. no more than five (5) "N" per 101 base sequence, (iii) has a GC content between thirty five (35) and seventy (70) percent, (iv) has a quality score of PHRED 20 or higher, and (v) is annotated with SNP and/or insertion or deletion sites, Orchid will provide the Formatting, using its standard procedures, free of charge. Orchid's standard Formatting procedures involve _____. 3.4 In the event that Orchid is unable to properly Format SNP Assay Kits for a submitted SNP of interest using its standard Formatting procedures, DNAPrint may request Orchid to use more than its standard Formatting procedures to attempt to properly Format SNP Assay Kits. DNAPrint will pay Orchid two thousand dollars ($2,000) per man-day for its efforts beyond its standard formatting procedures. 2 3.5 Both Orchid and DNAPrint recognize that Formatting for a particular SNP of interest is inexact and may be commercially unreasonable or impossible. Therefore, neither DNAPrint nor Orchid expect Orchid to be able to Format for more than X% of the SNPs of interest submitted. In the event, however, Orchid is unable to Format at least X% of the SNPs DNAPrint submits, then the Minimum Amount of SNP Assay Kits DNAPrint is committed to purchase under paragraph 4.1 will be reduced by a factor equal to the percentage of SNPs Orchid was unable to Format (Y%) divided by X% (i.e. the Minimum Amount will be reduced in a amount equal to Y%/X% x the Minimum Amount). 4 Minimum 4.1 DNAPrint will purchase, at a minimum, SNP Assay Kits to perform two hundred thousand (200,000) genotypes during the term of this Agreement (the "Minimum Amount"). 4.2 In the event the quantity of SNP Assay Kits actually purchased by DNAPrint is less than the Minimum Amount, DNAPrint will pay to Orchid a Shortfall Fee equal to fifty percent (50%) of the purchase price of the difference in the Minimum Amount and the amount of SNP Assay Kits it did purchase. 4.3 DNAPrint will pay the Shortfall Fee to Orchid within thirty (30) days of the expiration or termination date of this Agreement. 4.4 In the event Orchid is unable to fill DNAPrint's purchase order on the delivery date set forth in the purchase order, then the Minimum Amount will be reduced by the amount of SNP Assay Kits Orchid is unable to supply. 3 5 Delivery 5.1 Orchid will use reasonable efforts to deliver to DNAPrint SNP Assay Kits on or before the date requested in DNAPrint's purchase order, but will have no obligation to deliver SNP Assay Kits in less than twenty (20) business days from receipt of the purchase order. 5.2 Orchid will ship SNP Assay Kits F.O.B. Orchid's manufacturing plant, or its supplier's plant, freight prepaid, to the address specified in DNAPrint's purchase order. DNAPrint will be invoiced for all shipping charges, freight, insurance, special handling (where required) and similar costs, import permits and duties (if applicable) and all taxes assessed. Title and the risk of loss with respect to SNP Assay Kits transfer to DNAPrint at this time. 5.3 DNAPrint, in consultation with Orchid, will select the carrier or freight forwarder which will be at all times an agent of DNAPrint. Orchid will not be liable for any damages, loss or penalty for delay in delivery caused by the carrier or freight forwarder or for failure of the carrier or freight forwarder to give DNAPrint notice of any delay. 6 Price and Payment 6.1 The purchase price for SNP Assay Kits to be delivered by Orchid under this Agreement to DNAPrint will be equivalent to seventy cents ($.70) per genotype. 6.2 All payments for SNP Assay Kits will be made in United States Dollars and within thirty (30) days of receipt of Orchid's invoice therefor. 6.3 Orchid may add an interest charge equal to 1/1/2% per month (18% per year) on any amounts payable by DNAPrint that remain unpaid after the payment due date. 7 Forecasts and Allocation 7.1 Within thirty (30) days of the Effective Date of this Agreement and at the beginning of each calendar quarter thereafter, DNAPrint will provide Orchid with a written forecast of its requirements for SNP Assay Kits for the remainder of the term of this Agreement. The first calendar quarter of a forecast represents a firm commitment to purchase such SNP Assay Kits in that quarter (subject to the cancellation provisions of paragraph 2.6). The remaining portion of each forecast represents a non-binding projection on which Orchid will base its material procurement and manufacturing plans. 7.2 In the event that demand for any SNP Assay Kit should at any time exceed Orchid's capacity to fill and deliver all of its customer's orders (and its own need for SNP Assay Kits), Orchid will notify DNAPrint of the excess demand. Until such time as the excess demand abates or Orchid's capacity becomes sufficient to meet such demand, Orchid will have the right to equitably allocate, in any manner it deems just and fair, its available supplies, manufacturing capacity, inventory and other resources, among DNAPrint, itself and its other customers, including those not then under contract. 4 7.3 In the event Orchid is unable, or expects to be unable, to reasonably supply DNAPrint's requirements of forecast SNP Assay Kits for twenty (20) consecutive business days from the delivery date set out in DNAPrint's purchase order, DNAPrint may obtain from any other source, reasonably acceptable to Orchid, that portion of its requirements for SNP Assay Kits which Orchid is unable to reasonably supply for so long as Orchid is unable or expects to be unable to supply that portion of DNAPrint's requirements. The alternate source will supply only SNP Assay Kits that conform to Orchid's specifications and are of the same or better quality as those supplied by Orchid. Orchid will provide DNAPrint with technical assistance and information as may be reasonably required by DNAPrint to establish an alternate source of SNP Assay Kits, including a license under any patent to which Orchid has rights to license on the method of manufacture of the SNP Assay Kits or on the method of use of the SNP Assay Kits authorized in this Agreement. 7.4 In the event that both Orchid and sources reasonably acceptable to Orchid are unable to deliver forecast SNP Assay Kits for thirty (30) consecutive business days from the original purchase order delivery date, then DNAPrint at its sole discretion may elect to terminate this Agreement upon ten (10) days prior written notice to Orchid. In the event DNAPrint terminates this Agreement pursuant to this paragraph, DNAPrint will be relieved of its obligations to purchase the Minimum Amount and to pay the Shortfall Fee. 8 Inspection and Acceptance 8.1 DNAPrint may conduct acceptance testing upon receipt of SNP Assay Kits to verify conformance with their specifications. In the absence of written notice to Orchid of nonconformance and nonacceptance within twenty five (25) business days of delivery, the SNP Assay Kits will be deemed accepted. Orchid will provide to DNAPrint with each SNP Assay Kit delivery data verifying the SNP Assay Kit's conformance with its specifications. 8.2 If Orchid disputes DNAPrint's notice that a SNP Assay Kit fails to conform to its specifications, such dispute will be resolved by an independent laboratory, selected by Orchid and reasonably acceptable to DNAPrint, whose determination will be final and binding. All fees and disbursements incurred in connection with the independent determination will be borne by the party which incorrectly determined that the SNP Assay Kit did or did not conform to its specifications. 5 8.3 Orchid promptly will replace any SNP Assay Kit not conforming to its specifications, at its expense; or, if unable to make prompt replacement, refund any payment made on the nonconforming SNP Assay Kit. The amount of any nonconforming SNP Assay Kits that are not replaced will be deducted from the Minimum Amount. 9 Limited License 9.1 Orchid grants to DNAPrint, for the term of this Agreement, a non-transferable, non-exclusive license to use the SNP Assay Kits (provided under this Agreement) on DNAPrint's SNPstream Instrument solely for research use and only for the detection of genetic polymorphisms by SNP-IT. DNAPrint may make this use only on its own behalf and in its provision of Genotyping Services under this Agreement. 9.2 No other license is intended or granted through sale of SNP Assay Kits to DNAPrint. 9.3 DNAPrint may use the SNP Assay Kits only on DNAPrint's SNPstream Instrument and only at its facility at a location to be specified prior to September 30, 2000. 9.4 DNAPrint is specifically not authorized to, and is forbidden from, using SNP Assay Kits for diagnostic or therapeutic purposes or as direct components in the manufacture or use of any diagnostic or therapeutic product. 9.5 Purchase by DNAPrint of SNP Assay Kits does not include or carry any right to resell or transfer the SNP Assay Kits, either as a stand alone product or as a component of another product, or to disassemble and use any component or part of any SNP Assay Kit separate from its other components and parts, or to otherwise commercially exploit the SNP Assay Kits. Any use of SNP Assay Kits other than the licensed use without the prior, express written authorization of Orchid is strictly prohibited. 6 10 Trademarks 10.1 Orchid grants to DNAPrint, for the term of this Agreement, a non-transferable, non-exclusive license to use the Orchid Trademarks solely for and in connection with the marketing, promotion, advertisement, sale and provision of Genotyping Services under this Agreement. 10.2 DNAPrint may not use the Orchid Trademarks in connection with any products or services other than the Genotyping Services. 10.3 DNAPrint, in connection with the use of the Orchid Trademarks, will place adjacent to the Orchid Trademarks the appropriate designation "(TM)", "(sm)", or "(R)" and indicate on all printed oR electronic materials a notice to the effect the Orchid Trademarks are the trademarks and service marks of Orchid and are used under license from Orchid. 10.4 DNAPrint may not use the Orchid Trademarks in any manner that might adversely reflect on the image of quality symbolized by the Orchid Trademarks. 10.5 DNAPrint acknowledges Orchid's exclusive right, title and interests in and to the Orchid Trademarks, and acknowledges that nothing in this Agreement or DNAPrint's use of the Orchid Trademarks will confer to it or create any rights for it in the Orchid Trademarks except for the limited license expressly provide in this Agreement. All goodwill symbolized by and connected with the use of the Orchid Trademarks will inure solely to the benefit of Orchid. 10.6 DNAPrint will not use any trademark or service mark that is confusingly similar to, or a colorable imitation of, any Orchid Trademark during the term of this Agreement or at any time thereafter. 10.7 Except as provided in this Agreement, or with other express written consent of the other party, neither party will at anytime include the other parties name in any written material, marketing or advertising brochures, bids, contracts, proposals, applications or otherwise, except as may be required by law, or in any way represent or imply that the other party has endorsed that party or its business. 10.8 Immediately upon expiration or termination of this Agreement, with or without reason, DNAPrint will cease and not thereafter use in any manner the Orchid Trademarks. 11 Genotyping Services 11.1 Orchid grants to DNAPrint a non-transferable, non-exclusive license for the term of this Agreement to provide Genotyping Services. 7 11.2 DNA print has no right under this Agreement to provide Genotyping Services other than solely for research use and not for diagnostic or therapeutic purposes, unless permitted to do so under a separate written license from Orchid. 11.3 DNAPrint will inform each third party in writing who requests Genotyping Services that the employed Primer Extension Technology is proprietary to Orchid and that DNAPrint is only licensed to provide Genotyping Services solely for research purposes and not for diagnostic or therapeutic purposes. 11.4 DNAPrint will include in its printed and electronic marketing, promotional and advertising materials relating to Genotyping Services notification clearly stating substantially the following information: (i) Genotyping Services are subject to proprietary rights of Orchid and are provided by DNAPrint under license from Orchid; (ii) results of the Genotyping Services are solely for research use and not for diagnostic or therapeutic purposes; and (iii) all warnings and statements required by applicable law or regulation, or provided by Orchid from time to time, for notification to customers. 