**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**








**FORM
      10-KSB**




**x ANNUAL
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




**For
      the Fiscal Year Ended December 31, 2005**




**o****TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




**For
      the Transition Period from _____ to _____**





Commission
      File Number 000-24965




**ADVANCED
      ID CORPORATION**


(Exact
      name of small business issuer as specified in its charter)




**South
                Dakota**
            **46-0439668**(State
                or other jurisdiction of incorporation
              or
                organization)
            (IRS
                Employer Identification No.)**6143
                - 4 Street SE****,
                Suite 14**
              **Calgary,
                Alberta, Canada**
            **T2H
                2H9**
            **(403)
                  264-6300**(Address
                of principal executive office)
            (Postal
                Code)
            (Issuer's
                telephone number)




Securities
      registered under Section 12(b) of the Exchange Act:





None.





Securities
      registered under Section 12(g) of the Exchange Act:





Common
      Stock.




Indicate
      by check mark whether the issuer (1) has filed all reports required to be filed
      by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.




Yes  **x** No  **o**




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-B is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      Form 10-KSB.




Yes 
      **x** No o




Total
      revenues for our fiscal year ended December 31, 2005 were
      $1,027,723





As
      of
      March 23, 2006 the aggregate market value of the common stock held by
      non-affiliates of the registrant, computed by reference to the closing bid
      price
      for the common stock as reported on the OTC Bulletin Board, was $8,260,814.
      In
      addition to shares excluded by affiliates, this calculation also excludes shares
      of the registrant's Common Stock that are held by Schedule 13D filers.




1




APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEEDING FIVE
      YEARS




Check
      whether the issuer has filed all documents and reports required to be filed
      by
      Sections 12, 13, or 15(d) of the Exchange Act subsequent to the distribution
      of
      securities under a plan confirmed by a court.




Yes 
      **o**No**o**





APPLICABLE
      ONLY TO CORPORATE ISSUERS





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date:





As
      of
      March 23, 2006 there were 47,190,343 shares of common stock issued and
      outstanding.










**ADVANCED
        ID CORPORATION**
 **FORM
        10-KSB**
  **For
        the Fiscal Year Ended December 31, 2005**









**ITEM
                  1. DESCRIPTION OF BUSINESS**
              
              4OVERVIEW
              
              4PRODUCTS
                  AND SERVICES OVERVIEW
              
              5Companion
                  Animal/Biological Sciences Products and Services
              
              5Livestock
                  Animal Products and Services
              
              5BUSINESS
                  MODEL
              
              6INTELLECTUAL
                  PROPERTY
              
              6TARGET
                  MARKET
              
              6MARKETING
                  AND SALES STRATEGY
              
              7Sales
                  and Distribution Channels
              
              7Pricing
                  Strategy
              
              7Recent
                  Developments
              
              7COMPETITION
              
              8COMPETITIVE
                  ADVANTAGES
              
              9CAUTIONARY
                  FACTORS THAT MAY AFFECT FUTURE RESULTS
              
              9TRADEMARKS
                  AND PATENTS
              
              12EMPLOYEES
              
              12REPORTS
                  TO SECURITY HOLDERS
              
              12**ITEM
                  2. DESCRIPTION OF PROPERTY**
              
              12**ITEM
                  3. LEGAL PROCEEDINGS**
              
              13**ITEM
                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS**
              
              13
   2
   **ITEM
                    5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                    MATTERS**
                
                13MARKET
                    INFORMATION
                
                13HOLDERS
                
                13DIVIDENDS
                
                13SECURITIES
                    AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
                
                13RECENT
                    SALES OF UNREGISTERED SECURITIES
                
                14(i)
                    Fiscal 2004 Transactions
                
                14(ii)
                    Fiscal 2005 Transactions
                
                15(iii)
                    Fiscal 2006 Transactions
                
                16**ITEM
                    6. MANAGEMENT'S DISCUSSION AND ANALYSIS**
                
                17RESULTS
                    OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005 AND
                    DECEMBER
                    31, 2004
                
                17Revenues
                
                18Cost
                    of Revenues
                
                18Research
                    and Development
                
                18Selling,
                    General and Administrative
                
                18Insurance
                
                18Minority
                    Share of Net Income
                
                18Interest
                    Expense
                
                18Liquidity
                    and Capital Resources
                
                18**ITEM
                    7. FINANCIAL STATEMENTS AND NOTES TO FINANCIALS**
                
                20**ITEM
                    8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                    AND
                    FINANCIAL DISCLOSURE**
                
                33**ITEM
                    8A. CONTROLS AND PROCEDURES**
                
                33**ITEM
                    9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                    PERSONS**
                
                34DIRECTORS,
                    OFFICERS AND SIGNIFICANT EMPLOYEES
                
                34BUSINESS
                    EXPERIENCE OF OFFICERS, DIRECTORS AND SIGNIFICANT
                    EMPLOYEES
                
                34**ITEM
                    10. EXECUTIVE COMPENSATION**
                
                35**ITEM
                    11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                    AND
                    RELATED STOCKHOLDER MATTERS**
                
