CALVERTON, N.Y., July 29, 2004 (PRIMEZONE) -- AdZone Research, Inc. (OTCBB:ADZR), a provider of pioneering Internet surveillance technology, reported today that its Chairman & CEO, Charles A. Cardona III, has issued the company's latest operational report to shareholders. The full text of his message follows: July 29, 2004
Dear Fellow Shareholders:
In the two weeks since we last reported to you, we have been able to move ahead on important and pressing matters. Today, I want to cover several issues very pertinent to both the near- and longer-term future of the company. They are important signposts of the strategic plan we see for AdZone as it matures into a company servicing both the defense and commercial sectors.
The most immediate good news, as disclosed on Tuesday, is that our NetGet(TM) (patent protected) technology has proven itself enough for the Government to issue an extension of the existing contract. I cannot stress enough the importance of the government contract we have won. As you read this, General Weaver is working very hard to secure the next phases of this contract, just as the technical staff is working virtually round-the-clock in meeting the customer's challenges.
The primary reason AdZone decided to directly approach potential Government customers was our belief the company had already accumulated critical data that had to get into the "right" hands. Unfortunately, that's not the typical role of "business development" at the major defense companies. By nature they are large bureaucracies, and their job is to contract and subcontract based on broadly defined awards as specific "task orders" are defined.
So, although AdZone had been told of cases where we were to participate, we waited while the process bogged down at both our identified strategic partners, along with another that we were precluded from naming. This caused delay after delay, until it became clear the best immediate path was to move forward on our own. In short order, we landed a direct contract. Ironically, however, this in no way inhibits AdZone from participating as a subcontractor along the lines detailed in our prior news releases should major intelligence and defense-related contractors seek us out, as several already have since announcement of our Government contract. Nevertheless, based on events to date, it's a good thing we chose not to rely solely on that path, or we'd still be waiting for our first commitment.
As to corporate expansion, in our initial April month-end report we said the company has identified several defense-related target companies that would be revenue generating and profitable if acquired. This process is time-consuming, but ongoing. In the past three months, our acquisition team has not only completed substantial due diligence, but has had several meetings with the senior management of these companies, located in the Northeast, the Southeast, and the West. Funding necessary to pursue these acquisitions, as well as additional authorized shares, are both now in place and available, following completion and effectiveness of the registration statement tied to the $1,850,000 commitment from The Nutmeg Group. Access to additional funding has been identified and will also be available as may be needed.
Now let's focus on last week's filing of restricted common stock for the company's incentive compensation program, as well as the registration statement covering the recent funding by The Nutmeg Group, as well as other consultants and early stage investors.
The 2004 incentive compensation plan is primarily designed to retain directors, executives and selected employees and consultants, and to reward them for making major contributions to the success of AdZone Research. These objectives are accomplished by making long-term incentive awards under the plan, providing participants with a proprietary interest in the growth and performance of AdZone. It is an important cornerstone of our future success, and has been structured in a manner that rewards the people we seek to attract and retain to grow the company, and that we believe will have no really dilutive impact on the company's valuation.
From time to time, participants will be given restricted awards that vest over a period of three and one half years. Such a program is integral to being competitive in our marketplaces, especially when so many employees today want more in their future than just a paycheck. It also enables us to offer the potential of having equity in the company, just as our more than 4,000 shareholders of record have, and will help keep our overall infrastructure expenses more reasonable as we grow. We can thus offer the incentive of growth through individual personal recognition, higher levels of compensation as merited, and the benefit of personal wealth building. In this scenario, it is a very powerful incentive to foster excellence in all we seek to accomplish, not the least of which is higher shareholder value and a measurable return on investment as the company moves forward.
As to the registration statement, it primarily covers shares and warrants provided to The Nutmeg Group in return for its investment in AdZone, and also provides for the registration of underlying shares for previously issued warrants to a range of consultants as well as early stage investors in the company. When this registration statement becomes effective, it may trigger an additional investment of $750,000 by The Nutmeg Group within five days of the effective date. We have already been told by the majority of individual holders named in the filing that they are long-term holders, and have no near term intention to liquidate their shares. As to The Nutmeg Group, we believe its similar longer-term belief in the company will result in an equally conservative attitude toward liquidation of shares and warrants.
In closing, we anticipate that, on or around August 1, The Nutmeg Group will invest an additional $100,000 in AdZone, with terms identical to its first $1,000,000 in funding. The specific reason for this additional cash infusion is to focus on creating new business opportunities and joint ventures with Nutmeg to our mutual benefit. It underscores the very strong long-term attitude the funding group has related to its investments in AdZone.
We also anticipate that early next month the company will announce the hiring of a financial executive to join the corporate staff. She will manage the company's day-to-day financial operations, giving management more time to involve itself in the many strategic opportunities unfolding.
As always, we appreciate your continued support, and are always available to answer your questions to the best of our ability. God bless America, and all who stand with us and for us in these unsettling times.
Sincerely, Charles A. Cardona III Chairman & CEO
AdZone Research is headquartered in Calverton, N.Y., in a facility that formerly housed major defense contractor Northrop Grumman Corporation. The facility was earlier used for top-secret defense research and development, and was part of the United States Navy's Naval Defense Technology Center.
Through monitoring of more than 500,000 Web sites worldwide, AdZone provides tracking and monitoring of targeted information on the Internet, with an expanded focus on global Internet analysis of security-related data transmissions. For additional information, please visit the company's Web site at http://www.adzoneresearch.com.
Certain statements contained herein are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.