11.5 If DNAPrint considers in its reasonable judgment that any third party requesting Genotyping Services intends to use, or is using, the Genotyping Services not for research purposes, or for diagnostic or therapeutic purposes, DNAPrint will not provide, and will immediately cease providing, any Genotyping Services to that third party, and will notify Orchid in writing of the third party's name and address, the dates, types and amounts of Genotyping Services it provided to the third party, and acknowledge that it has ceased providing Genotyping Services to the third party. 11.6 In the marketing, advertising, promotion, sale or performance of Genotyping Services, DNAPrint will not be an agent of, hold itself out as an agent of, or give the appearance of being an agent for Orchid. 12 Maintenance of Quality 12.1 In the course of marketing, promoting, advertising, selling and providing Genotyping Services under the Orchid Trademarks, DNAPrint will at all times maintain and adhere to the quality standards adopted by Orchid consistent with the high reputation of the Orchid Trademarks. 12.2 Prior to using any Orchid Trademark on any type of printed or electronic marketing, advertising or promotional materials, DNAPrint will submit samples of the material to Orchid for approval, which approval will not be unreasonably withheld. Once approved by Orchid, DNAPrint may use the Orchid Trademarks on printed or electronic marketing, advertising or promotional materials prepared in accordance with the previously submitted and approved samples. 8 12.3 To further ensure that quality standards are maintained, Orchid will have the right, but not the obligation, to inspect, monitor and test the equipment, materials and procedures, including DNAPrint's SNPstream Instrument and Primer Extension method, and to inspect DNAPrint's books and records relating to the provision of Genotyping Services to ensure that DNAPrint is in compliance with Orchid's quality standards. Any inspection will be with prior notice to DNAPrint and in a manner that does not unreasonably interfere with the business and affairs of DNAPrint. 13 Royalty 13.1 In consideration of the right and license to use SNP Assay Kits in performance of Genotyping Services for Permitted Parties, DNAPrint will pay to Orchid a royalty equal to fifteen percent (15%) of the total gross sales price invoiced for the Genotyping Services, less one percent (1%) in lieu of any discounts or offsets. 13.2 Notwithstanding paragraph 13.1, in no event will the royalty payable to Orchid be less than fifteen percent (15%) of twice DNAPrint's actual cost (including overhead) in providing the Genotyping Services as determined in accordance with United States generally accepted accounting principles. 13.3 DNAPrint will pay Orchid the royalties accrued in a calendar quarter within thirty (30) days after the end of the calendar quarter and accompany each payment with a report detailing the calculation of the royalties due, which report Orchid may rely on without independent verification. 13.4 Where the gross price for Genotyping Services comprise non-monetary consideration, in whole or in part, DNAPrint will pay Orchid the cash equivalent to the fair market value of the non-monetary consideration. 13.5 All payments will be made in United States Dollars by wire transfer of funds to an account designated by Orchid or by delivery of an irrevocable cashier's check to Orchid. 13.6 Orchid may add an interest charge equal to 1/1/2% per month (18% per year) on any amounts payable by DNAPrint that remain unpaid after the payment due date. 9 14 Records and Inspection 14.1 DNAPrint will keep complete and accurate records of all Genotyping Services provided, the cost of providing Genotyping Services, the prices invoiced for Genotyping Services, the names and addresses of third parties to whom Genotype Services were provided, and all other information reasonably necessary to permit Orchid to verify the quality of the Genotyping Services provided and the computation and amount of royalties due Orchid. 14.2 At Orchid's request and expense, DNAPrint will permit an independent certified public accountant selected by Orchid, and reasonably acceptable to DNAPrint, to examine all records deemed by the accountant as reasonably necessary in verifying for Orchid the computation of, and the amount of royalties accrued, payments made or to be made, and the accuracy of the royalty reports. 14.3 Each accountant who examines records will agree in writing to treat as confidential and not to disclose any information other than information relating solely to the royalties accrued and the accuracy of the royalty reports and payments required to be made. 14.4 The examination of records in all instances will be conducted during reasonable business hours, be limited to once per calendar year, and be for a period of time of no more than three (3) fiscal years immediately preceding the request for examination. 14.5 In the event any examination reveals that DNAPrint under compensated Orchid in an amount in excess of five percent (5%) of the amount actually owed, DNAPrint will pay the fees of the account plus interest at a rate of one and a half percent (1 1/2%) per month (18% per year) on the amount of underpayment from the date payment was due to the date payment is made. 15 Warranties 15.1 Orchid warrants that all SNP Assay Kits when delivered to DNAPrint are free from defects in materials and workmanship and conform to their respective Specifications. 15.2 THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND NONE ARE CREATED, WHETHER UNDER THE UNIFORM COMMERCIAL CODE, CUSTOM OR USAGE IN THE INDUSTRY OR THE COURSE OF DEALINGS BETWEEN THE PARTIES. 10 15.3 ORCHID MAKES NO WARRANTY OR REPRESENTATION TO DNAPRINT THAT USE OF ANY SNP ASSAY KIT, FORMATTING, OR KNOW HOW, OR ANY PRODUCT PRODUCED BY SUCH USE, WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADE SECRET, OR OTHER PROPRIETARY RIGHT, FOREIGN OR DOMESTIC, OF ANY THIRD PARTY TO WHICH ORCHID HAS NOT OBTAINED RIGHTS. ORCHID WARRANTS THAT IT IS NOT AWARE OF ANY SUCH INFRINGEMENT AND HAS NOT RECEIVED ANY NOTICE OF POSSIBLE INFRINGEMENT. 15.4 ORCHID DOES NOT WARRANT, GUARANTEE OR MAKE ANY REPRESENTATION REGARDING THE USE, OR THE RESULTS OF THE USE, OR THE PERFORMANCE OF THE SNP ASSAY KIT, FORMATTING, OR KNOW HOW. DNAPRINT REPRESENTS AND WARRANTS THAT ANY STATEMENTS HERETOFORE OR HEREAFTER MADE BY ORCHID OR ANY AUTHORIZED REPRESENTATIVE RELATIVE TO THE USE, RESULTS OF THE USE OR PERFORMANCE OF THE SNP ASSAY KIT, FORMATTING, OR KNOW-HOW WERE AND WILL ALWAYS BE INDEPENDENTLY VERIFIED BY DNAPRINT AND DNAPRINT AGREES THAT ITS ACCEPTANCE AND/OR USE OF SUCH STATEMENTS IS ENTIRELY AT ITS OWN RISK. 16 Indemnification 16.1 Orchid agrees to indemnify, defend, and hold harmless DNAPrint from and against all liabilities, damages, expenses and losses (including reasonable attorney fees and costs), arising out of (i) the negligent actions of Orchid, its employees or any third party acting on behalf or under authority of Orchid in the performance of this Agreement and (ii) any actual or alleged act of patent infringement, contributory patent infringement, inducing patent infringement, or copyright infringement resulting from DNAPrint's use of the SNP Assay Kits, Formatting, Know-How or any information and materials received, in a manner approved by Orchid. At any time during the course of any action involving a SNP Assay Kit, or if in Orchid's opinion a SNP Assay Kit is likely to become the subject of a patent infringement claim, Orchid may at its option and expense, (i) procure for DNAPrint the right to continue using the SNP Assay Kit, (ii) replace or modify the SNP Assay Kit so that it becomes noninfringing or (iii) accept return of the SNP Assay Kit, refund the purchase price and terminate this Agreement. 16.2 Orchid will not be liable to DNAPrint under paragraph 16.1 if the patent or copyright infringement claim is based on an alteration or modification of the Formatting, or SNP Assay Kit or a use of the SNP Assay Kit not authorized by Orchid. 11 16.3 ORCHID WILL NOT BE LIABLE TO DNAPRINT OR ANY THIRD PARTY WITH RESPECT TO ANY USE OF THE SNP ASSAY KIT, FORMATTING, OR KNOW-HOW BY DNAPRINT OR ANY AGENT OR EMPLOYEE OF DNAPRINT, FOR ANY LOSS, CLAIM, DAMAGE OR LIABILITY OF ANY KIND OR NATURE WHICH MAY ARISE FROM OR IN CONNECTION WITH THE USE, HANDLING, STORAGE OR DISPOSAL OF THE SNP ASSAY KITS, OR KNOW-HOW, OR ANY PRODUCTS RESULTING FROM SUCH USE; OR ANY CLAIM FOR LOSS OF PROFITS, LOSS OR INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND. 16.4 DNAPrint agrees to indemnify, defend and hold harmless Orchid from and against all liabilities, demands, damages, expenses and losses (including reasonable attorney fees and costs) arising out of (i) DNAPrint's use, handling, storage and disposal of SNP Assay Kits, Formatting, Know-How and any information and materials received from Orchid, except those resulting from Orchid's (or its employees or agents) negligence or willful misconduct, (ii) any products developed or made by DNAPrint as a result of the use of the SNP Assay Kits, Formatting, Know-How and any information and materials received from Orchid, (iii) DNAPrint's provision of Genotyping Services, and (iv) any actual or alleged act of patent infringement, contributory patent infringement, inducing patent infringement, or copyright infringement resulting from DNAPrint's use of the SNP Assay Kits, Formatting, Know-How and any information and materials received, in any manner not approved by Orchid or in DNAPrint's manufacture, use or sale of any product resulting from such use. 16.5 A party seeking indemnification under this Agreement will give prompt written notice to the indemnifying party of the commencement of any action (and any prior claims relating to such action) for which the party seeks indemnification. An indemnifying party will have no liability or responsibility of any kind to the party seeking indemnification if it is not promptly notified and does not have adequate opportunity to defend. The indemnifying party will have sole control of the defense of the action and of all negotiations for its settlement or compromise. 16.6 This section 16 survives any termination or expiration of this Agreement. 17 Improvements 17.1 Upon, or before, delivery of DNAPrint's initial order of SNP Assay Kits, and subject to section 18, Orchid will disclose in confidence to DNAPrint its Know How regarding the ordered SNP Assay Kits. 12 17.2 DNAPrint agrees to grant and hereby grants to Orchid a perpetual, world-wide, nonexclusive, royalty-free license to any Improvements directly related to the SNP Assay Kits, Formatting, and Know How related thereto. This paragraph survives any termination or expiration of this Agreement. 18 Confidentiality 18.1 Orchid agrees not to disclose publicly or to any third party, and to keep in strictest confidence, all (i) all information identified by DNAPrint as being secret or confidential, and (iii) all information which by its nature or the circumstances should be treated as confidential. 18.2 DNAPrint agrees not to disclose publicly or to any third party, and to keep in strictest confidence, all (i) prices and price schedules, (ii) Know How, (iii) all information identified by Orchid as being secret or confidential, and (iv) all information which by its nature or the circumstances should be treated as confidential. 18.3 The obligation of confidentiality under this section 18 does not apply to information which the recipient can demonstrate is known publicly, is in the public domain or enters the public domain without the fault of the recipient, is disclosed to the recipient by a third party not under obligation of confidence, or with respect to Technical Data was known to DNAPrint prior to the Effective Date of this Agreement, or with respect to Assay Data and Know How was known to the recipient prior to the disclosure thereof. 18.4 The obligations of this section 18 survive and continue for a period of five (5) years after any termination or expiration of this Agreement. 19 PUBLICITY 19.1 DNAPRINT MAY REFER TO ORCHID AS A LICENSEE FOR THE PERFORMANCE OF GENOTYPING SERVICES IN ITS MARKETING AND PROMOTIONAL MATERIALS. WITHIN TWENTY (20) DAYS OF THE EFFECTIVE DATE OF THIS AGREEMENT, ORCHID AND DNAPRINT WILL ISSUE A MUTUALLY ACCEPTABLE JOINT PRESS RELEASE (DESCRIBED IN 10.1 OF THE "OPTION AGREEMENT" IF IN FACT SAID AGREEMENT IS EXECUTED), DISCLOSING THE CONFERRAL OF THIS LICENSE. 13 20 Term and Termination 20.1 Notwithstanding 11.1, unless extended by mutual agreement of Orchid and DNAPrint, this Agreement will expire and terminate one year (1) from the Effective Date of this Agreement. 