                36(I)
                    PERSONS BENEFICIALLY OWNING MORE THAN 5% OF OUTSTANDING COMMON
                    STOCK
                
                36(II)
                    DIRECTORS OF ADVANCED ID CORPORATION
                
                36(III)
                    OFFICERS AND SIGNIFICANT EMPLOYEES OF ADVANCED ID
                    CORPORATION
                
                36(IV)
                    DIRECTORS AND OFFICERS OF ADVANCED ID CORPORATION AS A
                    GROUP
                
                36**ITEM
                    12. CERTAIN RELATIONSHIPS AND RELATED
                    TRANSACTIONS**
                
                37HERITAGE
                    VENTURES LTD
                
                37SEYMOUR
                    KAZIMIRSKI
                
                37HUBERT
                    MEIER
                
                37CHE
                    KI LI
                
                38David
                    Goldenberg
                
                38Terry
                    Fields
                
                38**ITEM
                    13. EXHIBITS AND REPORTS ON FORM 8-K**
                
                38**ITEM
                    14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
                
                40**SIGNATURES**
                
                40
 3


PART
      I




ITEM
      1.DESCRIPTION
      OF BUSINESS





Overview





On
      October 17, 2002 AVID Canada Corporation combined with USA Sunrise Beverages,
      Inc. (USA), an inactive publicly owned company with no assets or liabilities,
      in
      a business combination accounted for as an acquisition of AVID Canada and a
      recapitalization of USA. USA had then outstanding shares of 10,625,724 and
      agreed to return 3,624,725 for cancellation, leaving 7,000,999 shares
      outstanding. USA then issued 28,000,000 shares to Heritage Ventures Ltd., AVID
      Canada’s former parent company, in exchange for the 200 outstanding shares of
      AVID Canada and $505,724 in debt owed by AVID Canada to Heritage Ventures.
      Avid
      Canada was incorporated in Alberta, Canada, on November 26, 1993. USA changed
      its name to Advanced ID Corporation effective November 15, 2002. As a result
      of
      the reverse merger transaction, Advanced ID now wholly owned AVID Canada and
      the
      original security holders of USA now hold 7,000,999 shares in Advanced ID.
      No
      consulting fees or finder’s fees were paid in relation to the reverse merger
      transaction.





Advanced
      ID has three subsidiaries, Advanced ID Asia Engineering Co. Ltd. (formerly
      AFG
      Asia Engineering Co. Ltd.) AVID Canada Corporation and Universal Pet Care,
      both
      of whom are wholly owned. AVID Canada Corporation is a reseller of radio
      frequency identification (RFID) microchips and scanners manufactured by American
      Veterinary Identification Devices (AVID) of the United States under the brand
      name AVID. AVID Canada does not own the AVID brand name or trademark. There
      currently exists no distribution agreement with AVID. The products are marketed
      to the companion animal and biological sciences sectors in Canada only.


Universal
      Pet Care is a non-operating entity with no assets or liabilities.





On
      July
      1, 2005 Advanced ID concluded an agreement to acquire a 60% interest in AFG
      Asia
      Engineering Co. Ltd. of Chiang Mai, Thailand to strengthen its resources in
      the
      radio frequency identification market. AFG Asia Engineering is a leader in
      the
      design and development of ultra high frequency (UHF) radio frequency
      identification technology.





Advanced
      ID develops, manufactures and sells, either directly or through distributors,
      microchip identification technologies referred to as radio frequency
      identification microchips and readers to the animal industry. In the second
      quarter of 2004, we began commercializing these products under the brand name,
      DataTRAC(TM). The intellectual property rights to the DataTRAC(TM) products
      are
      owned by Advanced ID Corporation.





RFID
      allows for the positive identification and location tracking of animals or
      objects that are embedded or tagged with RFID microchips. We currently supply
      over 3,000 organizations such as animal shelters, veterinarians, breeders,
      government agencies, universities, zoos, research labs and fisheries with RFID
      devices for companion animals, exotics, equines, bovines, llamas, alpacas,
      ostriches, aquatic species, reptiles, migratory and endangered species. We
      have
      implanted microchips in over 450,000 companion and other valuable animals,
      currently track nearly one million animals in our PETtrac database, and reunite
      numerous lost animals with their families each month.





Sales
      of
      microchips and readers to the companion animal and biological sciences markets
      in Canada continue to contribute a majority of our income in 2005, additionally
      sales of Ultra High Frequency (UHF) animal tags and readers were made to the
      states of New York and Colorado for the purpose of identifying captive Elk
      and
      Deer who are potential carriers of Chronic Wasting Syndrome Disease.
      Additionally Advanced ID Corporation commenced selling UHF identification tags
      to Goodyear Tire and Rubber Company under a purchase order finalized in the
      third quarter of 2005, this purchase order has continued into 2006.





As
      noted
      above, we are currently serving the Canadian market as a reseller of AVID’s RFID
      products. We have no plans to expand the marketing of AVID’s RFID technology for
      the companion animal and biological sciences sectors beyond Canada. The only
      way
      we would consider selling AVID’s products outside of Canada is if we first
      obtained written authorization, and it is not our intent to seek such approval
      at this time.





