ALL: Some competitor information. Hmmm vely intelesting ... (to quote Laugh In)!
Neil.
======================
SONOMA ANNOUNCES BII ACQUISITION
VANCOUVER, June 15 /CNW/ - Sonoma Resource Corp.
Trading Symbol: SNA (VSE)
June 15,1998
Sonoma Resource Corp. (VSE-SNA) announces that it has entered into an
agreement to acquire up to 45% of Biometric Identification, Inc., a private
California based company in the business of developing and marketing
fingerprint recognition technology.
Executive Summary
The Company proposes to acquire up to US$5,000,000 of convertible
debentures to be issued by Biometric Identification, Inc. (''BII''), a private
California corporation, BII is currently controlled by Arete Associates
(''Arete'') which is also a private California corporation. Arete has been a
Department of Defence research and development contractor for over 20 years
which specializes in sensor systems and pattern recognition software
development. The Company has been told that many of Arete's staff of
mathematicians, physicists and engineers, of which 50 hold Ph.D's, helped
develop the BII fingerprint identification technology and that this technology
has been exclusively licensed to BII by Arete. If all the convertible
debentures are acquired and all the rights of conversion thereunder are
exercised, the Company will hold approximately 45% of the issued shares of
BII. Approximately 83% of the issued shares of BII are currently held by
Arete (''Arete'') and the remaining shares are held primarily by employees of
BII and Arete.
Biometrics is the science of identifying an individual through their own
unique personal physiology. Examples of biometric-based products are
fingerprint readers, hand geometry, eye scanners and face-recognition.
Behavioural-based devices include voice response and keystroke systems. BII
has entered the commercial market for the supply and integration of biometric
fingerprint identification technology.
BII has a total of 28 employees and consultants, lead by its Chairman,
Dr. Stephen Lubard, a Ph.D. in Aerospace Engineering (Maryland) and its CEO
and CFO, Robert Kamm, a technology entrepreneur with an MBA in Finance from
UCLA. Dr. Lubard is a co-founder of both BII and Arete.
A more detailed discussion of this transaction is set out below.
The Business of BII
On March 18, 1998, Rand Edgar Capital Corp. (''RECC'') entered into an
initial version of a Memorandum of Agreement (the ''MoA'') with BII and with
Arete. The initial version of the MoA was amended and replaced on May 20,
1998. BII is a private California corporation currently controlled by Arete,
also a private California corporation. BII is a spin-off from Arete, a
Department of Defence research and development contractor for over 20 years
which specializes in sensor systems and pattern recognition software
development. Arete has over 140 employees and many of its 50 Ph.D.'s,
mathematicians, physicists and engineers helped develop the BII fingerprint
technology described below. This technology has been exclusively licensed to
BII by Arete. The license agreement provides that BII will pay to Arete a
license fee of US$0.10 per unit for the first 2,500,000 products and US$0.05
per unit for the next 20,000,000 products. On payment of US$1,250,000 of
royalties, Arete will transfer ownership of the intellectual property to BII.
Biometrics is the science of identifying an individual through their own
unique personal physiology. Examples of the total spectrum of biometric-based
products are fingerprint readers, hand geometry, eye scanners and face-
recognition. Behavioural-based devices include voice response and keystroke
systems. The fingerprint portion of the market is estimated to encompass 77%
of the total biometric market. BII has entered the commercial market for the
supply and integration of biometric fingerprint identification technology.
Fingerprint biometrics has specific applications within many different
markets, and include both closed and open systems. Examples of a closed
system would include time and attendance control and security access. Examples
of open systems would include Internet security and electronic commerce. The
Company has been informed that BII's strategy has been to initially focus upon
the time and attendance and access control markets where an immediate need
exists.
BII has represented to the Company that BII's products allow the ability
to register/enroll a fingerprint of an individual, save a template of it, and
then at a later time verify the identity of the individual by retrieving the
template and performing a comparison with a newly obtained fingerprint image.