20.2 THE TERM OF THE LICENSE TO PROVIDE GENOTYPING SERVICES (11.1) WILL BE FOR A PERIOD OF 5 YEARS, UNLESS DNAPRINT BREACHES ANY OF THE TERMS OF THIS AGREEMENT, AND WILL BE AUTOMATICALLY RENEWED FOR A SUCCESSIVE 5 YEAR PERIOD UNLESS DNAPRINT IS FOUND TO BE IN BREACH OF ANY PROVISIONS OF THIS AGREEMENT. 20.3 Orchid and DNAPrint have the right to terminate this Agreement if the other fails to make any payment due and owing, or commits a breach of any material provision of this Agreement and fails to make such payment within thirty (30) days or remedy such breach within sixty (60) days after receiving written notice of such default or breach. 20.4 Orchid and DNAPrint each have the right to terminate this Agreement if any proceeding is instituted by or against the other party seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking an entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or taking any action to authorize any of the foregoing or similar actions. No assignee for the benefit of creditors, receiver, liquidator, sequestiator, trustee in bankruptcy, sheriff or any other office of the court or official charged with taking over custody of DNAPrint's assets or business will have any right to continue the performance of this Agreement. 20.5 Upon expiration or termination of this Agreement for any cause or reason neither DNAPrint nor Orchid will be released from any obligation theretofore accrued. 21 Miscellaneous 21.1 The relationship of Orchid and DNAPrint under this Agreement is that of seller and buyer. The provisions of this Agreement may not be construed to create between Orchid and DNAPrint the relationship of principal and agent, joint venturers, co-partners or any other similar relationship, the existence of which is hereby denied by Orchid and DNAPrint. Neither party hereto is liable in any way for any engagement, obligation, liability, contract, representation or warranty of the other party to or with any third party. Orchid is not an agent for DNAPrint and DNAPrint is not an agent for Orchid for any purpose whatsoever and each party has no right or authority to assume or create any obligations, express or implied, on behalf or in the name of the other party. 14 21.2 No amendment, variation, modification or waiver of any breach of any provision of this Agreement will be binding unless executed in writing by an authorized officer of the party to be bound. No waiver of any breach of any provision of this Agreement will constitute a waiver of any prior, concurrent or subsequent breach of the same or any other provision of this Agreement. 21.3 Any notice required or permitted under this Agreement will be deemed to have been sufficiently provided and effectively made if sent by facsimile and either hand-delivered or sent by overnight express courier (e.g. Federal Express) and addressed to the receiving party at its respective address as follows: Orchid Biosciences, Inc. DNAPrint Genomics, Inc. 303 College Road East 1748 Independence Boulevard, Suite 1D Princeton, NJ 08540 Sarasota, Florida 34234 Facsimile: (609) 750-2250 Facsimile: Attn: Kevin Nash Attn: With a courtesy copy to: With a courtesy copy to: Kalow & Springut LLP 488 Madison Avenue New York, NY 10016 Facsimile: (212) 813-9600 Facsimile: Attn: David A. Kalow Attn: or such other address of which the receiving party has given notice pursuant to this paragraph. The effective date of the notice is the date of receipt of the hand or courier delivery. 21.4 In the event that the performance of this Agreement or of an obligation hereunder, other than the payment of money, is prevented, restricted or interfered with by reason of any cause not within the control of the respective party, and which could not by reasonable diligence have been avoided by such party, the party so affected, upon the giving of prompt notice to the other party, as to the nature and probable duration of such event, is excused from such performance to the extent and for the duration of such prevention, restriction or interference, provided that the party so affected uses its reasonable efforts to avoid or remove such cause of non-performance and continues performance under this Agreement whenever and to the extent such cause or causes are removed. For the purpose of this 15 paragraph, but without limiting the generality hereof, the following will be considered as not being within the control of a party: acts of God; acts or omissions of a governmental agency or body; compliance with requests, recommendations, rules, regulations, or orders of any governmental authority or any officer, department, agency, or instrument thereof; flood; storm; earthquake; fire; war; insurrection; riot; accidents; acts of the public enemy; invasion; quarantine restrictions; strike; labor lockout; differences with workmen; embargoes; delays or failures in transportation; and acts of a similar nature. 21.5 If any provision of this Agreement is held to be invalid, illegal, unenforceable or void, such will be without effect on the validity, legality and enforceability of the remaining provisions or this Agreement as a whole. Both parties will endeavor to replace the invalid, illegal, unenforceable or void provision with a valid and enforceable one which in its equitable effect is most consistent with the prior provision. 21.6 The paragraph headings are for convenience only and cannot have any effect on the interpretation or construction of this Agreement. 21.7 The laws of the State of New Jersey, excluding the principles of conflicts of laws (and the 1980 U.N. Convention on Contracts for the International Sale of Goods), govern this Agreement. Any legal action arising from a dispute or question regarding the terms and conditions, or performance of this contract may be instituted only in the Superior Court for Mercer County New Jersey or the United States District Court for the District of New Jersey. Both DNAPrint and Orchid consent to the personal jurisdiction and waive any objection to the venue of these courts. Both DNAPrint and Orchid further consent that any service of process may be served by overnight courier or express mail at its address stated in paragraph 20.3. 21.8 The rights provided herein are personal to DNAPrint and may not be sub-licensed, sub-contracted or otherwise transferred without the prior express written approval of Orchid except in connection with the sale or acquisition of substantially all of the assets or stock of DNAPrint related to this Agreement. 21.9 This Agreement is binding upon and inures to the benefit of the heirs, successors and assigns of the parties hereto, provided that this Agreement, in whole or in part, is not assignable by either party without the prior written consent of the other party, such consent not to be unreasonably withheld, except that Orchid may assign this Agreement to an affiliate without any such consent. Any effort to assign in violation hereof is considered void. In the event of any assignment, the assigning party must provide the other party with appropriate documentation of the assignment. 16 21.10Each party acknowledges that it has read this Agreement, understands it, and agrees to be bound by its terms and further agrees that it constitutes the complete and exclusive understanding between the parties, which supersedes and merges all prior proposals, understandings and all other agreements, oral and written, between the parties regarding the subject matter of this Agreement; and no party has relied on any representation not expressly set forth or referred to in this Agreement. 21.11DNAPrint and Orchid acknowledge that (i) its counsel reviewed the terms of this Agreement, (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting party will not be employed in the interpretation of this Agreement, and (iii) the terms of this Agreement are to be construed fairly as to both parties and not in favor or against either party, regardless of which party was generally responsible for the preparation of this Agreement. 21.12This Agreement may be executed in two or more counterparts, all of which constitute one and the same legal instrument. 21.13DNAPrint and Orchid agree to execute, acknowledge, and deliver any further instruments and to do all other acts as may be necessary or appropriate to effect the purpose and intent of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date. DNAPrint Genomics, Inc. Orchid Biosciences, Inc. By:________________________ By: _______________________ Title:______________________ Title:_______________________ EX-10.5 6 0006.txt AGREEMENT & PLAN OF EXCHANGE ================================================== AGREEMENT AND PLAN OF EXCHANGE BY AND BETWEEN CATALYST COMMUNICATIONS, INC. And DNAPRINT GENOMICS, INC. AND ITS SHAREHOLDERS ================================================== Dated: JULY 11, 2000 TABLE OF CONTENTS 1. Delivery of Shares of the Company .......................... 1 2. Consideration for Transfer of Shares ......................... 1 3. Miscellaneous Provisions Relating to Delivery of `CLYC' Stock. ....................................... 1 4. Access to Books and Records .................................... 2 5. Closing.......................................................... 2 6. Representations and Warranties of the Shareholders ........... 2 a. Organization and Standing............................... 2 b. Subsidiaries, Etc....................................... 3 c. Capital Stock........................................... 3 d. Indebtedness............................................ 3 e. Financial Statements.................................... 3 f. Contracts and Other Commitments ...................... 3 g. Intellectual Property................................... 4 h. Assets.................................................. 4 i. Insurance............................................... 5 j. Employees............................................... 5 k. Employee Benefit Plans.................................. 6 l. ERISA................................................... 6 m. Litigation.............................................. 7 n. Accounts Receivable .................................... 7 o. Inventories............................................. 7 p. Purchase Commitments and Outstanding Bids............... 7 q. Real Estate............................................. 8 r. Changes, Dividends, Etc................................. 8 s. Tax Returns and Liabilities............................. 8 t. Breaches of Contracts, Etc.............................. 9 u. Title to Company Stock.................................. 9 v. Conflict of Interests................................... 9 w. Disclosure.............................................. 10 7. Representations and Warranties of CATALYST COMMUNICATIONS, INC.... 10 a. Organization and Standing ............................. 10 b. Capital Stock............................................ 10 c. Validity of Shares ...................................... 11 d. Changes, Dividends, Etc. ............................... 11 e. Authorization of Agreement ............................. 11 f. No Violation of Law, Etc................................. 11 g. Financial Statements..................................... 11 h. No Material Changes...................................... 11 8. Conditions & Obligations of `CATALYST COMMUNICATIONS, INC.' ...... 12 9. Conditions to Obligations of the Company and the Shareholders ... 14 10. Certain Covenants Prior to Closing .......................... 16 11. Survival of Representations and Warranties; Indemnification ..... 17 a. Survival................................................. 17 b. Indemnification by Company and Shareholders ............ 18 c. Indemnification by CLYC ............................... 18 d. Procedure for Indemnification ........................ 18 e. After - Tax Basis........................................ 19 12. Investment Representation ....................................... 20 13. Further Assurances................................................ 21 14. Expenses.......................................................... 21 15. Employees of the Company ...................................... 21 16. Directors......................................................... 21 17. Other Matters..................................................... 22 a. No Other Agreements .................................... 22 b. Amendment................................................ 22 c. Notices.................................................. 22 d. Specific Performance..................................... 22 e. Assignment............................................... 22 f. Paragraphs and Other Headings ....................... 22 g. Choice of Law............................................ 23 h. No Waiver................................................ 