However,
      since we own the intellectual property of the DataTRAC(TM) microchips, we plan
      to market the sale of our products throughout the world, either directly or
      through international distributors. Our DataTRAC(TM) products are in no way
      competitive to the products supplied to us by AVID. We do not expect that any
      of
      our initiatives to market our DataTRAC(TM) products will negatively affect
      our
      current relationship with AVID, or at any time in the future. Our initial focus
      will be to target the bovine market that is numbered at over one billion cattle
      including 110 million in North America. In the United States and Canada, packing
      plants slaughter approximately 150,000 head of cattle each day or approximately
      35 million per year. Our next market will be the 750 million hogs worldwide.
      Annual hog slaughter in Canada and the United States totals 117 million.
      Currently, the Taiwanese hog population is 7.2 million head with annual
      slaughtering totaling approximately 11 million. Our third target market is
      the
      sheep industry. With inventories of 165 million head in Australia and New
      Zealand and total reliance on export markets, there is concern over the economic
      ramifications of a disease outbreak should the sheep industry be unable to
      ensure food safety. North America, Asia and Europe are the main importers of
      their meat products and are demanding food safety for their consumers. It is
      important to note that livestock identification tags carry a unique numeric
      sequence that is used only once.1





1  www.fas.usda.gov/dlp/circular/2001/01-101p/toc.htd


4




Products
      and Services Overview





Compa nion
      Animal/Biological Sciences, Inanimate Products and Services





Our
      current product offering includes an established line of RFID tags, readers,
      and
      software.





RFID
      Tags :
      Our
      RFID Tags purchased from American Veterinary Identification Devices consist
      of
      an integrated circuit or microchip utilizing a low frequency of 125 KHz or
      134
      KHz. The microchip is sealed in glass, compatible with the animal’s body,
      containing a programmed identification number which fits inside a hypodermic
      needle, and can be injected under the skin of an animal. Since these RFID Tags
      are passive, meaning they do not require a battery, a reader temporarily
      energizes the microchip allowing it to transmit its data to the reader with
      error-free reliability. Under normal conditions, the RFID Tags can last in
      excess of 20 to 25 years and generally well beyond the life of any companion
      animal. The read range for low frequency tags is approximately three to seven
      inches.





RFID
      Readers :
      We
      offer a variety of hand-held readers that read both our microchips and our
      competitors' microchips. Our reader formats include International Standards
      Organization (ISO), Federation of European Companion Animal Veterinarian
      Association (FECAVA) and AVID’s encrypted standard.





Software :
      We
      offer a proprietary Microsoft(R).Net based database called PETtrac which is
      our
      advanced software program that stores and tracks identification numbers from
      implanted animals by recording their microchip ID as well as unique information
      including data such as:





(1)  Pet
      name,
      breed, and description;


(2)  Animal's
      brand and tattoo numbers;


(3)  Present/past
      owners, and current details;


(4)  Medical
      history of the animal, medication, allergies, etc.; and


(5)  Other
      pertinent information specific to each sector/industry.





Services :
      We
      provide an electronic and manual data entry service to the PETtrac global
      tracking system for all animals identified with a microchip, including our
      competitors’ microchips, collar tags, rabies vaccination numbers and tattoo
      numbers in Canada. Animal recoveries can be performed by accessing our database
      through a web browser, as well as through a 24/7 operator assisted service
      by
      calling a toll free line.





Livestock
      Animal Products and Services





We
      have
      only recently begun commercializing our product offering which currently
      includes three different sized RFID tags, readers, and software specifically
      tailored to meet the nuances of each type of livestock and region.





RFID
      Tags :
      Our
      RFID Tags will be comprised of an integrated circuit or microchip utilizing
      an
      ultra high frequency of 915 MHz. An antenna is attached to the microchip to
      provide a longer read range, all of which is encapsulated in plastic. Our RFID
      Tags are passive thereby not requiring a battery, and can transmit their data
      to
      the reader with a read range of up to approximately ten feet.





Effective
      April 2003, we signed a strategic partnership agreement with Guide-Trend
      Technology Company Ltd. of China for the manufacturing of our RFID tags. Once
      completed, the final product is shipped directly to our customers. The
      integrated circuits or microchips are purchased on our behalf by Guide-Trend
      from EM Microelectronic of Switzerland or Philips Semiconductors of the
      Netherlands, two of the world’s largest RFID integrated circuit manufacturers.
      There exists no purchase contract with any of our suppliers as each purchase
      order is negotiated separately at this time.





Currently,
      we are the only company that is offering ultra high frequency tags to the
      livestock industry. All of our competitors offer low frequency tags which are
      generally more costly to produce, offer a shorter read range, and have limited
      reading capability within automated livestock processing plant environments.
      Adoption of RFID technology by animal owners has been slower than anticipated
      resulting lower than anticipated sales, additionally the adoption of Low
      Frequency ISO 11784 and 11785 compliant technology by a growing number of
      countries could delay or reduce tag and reader sales.




5




RFID
      Readers :
      We
      offer stationary and handheld readers that will scan and read our microchips.
      Effective November 2003, we secured a partnership agreement with Applied
      Wireless Identifications Group, Inc. of New York to supply us with ultra high
      frequency readers that we will resell to our customers.





Services :
      Our
      objective is to become the complete system provider for livestock identification
      and trace-back. As part of providing a complete system for our customers, we
      will provide in-depth analysis prior to implementation of a recommended
      solution.





Inanimate
      Products and Services: In
      August 2005 Advanced ID was awarded a Purchase Order from Goodyear Tire and
      Rubber Company of Akron Ohio for RFID identification tags. Goodyear is
      undertaking trials to test the durability and practicality of embedding UHF
      tags
      specifically designed for their tires. Tags were produced on a prototype basis
      initially prior to moving into larger scale production. The 2006 NASCAR racing
      tires will all have this product attached to their racing tires.





Business
      Model





We
      are
      planning to enhance our current revenue streams by:





-
      Offering higher integrity and more cost effective identification solutions
      over
      current practices in the global livestock markets with our DataTRAC(TM) RFID
      tags and readers, and our web-based tracking and recovery software
      system.