Competitive fingerprint identification systems are based on algorithms that
read ''minutia'' (imaging points of interest on the fingerprint) and can be
fooled by temporary alterations such as changes to the finger due to cuts or
swelling. This results in a loss of accuracy. BII's products utilize a full
finger, two Di Ridge Pattern Recognition fingerprint verification software
system that is exclusive to BII. This images the entire two-dimensional ridge
pattern of the fingerprint and provides several times greater accuracy at the
highest security level. BII's products are not affected by temporary changes
to the finger and provide a response time of less than one second, an
enrolment time of less than five seconds, and an accuracy rate of less than
one per thousand of false positive and less than one per thousand false
negative.
BII has further represented that it has developed a product line of
biometric fingerprint identification products which can be deployed in
stand-alone mode or as part of a larger application. BII has recently begun
marketing the Veriprint 2000 for access control and time and attendance
applications. This system is being used by the Venezuelan Legislature in
verification terminals that allow members of the Chamber of Deputies and
Senate, and their authorized surrogates, to vote electronically from their
desks.
Also recently introduced is the Veriprint 1000 Desktop Fingerprint
Identification System. The Veriprint 1000 is a silicon sensor based system
incorporating BII software and the new Veridicom chip. Applications include
safeguarding Internet access, intranet access, local area networks, electronic
commerce and other sensitive data applications.
Furthermore, BII has represented that competitive products rely primarily
on Application Specific Integrated Circuit (ASIC) Technology, which is
inherently inflexible and hard to integrate with external applications. BII
has developed a fully programmable device architecture which facilitates ease
of integration with external Original Equipment Manufacturers (''OEM'') and
Value Added Retailers (''VAR''). A complete application software development
kit has been constructed so that any VAR's and integrators can easily
interface. The software is Windows 95/NT compatible and is provided in the
form of a complete Dynamic Link Library (''DLL''), allowing the user to
customize all aspects of the BII product line.
BII was incorporated in 1995 as a subsidiary of Arete. BII represents
that, to date, more than U.S.$2,500,000 has been invested in the research and
development of the biometric fingerprint technology and Arete has committed to
invest up to a further U.S.$2,500,000 in the Company for research and
development and working capital. The audited Income Statement for BII's
fiscal year ended December 31, 1997 shows revenues of U.S.$494,000 and a net
loss of U.S.$1,332,000. An unaudited Income Statement for the four month
period ended April 30, 1998 showed revenues of U.S.$282,000 and a net loss of
U.S.$511,000. With the additional capital from the Company and from Arete,
BII plans to significantly ramp up its marketing efforts.
Terms of Acquisition
The Company proposes to invest up to U.S.$5,000,000 in convertible
debentures to be issued by BII. If all such convertible debentures are
acquired and all rights of conversion are exercised, the Company will hold
approximately 45% of the issued shares of BII. Approximately 83% of the
issued shares of BII are currently held by Arete. The remaining shares are
held primarily by employees of BII and Arete.
On June 12, 1998, the Company purchased U.S.$1,250,000 of the convertible
debentures (which includes taking an assignment of U.S.$350,000 already
advanced to BII by RECC). The Company may later elect (at its discretion) to
acquire additional convertible debentures to a maximum of U.S.$5,000,000
(which it currently intends to do). If the Company does not purchase all of
the convertible debentures in a particular tranche by the outside purchase
date specified in the following table, the Company will lose its right to
purchase convertible debentures.
<<
Designation Principal Amount Outside Purchase Date
----------- ---------------- ---------------------
Tranche A US$ 350,000 Previously advanced
Tranche B US$ 900,000 Advanced on June 12, 1998
Tranche C US$ 500,000 2 months following the Tranche B
closing date
Tranche D US$ 1,250,000 5 months following the Tranche B
closing date
Tranche E US$ 500,000 9 months following the Tranche B
closing date
Tranche F US$ 1,500,000 11 months following the Tranche B
closing date
_______________
Total: US$ 5,000,000
_______________
---------------
>>
The convertible debentures will bear interest at the lowest interest rate
imputed under the U.S. Internal Revenue Code and, if not converted, will
become payable five years after the closing date of the first acquisition.