23 i. Severability............................................. 23 j. Counterparts............................................. 23 Exhibit "A"................................................................ 24 Exhibit "B"................................................................ 25 AGREEMENT AND PLAN OF EXCHANGE AGREEMENT AND PLAN OF EXCHANGE (the "Agreement"), dated as of July 11, 2000, between Catalyst Communications, Inc., a Utah Corporation ("CLYC") and DNAPrint genomics, Inc., a Florida Corporation (the "Company") and all of the Shareholders of the Company whose names appear in Exhibit "A" hereto ("Shareholders"). WITNESSED: WHEREAS, the Shareholders represent that they are the legal and beneficial owners of all of the outstanding shares of capital stock of the Company; and WHEREAS, the Shareholders desire to exchange one hundred percent (100%) of the capital stock of the Company for shares of Common Stock of `CLYC' and `CLYC' desires to effect such exchange and purchase, all on the terms and conditions hereinafter set forth in such a manner that the exchange will constitute a tax-free reorganization pursuant to the provisions of Section 368(1)(B) of the Internal Revenue Code of 1986, as amended. NOW THEREFORE, in consideration of the premises and the mutual agreements and undertakings hereinafter set forth, the parties do hereby adopt said plan of reorganization, and, in order to consummate said plan, do hereby agree as follows: 1. DELIVERY OF SHARES OF THE COMPANY. The Shareholders agree to transfer and deliver to `CLYC', and `CLYC' agrees to acquire one hundred percent (100%) of the capital stock of the Company from the Shareholders as set forth in Exhibit "A" attached hereto and by this reference made a part hereof. 2. CONSIDERATION FOR TRANSFER OF SHARES. Upon closing, CLYC agrees to issue two million five hundred sixty thousand (2,560,000) post-reverse shares of its common stock, and fund Company in accordance with Exhibit "C" hereto. Upon the terms and subject to the representations and conditions set forth in such Agreement, `CLYC' agrees to deliver said shares to the Shareholders upon finalization of this Agreement. In addition, three million eight hundred forty thousand (3,840,000) post-reverse shares (The "Escrowed Shares") of CLYC common stock will be held in escrow for five (5) years, and will be released to the Shareholders based upon the terms, conditions and achievements set forth in Exhibit "D" attached hereto. CLYC anticipates a 1 for 30 reverse split of its securities within the next twelve (12) months from the date of this Agreement. 1 3. MISCELLANEOUS PROVISIONS RELATING TO DELIVERY OF CLYC'S COMMON STOCK. No fractional shares of Common Stock of CLYC will be delivered and the number of shares to be issued to any of the Shareholders will be rounded up to the nearest whole share if the Shareholder is entitled to receive one-half or more of a share and rounded down to the nearest whole share if the Shareholder is entitled to receive less than one-half of a share. 4. ACCESS TO BOOKS AND RECORDS. Except as hereinafter provided, `CLYC' and its officers, employees and agents, shall have full access at all reasonable times from and after the date hereof to the plants, facilities, books and records of the Company and the Company shall cooperate fully with `CLYC' to the end that it may become familiar with the properties and business of the Company. `CLYC' agrees to treat any information which is disclosed to `CLYC' by the Company and is proprietary or confidential to the Company, as confidential information, and in the event the Closing does not take place, all documents will be returned to the Company and `CLYC' will not make or retain copies of any documents or make use of any confidential information disclosed to it in the conduct of its business. 5. CLOSING. The Closing of the exchange provided for herein will take place at CLYC's office at 355 Interstate Blvd., Sarasota, Florida 34240 on July 11, 2000, such date being herein referred to as the "Closing Date". At the Closing, the Shareholders arranged to deliver to `CLYC' all certificates, assignments, and other instruments which may be necessary, desirable, or appropriate in order to transfer to `CLYC' all of the outstanding shares of capital stock of the Company, all in form and substance reasonably satisfactory to counsel for `CLYC'. At such Closing, `CLYC' shall deliver to the Company certificates evidencing the shares of Common Stock of `CLYC' to be delivered to the Shareholders pursuant to Paragraph 2 hereof, together with such other instruments which may be necessary, desirable, or appropriate to accomplish such transfers, all in form and substance satisfactory to the Shareholders. 6. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The Shareholders jointly and severally represent and warrant to and agree with `CLYC' as follows: A. ORGANIZATION AND STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, with full corporate power to carry on its business as now being conducted and to own and operate the property and assets now owned and operated by it, and is duly qualified to transact business and in good standing in each jurisdiction where the ownership of its properties or the conduct of its business requires it to be licensed or qualified to do business. The Company also delivered to `CLYC' a copy of its Articles of Incorporation and all amendments thereto, certified by the Secretary of State of the State of Florida, and a copy of its By-Laws as amended, certified by its Secretary, which documents are complete and correct as of the date of this Agreement. 2 B. SUBSIDIARIES, ETC. The Company has no subsidiaries and is not party to any partnership, joint venture of similar agreement, except as disclosed in the schedule referred to in subparagraph (f) of Paragraph 6 hereof. C. CAPITAL STOCK. The authorized capital stock of the Company consists of 105,000 shares of Common Stock, par value $.001, of which 105,000 shares are issued and outstanding. All of said outstanding shares of the Company have been duly authorized and validly issued, are fully paid and non-assessable. There are no options, warrants or other agreements or commitments which are now or may in the future obligate the Company to issue or purchase any shares of its capital stock or other securities. D. INDEBTEDNESS. The Company has delivered to `CLYC' a schedule, as attached hereto (The "Indebtedness Schedule"), identified by reference to this subparagraph, listing all promissory notes payable by the Company, all agreements of the Company to borrow money from others, and all commitments by others to lend money to the Company. As to each note, obligation to borrow and loan commitment, such schedule accurately sets forth the interest rate, terms of payment of principal and interest, identity of security (if any) and any other material terms of such indebtedness. The Company is not in default in any respect under, and is not otherwise, in violation or contravention of, any of the terms or provisions of any note, loan agreement, agreement to borrow money from others or any commitment by others to lend money. E. FINANCIAL STATEMENTS. The Company has delivered to `CLYC' a balance sheet (the "Balance Sheet") of the Company as of December 31, 1999 (the "Balance Sheet Date"). All of such financial statements are complete and fairly present the financial position of the Company on the indicated dates and the results of its present financial position of the Company on the indicated dates and the results of its operations for the indicated periods. All of such statements have been prepared on the tax basis of accounting consistently applied. The Company has no liabilities, whether absolute, accrued, contingent or otherwise, other than (i) liabilities disclosed, (ii) incurred in "arms-length" transactions in the ordinary course of business since the Balance Sheet Date and (iii) liabilities disclosed in subparagraph (k) of this Paragraph 6 or the schedule referred to in subparagraph (f) of this paragraph 6. F. CONTRACTS AND OTHER COMMITMENTS. The Company has delivered to `CLYC' a complete and accurate schedule, identified by reference to this subparagraph, listing and briefly describing all Material Contracts. For this purpose, the term "Material Contracts" shall be defined to mean (i) all contracts and commitments out of the ordinary course of business; (ii) 3 all contracts and commitments involving an obligation which cannot or, in reasonable probability, will not be performed or terminated within sixty (60) days from the date hereof; (iii) all bonus, incentive compensation, pension, group insurance or employee welfare plans of any nature whatsoever; (iv) all collective bargaining agreements or other contracts or commitments to or with any labor unions or other employee representatives or groups of employees; (v) employment contracts and other contracts, agreements or commitments to or with individual employees, agents or consultants extending for a period of more than three (3) months from the date hereof or providing for earlier termination only upon the payment of a penalty or equivalent thereof; or (vi) all other contracts or commitments providing for payments based in any manner upon the sales, purchases or profits of the Company. There has not been any material default in any obligation to be performed by the Company under any material contract listed on the said schedule, and the Company has not waived any material right under any such material contract. G. INTELLECTUAL PROPERTY. The Company owns, or is licensed or otherwise has the full and exclusive rights to use, all patents, trademarks, trade names, copyrights, technology, know-how, processes, names and likenesses used in or necessary for the conduct of its business as heretofore conducted. The Company has delivered to `CLYC' a complete and accurate schedule identified by reference to this subparagraph, listing all domestic and foreign patents, patent applications, licenses, formulae, trademarks, trade names and copyrights owned or held by the Company and a summary of the terms of all agreements relating to technology, know-how or processes which the Company is licensed or authorized to use by others. Except as set forth in this schedule, the Company has the sole and exclusive right to use the patents, trademarks, trade names, copyright, technology, know-how, processes, names and likenesses referred to therein, and the consummation of the contemplated transactions will not alter or impair any such rights; no claims have been asserted by any person to the use of any such patents, trademarks, trade names, copyrights, technology, know-how, processes, names and likenesses or challenging or questioning the validity or effectiveness of any such licenses or agreements, and there is no valid basis for any such claim and the use of such patents, trademarks, trade names, copyrights, technology, know-how, processes, names and likenesses by the Company does not infringe on the rights of any person. H. ASSETS. The Company has delivered to `CLYC' a complete and accurate schedule, identified by reference to this subparagraph, containing (i) a complete legal description of all real property owned, leased or otherwise used or occupied by the Company, (ii) a list of all banks and other institutions in which the Company has any account or safe deposit showing the identifying numbers and names of the persons authorized to draw thereon or have access thereto, and (iii) a list of all capitalized machinery, tools, equipment owned, leased or otherwise used by the Company. Except as disclosed on the schedule referred to in subparagraph (f) of this Paragraph 6, except as disclosed in the schedule of assets supplied pursuant to this subparagraph, and except as acquired after the date hereon on terms approved by `CLYC', the Company and good and marketable title to all 4 property and assets used in its business, including all property and assets reflected in the schedule referred to in this subparagraph and in the Balance Sheet and all properties and assets acquired after the Balance Sheet Date (other than assets disposed of since the Balance Sheet Date in the ordinary course of business), subject to no liens, mortgages, pledges, encumbrances or charges of any kind. The machinery, equipment and other facilities of the Company are in satisfactory operating condition and repair for the business now conducted by the Company. At the Closing, the Company will deliver to Buyer copies of all records, including all signatures or authorization cards, pertaining to such safe deposit boxes and bank accounts. I. INSURANCE. The Company