-
      Expanding our current market presence into other veterinary clinics and animal
      shelter markets across Canada.





-
      Expanding RFID technology into industrial applications such as the energy and
      manufacturing industries. The knowledge and profile gained through the
      relationship with Goodyear Rubber and Tire Company is one example.





Intellectual
      Property





Our
      intellectual property is comprised of our radio frequency identification (RFID)
      tags utilized for the identification and trace back of livestock. We currently
      do not own any patents and have not licensed any intellectual property used
      in
      our products.





Target
      Market





Advanced
      ID is fulfilling the needs of the companion animal and biological sciences
      markets in the RFID industry as outlined below:





-
      Increasingly, municipal animal control agencies are setting policy and by-laws
      for permanent tagging of pets.





-
      Pending
      guidelines will require livestock and meat product operators to use advanced
      tagging and tracking systems.





-
      Industries are demanding increased efficiencies in logistics, distribution,
      asset management, and tracking.





-
      The
      global RFID market reached over US$900 million in 1999 and worldwide revenues
      are forecast to reach US$7.5 billion by 2006.





Our
      PETtrac system has been approved for use across Canada by the National Companion
      Animal Coalition (NCAC) thereby giving us access to over 3,000 professional
      veterinarians as well as all SPCAs and humane societies, thus tapping a market
      of over eight million animals.





In
      the
      livestock industry, the Bovine Spongiform Encephalopathy (i.e. BSE or Mad Cow
      Disease) disease that plagued Europe in 1998 was thought to have infected North
      American herds. This resulted in legislative efforts for animal identification
      and tracking systems with RFID being the preferred technology. Governments
      are
      implementing legislation requiring a quick and secure animal trace back system,
      aimed at improving food safety for consumers from animal diseases. Our products
      have been designed to exceed existing regulations. 2





Advances
      in microchip design, miniaturization, global positioning tracking, read range,
      read/write capabilities and data storage have greatly expanded the applications
      for RFID tags. RFID systems are being piloted and used in a wide range of
      retail, commercial and industrial applications but they are not widely used
      in
      the livestock industry. Our initial focus in expanding our revenue streams
      is to
      be the system integrator or solutions provider for the livestock industry which
      is estimated to be in excess of two billion head of cattle, hogs and sheep.
      3





2  www.canadaid.ca/ccia-regulations


3  www.fas.usda.gov/dlp/circular/2001/01-101p/toc.htd


6


Marketing
      and Sales Strategy





Sales
      and Distribution Channels





With
      a
      strong channel already established in the Canadian companion animal and
      biological sciences markets with our direct sales team, comprised of one sales
      representative and three customer support personnel, we intend to leverage
      this
      position by securing additional relationships with other veterinarian
      professionals in targeted regions across Canada. Currently, we have
      relationships with the following distribution agencies; Associate Vet
      Purchasing, Western Drug Distribution Center, Vet Purchasing, Sage London,
      Canadian Kennel Club and Centre de Distribution de Medicaments Veterinaires
      (CDMV). There is no contractual agreement or volume commitment in place with
      any
      of these parties. During fiscal 2005, we had three customers, Canadian Kennel
      Club, Veterinary Purchasing and Goodyear Tire and Rubber Company, that each
      accounted for more than 10% of our revenues.





In
      the
      United States and Canada, we expect that the majority of our sales for our
      livestock products will be through direct channels and distribution
      co-operatives. In addition, we plan to use independent resellers or distributors
      in targeted regions and countries. We have established distributors in Taiwan,
      Argentina, Australia, New Zealand, China and Thailand These independent
      resellers and distributors will purchase our UHF products and resell them at
      a
      higher price. Our initial focus in the livestock industry will be to target
      those countries that have enacted mandatory animal identification legislation
      or
      have indicated their intent to enact such legislation.





Pricing
      Strategy





We
      plan
      to be a price-performance leader with all of our products and services. This
      is
      intended to assist our efforts to gain market acceptance and secure market
      share
      in the livestock industry, and further allow us to continue to increase our
      market share in the companion animal market. It is our goal to keep our
      expenditures small to ensure we maintain low product price points to discourage
      other competitors from entering the market yet allowing us to earn a healthy
      margin. We anticipate that any cost savings we achieve through process
      improvements will lead to reductions in our price points to discourage other
      competitors from entering the market.





Recent
      Developments





In
      Thailand, the Government has expressed their desire to implement an
      identification and trace back system as a result of the recent Avian influenza
      outbreak. We demonstrated our RFID technology in meetings held with government
      officials in May and October 2004. With the completion of Thailand’s election on
      February 6, 2005 and the appointment of the new Minister of Agriculture and
      Cooperatives in March 2005, numerous meetings have been held with government
      officials. No contracts or sales have been negotiated and it is not certain
      at
      this time what their final course of action will be.





In
      Argentina, we secured our first order for 100,000 RFID tags in April 2004.
      Due
      to high import taxes in Argentina, we have arranged through our Argentine
      distribution partner to finish production of our RFID tags in order to eliminate
      such taxes. Since April 2004, we have not secured any additional orders from
      our
      distributor.





In
      Taiwan, we met with elected government officials, including representatives
      from
      the Departments of Agriculture and Health, and demonstrated our RFID technology.
      In August 2004, we began implementation of a final large-scale trial, through
      our Taiwanese distribution partner, LKIT Co., Ltd., to aid in developing the
      requisite parameters for the establishment of such a system. A tag redesign
      was
      required due to some unanticipated reading failures from the biting pressure
      of
      the animals; the redesign was completed and tested in the fourth quarter of
      2005. New demonstrations are now underway; we anticipate a decision from
      government official later in 2006.