The Company may exercise its rights of conversion at any time. The
convertible debentures will automatically be converted on the earlier of an
initial public offering by BII or the acquisition of BII by a third party. If
all rights of conversion are exercised, the Company will be entitled to
receive the percentages of fully diluted common stock of BII specified in the
following table.
<<
% Upon Conversion
Designation of Entire Tranche Aggregate %(1)
----------- ----------------- --------------
Tranche A & B 20.00% 20.00%
Tranches C & D 11.73% 33.33%
Tranches E & F 11.667% 45.00%
>>
(1) Total percentage for the Tranche and all prior Tranches.
While the Company is not legally obligated to purchase additional
convertible debentures or to exercise its rights of conversion, the Company's
intention is to acquire all of the convertible debentures and, in due course,
to exercise all of the conversion rights. If all of the convertible
debentures are purchased and all rights of conversion are exercised, the
Company will ultimately hold 45% of the fully diluted shares of the common
stock of BII. The interest of the Company may be subject to dilution
resulting from the issuance of shares under BII's stock incentive plan or
under certain additional financings which may be undertaken by BII.
The parties bave also agreed that BII may be merged into or acquired by
Sonoma. The parties have agreed to examine this from a tax, securities and
commercial perspective to determine the best structure for this merger.
After the advance of the U.S.$1,250,000 to BII referred to above, the
Company will have approximately Cdn.$1,700,000 of working capital. From this,
it will be able to make the Tranche C advance. The Company will need
additional financing in order to make the subsequent tranche advances.
In connection with the investment, RECC will receive a fee of US$145,000
in cash, or in common shares of the Company at CDN$0.30 per share (converted
at the date of closing), or a combination of cash and shares, at the election
of RECC.
Management of BII
BII has a total of 28 employees and consultants. The two principal
members of the management team of BII are described briefly below.
Stephen Lubard, Chairman
Dr. Lubard is Chairman and founder of BII. He is also one of the
founders and Chief Executive Officer of Arete. Dr. Lubard brings over 20
years of experience in managing highly complex projects and development of
software and systems for solving complex image processing problems. Dr.
Lubard holds a Ph.D. in aerospace engineering from the University of Maryland.
Robert Kamm, Chief Executive Officer, Chief Financial Officer
Mr. Kamm is an experienced technology entrepreneur and has started two
previous technology companies. In 1988, Mr. Kamm co-founded a value-added
software company called Online Mortgage Documents and served as the company's
President. Mr. Kamm has an MBA in Finance from UCLA.
Historical Business of the Company
The Company historically has been in the mineral exploration business.
The Company owns 100% of the Cerro Toro Project, located in the San Juan
Province, Argentina and the Apeleg Claim Block located in the Chubut Province,
Argentina and holds several claim blocks in the Santa Cruz, Cordoba and San
Luis Provinces of Argentina. In light of the present state of the metals
markets, the Company has significantly reduced its staff and overhead in
Argentina and has cut back on its explorations activities. The Company is
currently seeking to joint venture its properties and it has had discussions
with a number of major mining companies. However, no agreements have yet been
reached.
Shareholder Approval
The Company will be asking its shareholders to approve this transaction
at its Annual General Meeting which has been rescheduled for Tuesday, June 30,
1998, at 2:00 p.m. An Information Circular Addendum has been mailed to
shareholders with full particulars of this transaction. Investors interested
in additional information about this transaction can obtain a copy of this
Information Circular Addendum from the Company.
Further announcements will be made as and when appropriate.
On Behalf of the Board of
SONOMA RESOURCE CORP.
-----------------------------------------
Patrick W. McCleery, President & Director
The Vancouver Stock Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of the content of this release.
-30-
For further information: Patrick W. McCleery, President & Director,
(604) 687-4144 or (800) 763-3255 or fax (604) 669-7678 |