has delivered to `CLYC' a complete and accurate schedule, identified by reference to this subparagraph, listing and briefly describing all policies of fire, liability, life, workmen's compensation and other insurance maintained by the Company. All such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date have been paid or financed, and no notice of cancellation or termination has been received with respect to any such policy. Such policies are sufficient for compliance with all requirements of law and all agreements to which the Company is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage for the assets and operations of the Company, will remain in full force and effect through the Closing Date without the payment of additional premiums, and will not in any way be affected by, or terminate or lapse by reason of, the contemplated transactions. The schedule provided by the Company identifies all risks that have been designated as being self-insured. No insurance carrier has refused to insure any operations or property assets of the Company, nor has any insurance carrier, which has carried, or received any application for, any such insurance limited the coverage during the last three (3) years. J. EMPLOYEES. The Company has delivered to `CLYC' complete and accurate schedules, identified by reference to this subparagraph, listing each salaried employee of the Company, together with each employee who is paid on an hourly basis and showing their respective rates of compensation (including bonuses, if any) and fringe benefits (including vacation time accrued to the Balance Sheet Date). The Company has paid in full to its employees all wages, salaries, commissions, bonuses and other direct 5 compensation for all services employed by them, other than amounts that have not yet become payable in accordance with the Company's customary practices. Except as set forth in the schedule, the Company is not liable for any severance pay or other payments on account of termination of any former employee except as listed in this schedule, is in compliance with all applicable laws respecting employment and employment practices, and terms and conditions of employment and wages and hours. K. EMPLOYEE BENEFIT PLANS. Except as set forth in a complete and accurate schedule and identified by reference to this subparagraph delivered to `CLYC', the Company does not have, none of its employees are covered by, and the Company does not have any obligation with respect to, any bonus, deferred compensation, pension, profit-sharing, retirement, insurance, stock purchase, stock option, or other fringe benefit plan, arrangement or practice, or any other employee benefit plan (as defined in subparagraph (1), whether formal or informal (collectively "Plans"). The schedule contains an accurate and complete description of, and sets forth the annual amount payable pursuant to, each of those Plans, and the Balance Sheets (which hereinafter shall refer to an unaudited balance sheet of the Company) reflect in the aggregate an accrual of all amounts accrued but unpaid under such Plans as of their respective dates. The Company has performed and complied with all of its obligations under or with respect to such Plans and such Plans have operated in accordance with their terms. The Company has no commitment, whether formal or informal and whether legally binding or not, to create any additional Plans. L. ERISA. The Company has delivered to `CLYC' a schedule of all Plans disclosed or required to be disclosed in subsection (k) above that are employee benefit plans and any related trust agreements (collectively, "Target Plans"). The schedule lists, and the Company shall provide `CLYC' with copies of, (a) the most recent Internal Revenue Section determination letter relating to each of the Target Plans (and none of the Target Plans has been amended or modified since the date of the determination letter relating to it and each of the Target Plans has been operated in accordance with the description contained in such determination letter), (b) the most recent annual report (Form 5500 Series) and accompanying schedules of each of the Target Plans filed with the Department of Labor pursuant to ERISA, (c) the most recent certified financial statements of each of the Target Plans as of the date thereof, and there have been no material changes in the assets or liabilities associated with such Target Plans since the date of such financial statements. The Company has delivered to `CLYC' copies of, and the schedule lists, all actuarial reports with respect to the Target Plans, which reports are complete and accurate. Except as set forth in the schedule, there are no accrued unpaid contributions to any of the Target Plans. The Target Plans have operated in accordance with the applicable requirements of ERISA and the Code. No reportable event (as defined in section 4043(e) of ERISA), prohibited transactions (as defined 6 in section 406 of ERISA or section 4975 of the Code), accumulated funding deficiency (as defined in section 302 of ERISA) or plan termination (as defined in Title IV of ERISA or section 411(d) of the Code) has occurred with respect to any of the Target Plans. Except as set forth in the schedule, no filing, application or other matters with respect to any of the Target Plans is pending with the Internal Revenue Service, Pension Benefit Guaranty corporation, United States Department of Labor or other governmental body, none of the Target Plans has been terminated, the Pension Benefit Guaranty Corporation has not taken any action to terminate any of the Target Plans and no trustee has been appointed by any court to administer any of the Target Plans. None of the Target Plans has been amended since the date of the Balance Sheets or will be amended prior to the Closing Date. M. LITIGATION. Except as identified in a complete and accurate schedule, identified by reference to this subparagraph and delivered to `CLYC', the Company is not engaged in or threatened with any legal action or other proceeding before any court or administrative agency. The Company has not violated any laws, regulations or order applicable to its business or activities, and the conduct of the present business of the Company at the present location is in conformity with all zoning and building code requirements. N. ACCOUNTS RECEIVABLE. All accounts receivable of the Company, whether or not reflected in the Balance Sheets or the Interim Balance Sheet, represent sales actually made in the ordinary course of business, and are current and collectible net of any reserves shown on the Balance Sheets or the Interim Balance Sheet (which reserves are adequate and were calculated consistent with past practice). Subject to such reserves, each of the accounts receivable has been collected in full or will be collected in full, without any set-off, within ninety (90) days after the day on which it first becomes due and payable. O. INVENTORIES. All inventory of the Company, whether or not reflected in the Balance Sheets or the Interim Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course of business, except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Balance Sheets or the Interim Balance Sheet. All inventories not written off have been recorded at the lower of average cost or market. The quantities of each type of inventory (whether raw materials, work-in-process, or finished goods) are not excessive, but are reasonable and warranted in the present circumstances of the Company. All work in process and finished goods inventory is free from any defect or other deficiency. P. PURCHASE COMMITMENTS AND OUTSTANDING BIDS. No purchase commitment of the Company is in excess of normal, ordinary and usual requirements of its business, or was made at any price in excess of the then current market price, or contains terms and conditions more onerous than those usually and customary in the industry. In the aggregate, the outstanding bids, sales proposals, contracts or unfilled orders of the Company (i) will not (based 7 on today's costs and reasonably foreseeable increases in such costs) require the Company to supply goods or services at cost to the Company in excess of the revenues to be received therefrom, and (ii) quote prices which include a mark-up over reasonably estimated costs consistent with past mark-ups on similar business. Q. REAL ESTATE. The Company shall have delivered to `CLYC' a schedule identified by reference to this subparagraph listing all contracts or commitments affecting ownership of, title to, use of, or any interest in real estate. All such leases of real property are valid, binding, and enforceable in accordance with their terms, and are in full force and effect; there are no existing defaults (or events which, with notice or lapse of time or both, would constitute a default) by the Company, and all lessors under such leases have consented (where such consent is necessary) to the consummation of the contemplated transactions without requiring modification in the rights or obligations of the lessee under such leases and all such consents are listed in the schedule provided to `CLYC'. The Company has delivered executed counterpart copies of all consents referred to in the preceding sentence to `CLYC'. R. CHANGES, DIVIDENDS, ETC. Since the Balance Sheet Date there has been no material adverse change in the condition (financial or otherwise), physical assets, capitalization or business of the Company, no dividend or other distribution declared, paid or made on any of the shares of the Company's capital stock, no direct or indirect redemption, purchase or other acquisition by the Company of any shares of its capital stock, no damage, destruction or loss (whether or not covered by insurance) adversely affecting the properties, business or prospects of the Company, no increase in the rate of compensation payable or to become payable to any officer or other employee of the Company (except as disclosed in the schedule referred to in subparagraph (j) of the Paragraph 6 or approved in writing by `CLYC', no significant labor disturbances, and no other event or condition which materially and adversely affects the business of the Company. Since the Balance Sheet Date, the business of the Company has been conducted diligently and in the ordinary course; the Company has not sold or transferred any of its property or assets except in the ordinary course of business, and no contracts have been entered into by the Company except in the ordinary course of business or with the written approval of `CLYC'. S. TAX RETURNS AND LIABILITIES. The Company has filed on a timely basis all tax returns that are or were required to be filed pursuant to the laws, regulations or administrative requirements of each governmental body with taxing power of it or its assets. The Company has delivered to `CLYC' all such Tax Returns filed since the Company's inception. The Company has paid, 8 all Taxes that have or may have become due pursuant to those Tax Returns, or otherwise, or pursuant to any assessment received by the Company, except such Taxes, if any, as are set forth in a schedule and are being contested in good faith and as to which adequate reserves (determined in accordance with the tax basis of accounting consistently applied) have been provided for in the Balance Sheets and Interim Balance Sheets. T. BREACHES OF CONTRACTS, ETC. Neither the execution nor the delivery of this Agreement by the Company, nor the performance of any of its obligations hereunder, will result in a breach or violation of any term or provision of or constitute a default under any indenture, mortgage or other agreement or instrument to which the Company is a party. Neither the execution nor the delivery of this Agreement by the Shareholders, nor the performance of any of their obligations hereunder, will result in a breach or violation of any term or provision of or constitute a default under any indenture, mortgage, or other agreement which any of them is bound, or any law or order, rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court having jurisdiction over the Shareholders or any of their assets or rights, or results in the creation or imposition of any lien, charge or encumbrance of any kind whatsoever on any of such assets or rights. U. TITLE TO COMPANY STOCK. Each of the Shareholders represents and warrants for themselves and not for the others; that this Agreement has been duly executed and delivered by the Shareholder(s) and is, as to themselves, a valid agreement binding upon them in accordance with its terms; that he individually has valid title to the shares of capital stock of the Company set forth opposite their name in Exhibit "A" hereto, with full right, power and authority to transfer, sell and deliver such shares pursuant to this Agreement; and that, upon delivery of their shares pursuant to this Agreement, `CLYC' will receive valid and marketable title to their shares, free and clear of all voting or other trust arrangements, liens, encumbrances, restrictions, and adverse claims, whether existing or contingent. V. CONFLICT OF INTERESTS. Neither the Company nor any of its affiliates (as this term is defined in the Securities Act of 1933 [the "1933 Act"] and in the rules and regulations promulgated by the Securities and Exchange Commission ["SEC"] thereunder) has, either directly or indirectly, (i) an interest in any corporation, partnership, proprietorship, association or other person or entity which produces or sells those products and services which are produced or sold by the Company, or (ii) a beneficial interest in any contract or agreement to which the Company is a party or by which the Company may be bound. For the purpose of this subparagraph, there shall be 9 disregarded any interest which arises solely from the ownership of less than a five percent (5%) equity interest in a corporation which has a class of securities regularly traded on any securities exchange or in the over-the-counter market, or quoted on any inter dealer quotation system. W. DISCLOSURE. No representations or warranties by the Shareholders or the Company in this Agreement and no statement contained in any document (including, without limitation, financial statements, the schedules), certificate, or other writing furnished or to be furnished to `CLYC' or any of its representatives pursuant to the provisions hereof or in connection with the contemplated transactions, contains or will contain any untrue statement of material fact or omits or will not state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they are made, not misleading. Documents delivered or to be delivered to `CLYC' pursuant to this Agreement are or will be true and complete copies of what they purport to be. There is no fact known to the officers, directors or employees of the Company unknown to `CLYC' on the date of this Agreement that may affect or does affect in a materially adverse manner CLYC's ability to conduct the business of the Company substantially as conducted prior to such date. 7. REPRESENTATIONS AND WARRANTIES OF CLYC. CLYC represents and warrants to and agrees with the Company as follows: A. ORGANIZATION AND STANDING. CLYC is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah, with full corporate power to carry on its business as now being conducted and to own and operate the property and assets now owned and operated by it, and is duly qualified to transact business and in good standing in each jurisdiction where the ownership of its properties or the conduct of its business requires it to be licensed or qualified to do business. B. CAPITAL STOCK. The authorized capital stock of `CLYC' consists of two hundred million (200,000,000) shares of Common Stock, $0.01 par value, one hundred ninety-two million three hundred sixty thousand nine hundred eighty-six (192,360,986) shares of Common Stock are presently issued and outstanding. All of said outstanding shares are validly issued, fully paid and non-assessable. CLYC is filing the necessary paperwork to increase the authorized capital stock of `CLYC' to five hundred million (500,000,000) shares of Common Stock. C. VALIDITY OF SHARES. The shares of Common Stock to be delivered by CLYC pursuant to this Agreement will, when so delivered, be validly issued and outstanding, fully paid and non-assessable. D. CHANGES, DIVIDENDS, ETC. Prior to the Closing hereunder, `CLYC' will not split, combine or otherwise change or reclassify its outstanding Common Stock or declare or distribute any cash or stock dividend upon such Common Stock. 10 E. AUTHORIZATION OF AGREEMENT. CLYC's Board of Directors has duly authorized the execution, delivery and performance of this Agreement by CLYC has been duly authorized by CLYC's Board of Directors, and will not result in any breach of or violate or constitute a default under its Articles of Incorporation or By-Laws or any indenture, mortgage or other agreement or instrument to which it is a party. F. NO VIOLATION OF LAW, ETC. Neither the execution, nor the delivery of this Agreement by CLYC, nor the performance of any of its obligations hereunder will result in a breach or violation of any law, order, rule, regulation, writ, injunction or decree or any governmental instrumentality or court having jurisdiction over CLYC or any of its assets or rights, or result in the creation or imposition of any lien, charge or encumbrance of any kind whatever on any of such assets or rights. G. FINANCIAL STATEMENTS. `CLYC" has delivered to the Company its initial balance sheet as of May 1, 2000, and the related statement of shareholder equity. Such financial statements have been initialed by officers of `CLYC' and the Company for identification. Such financial statements are complete, have been prepared in accordance with the tax basis of accounting consistently applied and fairly present the consolidated financial position of `CLYC' at such date, and the results of its operations for the period therein specified. H. NO MATERIAL CHANGES. Since July 1, 2000, there has been no material change in the condition (financial or otherwise), assets, liabilities, capitalization or business of `CLYC', which have not been disclosed to the Company. 8. CONDITIONS AND OBLIGATIONS OF CLYC. The obligations of `CLYC' under this Agreement are of the following conditions precedent: a. All representations and warranties of the Shareholders and the Company contained herein and in any certificate or other investment delivered pursuant to the provisions hereof, or in connection with the transactions contemplated hereby, shall be true on the Closing Date with the same force and effect as though such representations and warranties had been made on the Closing Date. b. The Shareholders and the Company shall have performed and complied with all of the terms, covenants and conditions of this Agreement to be performed or complied with by them, respectively, on or before the Closing Date. 11 c. The Directors of the Company shall have taken all necessary action to authorize the execution and performance of this Agreement, and the Company shall have delivered to `CLYC' true and complete copies, certified by the Secretary, of Resolutions of its Board of Directors evidencing such action. d. The Shares of CLYC's Common Stock, $0.01 par value, which are to be delivered within thirty (30) days from the Closing Date to the Shareholders in accordance with the terms hereof shall have been listed or authorized to be listed on the Exhibit "B". e. The Shareholders and the Company shall have delivered to `CLYC' such certificates dated as of the Closing Date. Certifying in such detail as `CLYC' may reasonably request to the fulfillment of the conditions specified in this Paragraph 8. No legend or other reference to any purported encumbrance shall appear on any certificate. The delivery of certificates to `CLYC' provided in Paragraph 2 will result in CLYC's immediate acquisition of record and beneficial ownership of the Shares, free and clear of all encumbrances (which term shall be hereinafter defined as any security interest, mortgage, lien charge, adverse claim or restriction of any kind, including, but not limited to, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership). f. Upon request, The Company shall have delivered to `CLYC' an opinion of its counsel for the Shareholders and the Company, dated as of the Closing Date, to the effect that: i. The Company is duly organized, validly existing and in good standing under the laws of the State of Florida, with full corporate power and authority to enter into and perform its obligations under this Agreement, to own and hold its properties owned and leased and to carry on the business in which it is engaged, and is legally qualified to do business as a foreign corporation in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased makes such qualification necessary. ii. The execution, delivery and performance of this Agreement and the instruments executed and delivered to `CLYC' pursuant to this Agreement by the Company, have been duly and validly authorized and approved (as required by law and the terms of this Agreement) by the Company's Board of Directors and this Agreement and such instruments have been duly executed and delivered by the Company and the Shareholders and constitute the valid and binding obligation of the Company and the Shareholders, respectively, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency and other laws affecting the enforcement or creditor's rights. 12 iii. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein will not result in any breach or violation of any of the terms or provisions of, or constitute a default under, the Company's Articles of Incorporation or By-Laws, or, to the knowledge of such counsel, any term or provision of any indenture, mortgage, deed of trust, lease, loan agreement, security agreement, or other agreement, instrument, commitment or arrangement, to which the Company or any of its Shareholders is a party or by which the Company or any of the Shareholders is bound or to which any of the Company's properties is subject. iv. The Company is authorized by its Articles of Incorporation to issue 105,000 shares of capital stock, all of which are duly authorized, validly issued and outstanding, fully paid or non-assessable, and the issuance and sale of such shares did not to the knowledge of such counsel violate the 1933 Act or the rules and regulations of the SEC thereunder or any applicable state securities or Blue Sky Laws. The Company has no other authorized or outstanding series or class of capital stock or other securities, or outstanding options, warrants or other rights to acquire securities of the Company. The Shareholders are the record and beneficial owners of the respective number of shares of the Company's capital stock set forth opposite their names in Exhibit "A" hereto. v. Insofar as is known to such counsel, all assignments, powers and other documents necessary to effect the transfer and delivery of the outstanding shares of capital stock of the Company to `CLYC' as provided for herein have been duly executed and delivered by the Shareholders and are adequate to transfer to `CLYC' valid and marketable title to said shares. vi. Such counsel has no knowledge of any litigation, proceeding or governmental investigation or labor dispute or labor trouble, pending or threatened against the Company, except matters specifically mentioned in the schedule required by subparagraph (m) of Paragraph 6 above. In rendering such opinion, such counsel may rely on certificates of public officials and upon certificates of officers of the Company and the Shareholders and upon opinions of counsel retained by the Company or the Shareholders in States other than California, copies of which certificates and opinion shall be furnished to `CLYC'. g. No action or proceeding by any governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit the carrying out of the transactions contemplated by this Agreement. h. All corporate and other proceedings and action taken in connection with the transactions contemplated by this Agreement and all certificates, opinions, agreements, instruments, and documents mentioned in this Paragraph 8 or incident to any such transaction shall be reasonably satisfactory in form and substance to `CLYC'. 13 The conditions contained in this Paragraph 8 are included herein for the benefit of `CLYC' and, without constituting a waiver of any of its rights hereunder, may be waived, in whole or in part, by `CLYC'. 9. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS. The Company and the Shareholders under this Agreement are subject to the fulfillment, on or before the Closing Date, of the following conditions: a. All representations and warranties of `CLYC' contained herein and in any certificate or other instrument delivered pursuant to the provisions hereof, or in connection with the transactions contemplated hereby, shall be true on the Closing Date with the same force and effect as though such representations and warranties had been made on the Closing Date. b. `CLYC' shall have performed and complied with all of the terms, covenants and conditions of this Agreement to be performed or complied with by it on or before the Closing Date. c. `CLYC' shall have delivered to the Shareholders a certificate of its President or a Vice President and its Secretary or an Assistant Secretary, dated as of the Closing Date, certifying in such detail as the Shareholders may reasonably request to the fulfillment of the conditions specified in this Paragraph 9. d. The Shares of CLYC's Common Stock, $0.01 par value, which are to be issued to the Shareholders within thirty (30) days from the Closing Date in accordance with the terms hereof shall have been listed or authorized for listing on the Exhibit "B". e. The Board of Directors of `CLYC' shall have taken all necessary action to authorize the execution and performance of this Agreement, including the delivery of shares of Common Stock of `CLYC' to the Shareholders in accordance with this Agreement, and `CLYC' shall have delivered to the Shareholders true and complete copies certified by its Secretary or Assistant Secretary, of Resolutions of its Board of Directors evidencing such action. f. `CLYC' shall represent to the Shareholders that: i. `CLYC' is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah, with an authorized capitalization as set forth in subparagraph (b) of Paragraph 7 of this Agreement, with full corporate power 14 and authority to enter into and perform its obligations under this Agreement, to own and hold its properties owned and leased and to carry on the business in which it is engaged. ii. The Execution, delivery and performance of this Agreement by `CLYC' have been duly and validly authorized and approved (as required by law and by the terms of this Agreement) by CLYC's Board of Directors and this Agreement has been duly executed and delivered by `CLYC' and constitutes the valid and binding obligation of `CLYC' in accordance with its terms, except as limited by bankruptcy, insolvency, and other laws affecting the enforcement of creditors' rights. iii. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein will not result in any breach or violation of any of the terms or provisions of, or constitute a default under, the Articles of Incorporation or By-Laws of `CLYC' or, to the knowledge of such counsel, any statue, law, order, rule or regulation of any court of governmental agency or body having jurisdiction over `CLYC' or any of its activities or properties or, to the knowledge of such counsel, any term or provision of any indenture, mortgage, security agreement, or other agreement, instrument, commitment or arrangement, to which `CLYC' is a party or by which it is bound or to which its property is subject. 15 iv. The shares of `CLYC' to be delivered to the Shareholders within thirty (30) days from the Closing Date pursuant to Paragraph 2 hereof, have been duly authorized and upon such delivery will be validly issued, fully paid, non-assessable and listed or authorized for listing on the Exhibit "B". g. No action or proceeding by any governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit the carrying out of the transactions contemplated by this Agreement. h. All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and all certificates opinions, agreements, instruments and documents mentioned in this Paragraph 9 or incident to any such transaction shall be satisfactory in form and substance to the Shareholders and their counsel. The conditions contained in this Paragraph 9 are included herein for the benefit of the Shareholders and, without constituting a waiver of any of its rights hereunder, may be waived, in whole or in part, by the Shareholders. 10. CERTAIN COVENANTS PRIOR TO CLOSING. a. The Shareholders will use their best efforts, and take such other action as may be necessary, to fulfill all of the conditions contained in Paragraph 8 hereof and to authorize and consummate, and cause the Company to authorize and consummate, all of the transactions herein contemplated. b. `CLYC' will use its best efforts, and take such other action as may be necessary, to fulfill all of the conditions contained in Paragraph 9 hereof and to authorize and consummate all of the transactions herein contemplated. c. Between the date of this Agreement and the Closing Date, the Company and Shareholders shall (a) give `CLYC' and its authorized representatives full access to all offices, warehouses and other facilities and properties of the Company and to the books and records of the Company (and permit `CLYC' to make copies thereof), (b) permit `CLYC' to make inspections thereof, and (c) cause its officers and its advisors (including, without limitation, its auditors, attorneys, financial advisors and other consultants, agents and advisors) to furnish `CLYC' with such financial and operating data and other information with respect to the business and properties of the Company, and to discuss with `CLYC' and its authorized representatives the affairs of the Company, all as `CLYC' may from time to time reasonably request. 16 d. Between the date of this Agreement and the Closing Date, the Company and Shareholders shall give notice to `CLYC' promptly upon the Company or Shareholders becoming aware of (a) any inaccuracy of a representation or warranty set forth in any schedule or (b) any event or state of facts that, if it had occurred or existed on or prior to the date of this Agreement, would have caused any such representation and warranty to be inaccurate, any such notice to describe such inaccuracy, event or state of facts in reasonable detail. e. Between the date of this Agreement and the Closing Date, the Company and Shareholders shall cause (a) copies of all reports and other documents given to the members of the Board of Directors (or any committee thereof) of the Company to be delivered to `CLYC' at the same time and (b) copies of the minutes of all meetings of, and actions taken without a meeting by, the Board of Directors (or any committee thereof) of the Company to be delivered to `CLYC' promptly after the preparation thereof. Between the date of this Agreement and the Closing, the Company and Shareholders shall give `CLYC' at least three (3) days prior notice of any meeting of or action to be taken without a meeting by, the Board of Directors or committee thereof, of the Company and shall cause the Company to permit one individual designated by `CLYC' to attend each such meeting as an observer. f. Between the date of this Agreement and the Closing Date, `CLYC', the Company and Shareholders shall discuss and coordinate with respect to any public filing or announcement concerning any of the contemplated transactions. g. `CLYC' and Shareholders shall cause the Company to, (a) file with applicable regulatory authorities the applications and related documents required to be filed by them (and prosecute diligently and related proceedings) in order to consummate the contemplated transactions and (b) cooperate with the others as they may reasonably request in connection with the following. 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. A. SURVIVAL. All representations, warranties and agreements contained in this Agreement shall survive the Closing notwithstanding any investigation conducted with respect thereto; however, a party shall have no liability with respect to a representation and warranty, or an agreement to be performed or complied with prior to the Closing Date, to the extent that the inaccuracy of such representation and warranty or the failure to perform and comply with such agreement was not intentional and was disclosed in a schedule delivered pursuant to this Agreement. 17 B. INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. The Company and Shareholders, jointly and severally, shall indemnify and hold harmless `CLYC', and shall reimburse `CLYC' for any loss, liability, claim, damage, expense (including, but not limited to, costs of investigation and defense and reasonable attorneys' fees) or diminution of value (collectively "Damages") arising from or in connection with, (a) any inaccuracy in any of the representations and warranties of the Company or Shareholders in this Agreement, or any actions, omissions or state of facts inconsistent with any such representation or warranty, (b) any failure by the Company or Shareholders to perform or comply with any agreement in this Agreement, (c) any claim by any person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such person with the Company or any Shareholder (or any person acting on their behalf) in connection with any of the contemplated transactions. C. INDEMNIFICATION BY `CLYC'. `CLYC' shall indemnify and hold harmless the Company and Shareholders, and shall reimburse the Company and Shareholders for, any Damages arising from or in connection with (a) any inaccuracy in any of the representations and warranties of `CLYC' in this Agreement, or any actions, omissions or state of facts inconsistent with any such representation or warranty, (b) any failure by `CLYC' to perform or comply with any agreement in this Agreement, or (c) any claim by any person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by such person with `CLYC' (or any person acting on its behalf) in connection with any of the contemplated transactions without having been discussed by the Company. D. PROCEDURE FOR INDEMNIFICATION. Promptly after receipt by an indemnified party of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under such section, give notice to the indemnifying party of the commencement thereof, but the failure so to notify the indemnifying party shall not relieve it of any liability that it may have to any indemnified party except to the extent the indemnifying party demonstrates that the defense of such action is prejudiced thereby. In case any such action shall be brought against an indemnified party and it shall give notice to the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof with counsel satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party under such section for any fees of other counsel or any other expenses, in each case subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation. If an indemnifying party assumes the defense of such an action, (a) no compromise or settlement thereof may be effected by the indemnifying party without the indemnified party's consent, which shall not be unreasonably withheld unless (i) there is no finding or admission of any violation of law or any violation of the rights of any person and no effect 18 on any other claims that may be made against the indemnified party and (b) the indemnifying party shall have no liability with respect to any compromise or settlement thereof effected without its consent, which shall not be unreasonably withheld. If notice is given to an indemnifying party of the commencement of any action and it does not, within ten (10) days after indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense thereof, the indemnifying party shall be bound by any determination made in such action or any compromise or settlement thereof effected by the indemnified party. Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that an action may adversely affect it other than as a result of monetary damages, such indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise or settle such action, but the indemnifying party shall not be bound by any determination of an action so defended or any compromise or settlement thereof effected without its consent, which shall not be unreasonably withheld. E. AFTER-TAX BASIS. In determining the Damages suffered by any person, the amount thereof shall be reduced by any tax benefit realized by such person as a result of the incidence of such Damages. Any payment required by this Paragraph 11 (for indemnification or otherwise) in respect of the Damages suffered by any person shall be in an amount that after deducting any tax cost incurred by the person receiving that payment equal the amount required to be paid as determined under the applicable provisions (other than this sentence) of this Paragraph 11. The tax benefit realized by a person by reason of any payment or other matter shall be the amount by which (a) the aggregate federal and state income and franchise taxes that would have been, but for such payment or other matter, payable by such person for the fiscal year, if any, in which such payment or other matter is taken into account ("but-for tax") exceeds (b) the aggregate federal and state income and franchise taxes actually payable by such person for such fiscal year ("actual tax") and the tax cost of any payment shall be the amount by which the actual tax exceeds but-for tax. f. Notwithstanding anything above contained to the contrary in Paragraph 11, (i) none of the provisions of this Paragraph 11 shall apply to any liability (whether by `CLYC' to one or more of the Shareholders or by one or more the Shareholders to `CLYC') arising out of or by virtue of the Provisions of Paragraph 12 below or any violation of the provisions of Paragraph 12, and (ii) the provisions of said Paragraph 12 shall survive the Closing Date. 19 12. INVESTMENT REPRESENTATION. Each of the Shareholders acknowledges his/her understanding that the shares of CLYC's Common Stock to be delivered to the Shareholders pursuant to this Agreement will not be registered pursuant to the 1933 Act and each of the Shareholders further represents to and agrees with `CLYC' as follows: a. He/she is acquiring the shares of CLYC's Common Stock pursuant to this Agreement for his/her own private personal investment account and with no present intention of reselling or distributing such shares or any portion thereof to others. b. They fully comprehend that in connection with the issuance of shares of CLYC's Common Stock pursuant to this Agreement, `CLYC' is relying to a material degree on the representations, warranties and covenants contained herein, and with such realization he/she authorizes `CLYC' to act as it may see fit in full reliance hereon. c. He/she agrees that none of such shares will be transferred or distributed unless (i) they are covered by an effective Registration Statement prepared in accordance with the 1933 Act and are distributed in a manner complying with the 1933 Act and with the Rules and Regulations promulgated thereunder; or (ii) they may be transferred in accordance with Rule 144 of the Rules and Regulations pursuant to the 1933 Act (or such similar Rule as may be applicable to such shares at the time of transfer) so long as such transfer strictly complies with said Rule 144 and with such procedures as `CLYC' may reasonably establish in connection therewith; or (iii) there is first delivered to `CLYC' the written legal opinion of legal counsel in form and substance reasonably satisfactory to CLYC's legal counsel or a "no action letter" from SEC indicating that any of the provisions of the 1933 Act and the Rules and Regulations promulgated thereunder. In the event such legal opinion is based upon the exemption now contained in Section 4(2) of the 1933 Act, the person acquiring shares or some portion thereof shall execute and deliver to `CLYC' a letter agreement complying with the 1933 Act and the Rules and Regulations promulgated thereunder. d. He/she hereby agrees that the certificate(s) representing such shares may bear a legend, as set forth below, setting forth the restrictions upon transfer which are contained in the foregoing subparagraph (c) and that `CLYC' may deliver to its transfer agents a "stop transfer order" directing the transfer agents not to effect any transfer of such shares without having received the permission of `CLYC' and evidence of compliance with applicable provisions of the 1933 Act and the terms of this Agreement. 20 The shares represented by this certificate have not been registered under the Securities Act of 1933 (the "Act") and are "restricted securities" as that term is defined in Rule 144 under the Act. The shares may not be offered for sale, sold or otherwise transferred except pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of `CLYC'. e. He/she hereby agrees that to indemnify `CLYC' against and hold it harmless from all losses, liabilities, costs and expenses (including reasonable attorneys' fees) which shall arise as a result of a sale or distribution by him/her of such shares or any portion thereof in violation of the 1933 Act or the terms of this Agreement. 13. FURTHER ASSURANCES. a. At the request of `CLYC', and without further consideration, the Company and Shareholders will execute and deliver such additional instruments of transfer and will take such other action as `CLYC' reasonably may request in order more effectively to transfer to `CLYC' full ownership and control of the Company. b. At the request of one or more of the Shareholders, and without further consideration, `CLYC' will execute and deliver such additional instruments and will take such other actions as Shareholders may reasonably request in order more effectively to carry out the transaction contemplated hereby. 14. EXPENSES. CLYC shall bear the expenses incident to the preparation, negotiation and delivery of this Agreement and the performance of its obligations hereunder. 15. EMPLOYEES OF THE COMPANY. `CLYC' agrees to maintain the employment of all of the company's employees in their present positions, with the same salary and seniority. 16. DIRECTORS. One (1) seat on the Board of Directors of `CLYC' may be made available to the Company. Should one seat be made available to Company, CLYC shall select one person to serve CLYC, under its by-laws, as a Board of Director. 21 17. OTHER MATTERS. A. NO OTHER AGREEMENTS. All terms and conditions of this Agreement are set forth herein, and there are no warranties, agreements or understandings, express or implied, except those expressly set forth herein. B. AMENDMENT. This Agreement may be amended only by a written instrument executed on behalf of CLYC, the Company and the Shareholders. C. NOTICES. Any notice or other communication required or permitted to be given hereunder shall be deemed properly given if personally delivered or deposited in the United States mail, registered or certified and postage prepaid, addressed to the Company or the Shareholders at 1748 Independence Blvd., Suite D1, Sarasota, Florida 34234, or at such other addresses as may from time to time be designated by the respective parties in writing. D. SPECIFIC PERFORMANCE. The parties acknowledge that the subject matter of this Agreement (i.e., the business and assets of the Company) is unique and that no adequate remedy of law would be available for breach of this Agreement. Accordingly, each party agrees that the other parties will be entitled to an appropriate decree of specific performance or other equitable remedies to enforce this Agreement (without any bond or other security being required) and each party waives the defense in any action or proceeding brought to enforce this Agreement that there exists an adequate remedy at law. E. ASSIGNMENT. Except as specifically permitted by the terms of this Agreement, neither this Agreement nor any right created hereby shall be assignable by CLYC. The Company or the Shareholders (or their respective successors in interest) without the prior written consent of all other parties hereto and any such attempted assignment shall be void. Nothing in this agreement, expressed or implied, is intended to convert upon any person, other than the parties hereto; any rights or remedies under or by reason of this Agreement. Notwithstanding any other provisions herein to the contrary, the right of each of the Shareholders to receive shares of CLYC's Common Stock pursuant to Paragraph 2 hereof shall not be assignable except upon the death of such Shareholder by testamentary disposition or the law of intestate succession. F. PARAGRAPHS AND OTHER HEADINGS. Paragraphs or other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 22 G. CHOICE OF LAW. It is the intention of the parties that the laws of the State of Florida should govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties. H. NO WAIVER. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. I. SEVERABILITY. In the event that any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable, the same shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. J. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. DNAPRINT GENOMICS, INC. ------------------------------------- ------------------------------------- CHIEF SCIENTIFIC OFFICER CATALYST COMMUNICATIONS, INC. ------------------------------------- ------------------------------------- CHAIRMAN 23 E X H I B I T "A" List of DNAPrint genomics, Inc. Shareholders OUTSTANDING NUMBER OF SHAREHOLDER NAME DNAPRINT GENOMICS, INC. SHARES Tony Frudakis 27,500 George Frudakis 27,500 Carl Smith, III 50,000 Total Shares 105,000 Percentages 100% 24 E X H I B I T "B" SECTION I. Issuance of 2,560,000 post-reverse shares of CLYC common stock to DNAPrint genomics, Inc. shareholders at closing will be as follows: SHAREHOLDER NAME NUMBER OF `CLYC' SHARES _Tony Frudakis___________________ _____670,476____________ _George Frudakis_________________ _____670,476____________ _Carl Smith, III_________________ _____1,219,048___________ Total Shares ____2,560,000____ SECTION II. OPERATION OF THE PORTFOLIO OF ESCROWED SHARES The three million eight hundred forty thousand (3,840,000) post-reverse shares of CLYC common stock held in escrow will be released to the Shareholders according to the terms, conditions and achievements set forth in Exhibit "D" attached hereto. The shares shall be issued to the below listed shareholders in the following percentages: SHAREHOLDER NAME PERCENTAGE _TONY FRUDAKIS__________________ _________26.2%__________ _GEORGE FRUDAKIS________________ _________26.2%__________ _CARL SMITH, III___________________ _________47.6%__________ 25 EXHIBIT "C" SECTION I. FUNDING CLYC shall fund Company based on the following schedule. Each scheduled payment will be made on the fifteenth (15TH) day of the month. Should the fifteenth (15TH) day of the month fall on a weekend or legal holiday, payment will be made the following Monday or the following business day subsequent to the holiday. MONTH PAYMENT JULY, 2000* $118,508.00 AUGUST, 2000 $ 75,883.00 SEPTEMBER, 2000 $ 77,700.00 OCTOBER, 2000 $ 67,095.00 NOVEMBER, 2000 $ 69,510.00 DECEMBER, 2000 $ 94,552.00 JANUARY, 2000 $ 84,630.00 FEBRUARY, 2001 $ 73,762.00 MARCH, 2001 $ 76,598.00 APRIL, 2001 $ 74,812.00 MAY, 2001 $ 74,865.00 JUNE, 2001 $ 75,915.00 * DNAPRINT GENOMICS, INC. HAS BEEN PROVIDED $37,000.00 OF THE JULY, 2000 FUNDING PRIOR TO CLOSING. Second year funding to Company will be determined prior to July 15, 2001. To determine the amounts and timing of second year funding, the Company must illustrate that it is a viable business concern, and must achieve certain scientific successes. These successes include but are not limited to: the favorable publishing of information in scientific publications in peer reviewed journals or books; significant patents and/or patents pending; a significant alliance or alliances with an organization or organizations that create a positive effect on the securities of the encompassing public entity; and invitations to present the Company's scientific results at industry recognized conferences. 26 EXHIBIT "D" SECTION I. COMPANY AND SHAREHOLDER EARN-OUT The Company and Shareholders shall be entitled to an earn-out based upon the performance and achievement of the Company. Said earn-out is understood and agreed to be as follows: Three million eight hundred forty thousand (3,840,000) post-reverse shares of `CLYC' stock will be held in escrow for five (5) years. All or a portion of the above stated shares of `CLYC' escrowed stock will be released to the shareholders quarterly based upon either of the following two (2) formulae. It is understood and agreed that only one (1) formula will be used to determine the amount of the potential earn-out, i.e., the two (2) methods cannot be combined to determine the earn-out. Company must either achieve gross profits for earn out as follows: One (1) share of `CLYC' stock for every thirty-three cents (33(cent)) worth of gross profit produced by the Company. This method shall be referred to as the gross profit method. OR Company may be appraised from time to time, not more than three (3) times during the earn-out period, by a mutually acceptable independent firm. Valuation of Company by said firm must meet or exceed the dollar levels outlined below in order for cross-referenced earn-out to be effected. Earn-out below is based on said quarterly release of shares and is not cumulative. COMPANY VALUATION `CLYC' EARN-OUT SHARES $5,000,000 384,000 CLYC SHARES $10,000,000 768,000 CLYC SHARES $15,000,000 1,152,000 CLYC SHARES $20,000,000 1,536,000 CLYC SHARES $25,000,000 1,920,000 CLYC SHARES $30,000,000 2,304,000 CLYC SHARES $35,000,000 2,688,000 CLYC SHARES $40,000,000 3,072,000 CLYC SHARES $45,000,000 3,456,000 CLYC SHARES $50,000,000 3,840,000 CLYC SHARES 27 SECTION II. EMPLOYEE INCENTIVES `CLYC' will allocate six hundred forty thousand (640,000) post-reverse shares of `CLYC' stock to Company to attract new employees. Said shares will be equivalent to approximately five percent (5%) of the issued and outstanding shares of CLYC. Said shares will be held in escrow as per the terms and conditions of Article 2 of the Agreement and Plan of Exchange attached hereto. Any and all employee incentive offers must be approved, in writing, by the Board of Directors of `CLYC' prior to being offered to any potential or new employee. 28 -----END PRIVACY-ENHANCED MESSAGE-----