In
      Australia, a larger sheep trial was completed using our new tag and a specially
      designed reader arrangement to demonstrate the effectiveness of reading larger
      groups of sheep as they pass through a wide alley. The industry has been clear
      that this is necessary from the producers’ point of view to ensure large sheep
      flocks can be read easily without stress to the animals. Excellent results
      were
      received a majority of the time but not as consistent as we would like, as
      a
      result additional reader layouts are being tested. The State government of
      Victoria has called for an RFID tender for Sheep and Goat identification; we
      are
      currently reviewing the requirements and anticipate completing the
      tender.





In
      March
      2005, we announced that Kansas State University began an evaluation of our
      technology to provide empirical data on its features and benefits, and to
      provide a comparison with competitive technology. This test was completed
      demonstrating proof of concept, a second and larger test is being undertaken
      to
      further document the UHF technology in animal identification. Additionally
      tag
      and reader sales were completed to the States of New York and Colorado for
      the
      purpose of identifying and tracking Elk and Deer under their Chronic Wasting
      Syndrome surveillance program.




7




In
      Canada, the Canadian Cattle Identification Agency (CCIA) adopted RFID animal
      identification based on ISO 11784 and ISO 11785 animal identification
      technology. To date this ISO standard only encompasses Low Frequency (LF)
      technology; it will replace the bar code tag technology that was implemented
      in
      2001. Efforts will continue to demonstrate the benefits of UHF technology as
      their mandate is to consider any new technology.





Advanced
      ID is seeking to establish evaluation programs of its RFID technology for the
      Brazilian cattle industry which is estimated at 180 million head. We are
      currently in discussions with an organization to be our exclusive distributor
      for Brazil. In January 2005, we met with government and industry officials.
      No
      formal arrangements have been secured to date.








Competition





Our
      largest competitor in the companion animal and biological sciences market in
      Canada is Pethealth Inc. who is estimated to have approximately 45% market
      share
      compared with our estimated 40% market share. During 2004, Anitech Enterprises
      Inc. ceased operations and no longer remains a competitor. Less than three
      years
      ago, Anitech held the largest market share in Canada. The remaining 15% market
      share is spread among two companies which includes Microchips 4 Solutions and
      EIDAP. While in business, Anitech was a reseller of Digital Angel Corporation’s
      microchips and readers and as further referenced under Applied Digital Solutions
      below.





Pethealth
      Inc. -
      Pethealth’s vision is to become the leading provider of insurance and integrated
      health related information services to the North American companion animal
      market. Currently Pethealth claims it is Canada's largest provider of accident
      and illness insurance for dogs and cats to pet owners and the second largest
      in
      North America. Pethealth entered the companion animal industry in February
      2003
      where it has grown its market share by offering significantly lower priced
      products than all other competitors in North America. Pethealth is a reseller
      of
      Allflex USA’s companion animal products and which is further discussed below.
      Allflex’s technology offers no competitive advantages over our technology except
      that Pethealth is offering a significantly lower priced product at this
      time. For the year ended December 31, 2004, Pethealth showed revenues of
      CAD $802,443 from microchip sales in Canada and United States which represented
      7% of their total revenues of CAD $11,287,000. Revenues from microchip sales
      during the year ended December 31, 2003 totaled CAD $ 224,524 Pethealth’s
      accumulated losses as at December 31, 2004 were CAD $18,950,691. 4




The
      current method of livestock identification predominantly utilizes standard
      bar
      code visual tags. The barriers for adoption of current RFID technology include
      its high cost and its limited read range. Currently, we have a very small market
      share in this segment. Our top three competitors in the livestock market are
      as
      follows:





Allflex
      USA Inc. -
      Allflex claims to be the world's leading supplier of livestock identification
      and management systems. Its products include visual identification ear tags
      and
      applicators, electronic identification systems and a variety of precision
      instruments. Allflex works closely with official and commercial organizations
      around the world to develop reliable and efficient systems for collecting and
      transferring information on animal identification, movement and performance.
      Allflex has manufacturing and technology subsidiaries in USA, Canada, Europe,
      Australia, New Zealand, Brazil and China. Allflex products are distributed
      in 80
      countries worldwide. For the years ended December 31, 2004 and 2003, Allflex
      attained unaudited revenues of $112.1 million and $84.1 million, no operating
      profits were disclosed. 5,6





Applied
      Digital Solutions, Inc. -
      Applied Digital, through its subsidiary Destron Fearing, has been in the animal
      identification business since 1945. For over 50 years, Destron Fearing has
      developed, manufactured and marketed a broad range of individual animal
      identification products. As the animal identification industry expanded, the
      Company culminated a merger of Fearing Manufacturing and Destron/IDI in November
      1993. Their products range from visual ear tags attached to livestock, to
      electronic microchips implanted under the skin of pets, fish, laboratory animals
      and livestock. On April 25, 2000, Destron Fearing was acquired by Applied
      Digital Solutions, Inc. (ADSX - NASDAQ) for $84.6 million through a merger
      of
      its wholly owned subsidiary, Digital Angel Corporation. For the year ended
      December 2005, Applied Digital had revenues of $113.7 million and net income
      loss of $10.1 million. In Applied Digital's "Advanced Wireless" operating
      segment which includes Destron Fearing's and Digital Angel's businesses,
      revenues from this segment accounted for 50% of total revenues or $ 56.8 million
      during Fiscal 2005. 7





4   www.pethealthinc.com


5www.allflexusa.com6www.electratrust.com


7   www.adsx.com and www.destronfearing.com


8





Trovan,
      Ltd. - Trovan
      is a privately held United Kingdom company established in 1988. Trovan is
      focused on developing and marketing RFID technology, telemetric systems and
      biomedical delivery technology. Trovan has established a network of distributors
      located in North America, South America, Europe, Asia, Australia, Africa and
      the
      Middle East. Users of their technology include Volkswagen, Daimler Benz, Coca
      Cola, Siemens, Nestle SA, Nissan, Merck, Samsung and Hoechst/Aventis in the
      private sector, as well as 60 government agencies in 13 countries around the
      world. 8


Other
      Competition - Other
      competition will come from the continued use of bar code tags in those countries
      that have not made it mandatory for users to purchase an RFID tag. The reason
      that bar code tags are used almost exclusively over an RFID tag is largely
      a
      function of price and the fact that previous RFID technology does not offer
      any
      significant benefits over bar code tags.





Competitive
      Advantages





Based
      on
      in-house research, the existing RFID technology available for livestock is
      centered on low frequency (30 to 300 KHz) tags and high frequency tags (3 to
      30
      MHz) which offers a read range up to three feet at a retail price point of
      $2.00
      to $10.00 per tag. Low and high frequency livestock identification tags have
      been available in the market for approximately ten years yet there has been
      only
      a limited level of adoption of this technology. This is largely because the
      read
      range is nominally greater than bar code tags that are currently priced at
      $1.00
      to $1.50 per tag and because the technology has not fully met the requirements
      of most users.





Our
      RFID
      technology utilizes a higher frequency of 915 MHz that provides a read range
      up
      to ten feet at a price point of $1.50 to $2.00 per tag. Some of our RFID tags
      also include a bar code to ensure a seamless transition for current bar code
      customers to adopt RFID technology. In addition, we will be developing RFID
      tags
      to offer read/write functionality allowing users to store additional data on
      each tag such as the animal's birth date, vaccinations, etc.





Our
      management team and board of directors have extensive experience in the RFID
      and
      Livestock industries. Strong relationships have been cultivated over numerous
      years with key participants in the livestock industry including relationships
      with key principals of national cattle associations, feedlots, packing plants,
      distribution groups and co-operatives, and primary producers. These
      relationships have been attained through personal contact, meetings, conferences
      and presentations, both within our current business operations and through
      prior
      business experience.





It
      is our
      belief that the adoption of any livestock identification method will require
      some form of mandatory requirement either through government legislation or
      import regulations by those countries that import meat and livestock. Currently,
      Canada has enacted legislation for mandatory identification of cattle and the
      European Union has enacted legislation for mandatory identification of all
      livestock. Other countries such as the United States, Australia, New Zealand,
      Argentina, Brazil, Taiwan and Thailand are considering similar
      requirements.





Our
      research and development activities over the last two years have included
      researching, designing and developing RFID tags for livestock identification.
      This entailed sourcing integrated circuit and reader manufacturers, whose
      products could perform under harsh environments, designing and optimizing an
      antenna to maximize read range, and developing an appropriate encapsulation
      process to protect these components from extreme weather conditions. Numerous
      tests were concluded in both a laboratory environment and under field conditions
      including farms, ranches, feedlots, and processing plants. These various tests
      have been conducted in United States, Germany, China, Canada, Taiwan, Argentina,
      Australia, Thailand and Brazil.





Cautionary
      Factors that may Affect Future Results





(a).
      We
      cannot offer any assurance as to our future financial results. You may lose
      your
      entire investment.





We
      have
      not received substantial income from operations to date and future financial
      results are uncertain. We cannot assure you that Advanced ID can operate in
      a
      profitable manner. To date, we have an accumulated deficit of $(4,072,856)
      as of
      December 31, 2005. Even if we obtain future revenues sufficient to expand
      operations, increased production or marketing expenses would adversely affect
      liquidity of Advanced ID.





(b).
      We
      do not have an active market in our securities. If our common stock has no
      active trading market, you may not be able to sell your common shares at
      all.





8   www.trovan.com


9





We
      do not
      have an active public market for our common shares. The trading volume of our
      securities on the OTC Bulletin Board has averaged 56,441 shares per day over
      the
      last twelve months ended December 2005 ranging from an average low of 27,692
      shares per day in the month of August 2005 to an average high of 117,646 shares
      per day during the month of January 2005. We cannot assure you that an active
      public market will ever develop. Consequently, you may not be able to liquidate
      your investment in the event of an emergency or for any other
      reason.





(c).
      We
      do not meet the requirements for our stock to be quoted on NASDAQ, American
      Stock Exchange or any other senior exchange and even though our stock is quoted
      on the OTC Bulletin Board, the tradability in our stock will be limited under
      the penny stock regulation.





The
      liquidity of our common stock would be restricted even after public listing
      if
      Advanced ID’s common stock falls within the definition of a penny
      stock.





Under
      the
      rules of the Securities and Exchange Commission, if the price of the company's
      common stock on the OTC Bulletin Board is below $5.00 per share, the company's
      common stock will come within the definition of a "penny stock." As a result,
      it
      is possible that Advanced ID’s common stock may become subject to the "penny
      stock" rules and regulations. Broker-dealers who sell penny stocks to certain
      types of investors are required to comply with the Commission's regulations
      concerning the transfer of penny stock. These regulations require broker-dealers
      to:





-
      Make a
      suitability determination prior to selling penny stock to the
      purchaser;


-
      Receive
      the purchaser's written consent to the transaction; and


-
      Provide
      certain written disclosures to the purchaser.





These
      requirements may restrict the ability of broker/dealers to sell the company's
      common stock, and may affect the ability to resell the company's common
      stock.





(d).
      Our
      cash balances in banks and brokerage firms may exceed the insurance limits.
      Our
      liquidity may be negatively affected if these institutions should
      fail.





At
      December 31, 2005, we maintained cash balances with the Bank of Montreal,
      Canadian Imperial Bank of Commerce and Bank One. Balances are insured up to
      $100,000 by the Federal Deposit Insurance Corporation. At times, balances may
      exceed such insurance limits. Our liquidity may be negatively affected if these
      institutions should fail.





(e).
      We
      are dependent on Dan Finch and key management personnel. The failure to attract
      and retain the necessary personnel could have a materially adverse effect on
      our
      business, operations and financial condition.





Our
      success is dependent upon, among other things, the services of Dan Finch CEO
      & President. The loss of Mr. Finch’s services could have a material adverse
      effect on our business, operations and financial condition. We do not have
      key-man life insurance policy for Mr. Finch. The expansion of our business
      will
      place further demands on existing management and future growth. Profitability
      will depend, in part, on our ability to hire and retain the necessary personnel
      to operate our business. There is no certainty that we will be able to identify,
      attract, hire, train, retain and motivate other highly skilled technical,
      administrative, managerial, marketing and customer service personnel.
      Competition for such personnel is intense and there is no certainty that we
      will
      be able to successfully attract, integrate or retain sufficiently qualified
      personnel. The failure to attract and retain the necessary personnel could
      have
      a materially adverse effect on our business, operations and financial
      condition.





(f).
      We
      are in an intensely competitive industry. There are numerous competitors
      offering various components of the type of products and services we offer.
      Also,
      there is no certainty that additional competitors will not enter markets that
      we
      intend to serve.





We
      believe that our ability to compete depends on many factors both within and
      beyond our control. At this time, there are a few other companies offering
      similar services as those intended to be offered by us. It should be expected
      that in the future we would be competing with additional companies, many of
      which may have greater financial resources than our company. There is no
      certainty that we will be able to compete successfully in this
      market.





(g).
      Your
      vote may not affect the outcome of any shareholder vote since our principal
      stockholder currently retains approximately 30.8% of our outstanding
      stock.





For
      instance, Heritage Ventures, Ltd. may be able to control the outcome of all
      stockholder votes, including votes concerning director elections, charter and
      by-law amendments and possible mergers, corporate control contests and other
      significant corporate transactions.





(h).
      Changes in foreign policies could have an adverse effect on our operations.
      All
      marketing will be done in-house and through international distributors.





There
      is
      no certainty that our marketing strategies will be effectively implemented.
      A
      portion of our marketing will be done through international distributors.
      Changes in foreign policies by international governments could have a material
      negative effect on our marketing strategies.




10




To
      date
      we have entered into three distribution agreements. In May 2003, Advanced ID
      announced that we had signed an agreement with Loving Kindness International
      Technology Co., Ltd. (LKIT) for the distribution of its products in Taiwan.
      LKIT
      is one of the largest suppliers of veterinary products in Taiwan, servicing
      the
      needs of the companion animal and livestock markets. In November 2003, Advanced
      ID announced that we had reached an agreement with Natural Fields S.A. of
      Argentina for distribution in that country. Natural Fields S.A. is one of the
      largest exporters of cattle to Europe and the United States. In January 2004,
      Advanced ID announced that we had signed an agreement with Trace Australia
      Pty
      Ltd. as its exclusive distributor for Australia. Trace Australia is a wholly
      owned subsidiary of Polymer Direct Australia Pty Ltd. ($30 million annual
      revenues) and was established specifically to focus on the development and
      distribution of RFID applications.





(i).
      Our
      success may depend on the ability of our distributors to implement viable
      marketing initiatives.





We
      intend
      to offer the majority of our products and services through a network of
      independent distributors. Our success is dependent upon the ability of these
      distributors to implement viable marketing initiatives. Many of these
      distributors may carry products from several different companies. There is
      a
      risk that these distributors will give priority to the products of other
      suppliers. The reduction or loss in sales by one or more of our key
      distributors, or the inability to attract new distributors, could have a
      material adverse effect on our business.





(j).
      Changes in the foreign exchange rate could negatively affect our
      profitability.





We
      face
      foreign exchange rate exposure. We will offer payment for our products and
      services in U.S. dollars except for our Canadian customers who will pay us
      in
      Canadian dollars. With the majority of expenses expected to be in Canadian
      dollars, we will be exposed to fluctuations in foreign exchange rates from
      both
      a transactional and translational perspective. There is a risk that foreign
      exchange rate fluctuations between the Canadian dollar and the U.S. dollar
      will
      be disadvantageous to us.





(k).
      We
      may be subject to product obsolescence that could result in reduced
      profitability.





The
      markets for our products are characterized by evolving industry standards,
      technological changes and changing customer needs. The introduction of products
      embodying new technologies and the emergence of new microchips or software
      could
      render our existing products obsolete and unmarketable. Consequently, our
      success will depend upon our ability to successfully develop and introduce
      new
      and enhanced products that evolves with technological and industry developments,
      industry standards and customer needs. The timing and success of product
      development is unpredictable due to the inherent uncertainty in anticipating
      technological developments, difficulties in identifying and correcting design
      flaws and market acceptance. Any significant delay in releasing new products
      or
      enhancements could have a material adverse effect on the success of new products
      or enhancements that could have a material adverse effect on our business.
      There
      is no certainty that we will be able to introduce new products on a timely
      basis, that such products will achieve any market acceptance or that any such
      market acceptance will be sustained for any significant period. Failure of
      new
      products to achieve or sustain market acceptance could have a material adverse
      effect on our business.





(l).
      We
      will also depend on technology from third parties and should there be any
      problems or delays, this could have a material adverse effect on our
      business.





We
      will
      contract with third parties to provide some of the technological components
      regarding our products. We cannot assure you that, if we cannot contract with
      these parties on terms favorable to us, that we will be profitable. We have
      outsourced the design and manufacturing of the antennae utilized as one of
      the
      key components in Advanced ID’s RFID products to Hana Microelectronics Public
      Co. Ltd of Lamphun, Thailand. In addition, Advanced ID has outsourced
      manufacturing of the plastic encapsulation of its RFID tags to Guide-Trend
      Co.,
      Ltd. of China. In April 2003, Advanced ID announced it had signed a strategic
      partnership agreement with Guide-Trend to perform production and encapsulation
      functions. There are no general contractual requirements as the terms are
      negotiated and specified for each purchase order based on volumes
      purchased.





(m).
      Our
      business may be negatively affected by the misappropriation of our intellectual
      property.





We
      have
      entered into confidentiality and assignment agreements with our employees,
      suppliers and contractors, and non-disclosure agreements with outside parties
      with which we conduct business, in order to limit access to and disclosure
      of
      our proprietary information. There is no certainty that these contractual
      arrangements will protect our intellectual property from misappropriation or
      deter third party development of similar technologies. We will pursue
      registration of our trademarks and may license our proprietary rights to third
      parties. While we will attempt to ensure the quality of our brand names is
      maintained by distributors and licensees, there is no certainty that such
      distributors and licensees will not take action that might materially adverse
      effect our business, operations and financial condition.




11


(n).
      Our
      Initial funding transaction concluded in January 2004 has resulted in the
      issuance of a total of 3,075,341 common shares and has increased
      dilution.





As
      a
      result of the HEM Mutual Assurance LLC Debenture Agreement as acquired by
      Advanced ID in a merger agreement with AIDO Acquisition, Inc. and Universal
      Pet
      Care, Inc. on January 20, 2004, $995,500 in principal amount of the First
      Debenture became convertible into unrestricted shares of Advanced ID common
      stock at a conversion price that is the lower of $0.95 or the average of the
      three lowest closing per share bid prices for the Common Stock during the 40
      trading days prior to conversion. $4,500 in principal amount of the Second
      Debenture also became convertible into unrestricted shares of Common Stock
      at a
      conversion price of $0.01 per share. The conversion price and number of shares
      of Common Stock issuable upon conversion of the First and Second Debentures
      is
      subject to adjustment for stock splits, stock dividends, combinations and other
      dilutive events. As a requirement of the Debenture Agreement, a total of 50
      million shares were held in escrow. Effective June 29, 2004, the remaining
      balance owing on the $995,500 debenture was converted into Advanced ID common
      stock. As a result, the $995,500 debenture and the $4,500 debenture, plus
      accrued interest, have been fully converted thereby terminating this Debenture
      Agreement. A total of 3,075,341 common shares were issued to pay back both
      debentures. The remaining 46,924,659 shares held in escrow were returned to
      Advanced ID’s transfer agent and canceled.





On
      May
      12, 2005, the SEC declared our Form SB-2 registration statement effective
      whereby we registered common shares and warrants for the purpose of raising
      capital. As of March 23, 2006 $512,250.10 has been raised from private
      placements an additional $12,749.70 remains unsold, there are no firm
      commitments the remaining funds will be raised. The shares and warrants were
      priced as a unit (1share and 1 warrant = 1 unit). Shares are priced at
      $.15/share and 3 year warrants are priced at $.30/warrant.





The
      object of our business model is to be a viable, profitable entity. Should one
      or
      several of these factors be implemented or become effective, this could
      adversely affect our objective and as such, place any investment in us at
      risk.





Trademarks
      and Patents





We
      will
      be filing trademark registrations for certain brand names. In addition, we
      have
      secured the following Internet names: avidcanada.com, advancedidcorp.com and
      advancedid.ca. We have also identified additional trademarks and URLs that
      we
      plan to register in the immediate future. We currently do not have any patents
      registered.





Employees





We
      presently have seven full-time employees and one part-time employee. We have
      entered into consulting agreements with Two other parties to perform such duties
      as technical support, software development, channel development, product
      development, marketing and sales. On July 1, 2005 Advanced ID Corporation
      acquired a 60% interest in AFG Asia Engineering Ltd of Chiang Mai, Thailand.
      The
      Managing Director, Mr. Gottfried Auer and 40 % owner of AFG Engineering Asia
      Ltd. has been providing Advanced ID Corporation with all RFID engineering
      services since 2003. Mr. Auer has a Staff of nine hardware and software
      engineers and support staff in the Chiang Mai office. Subsequent to the purchase
      of AFG Asia Engineering Ltd. the corporate name was changed to reflect the
      new
      ownership structure and is now known as Advanced ID Asia Engineering Co.
      Ltd.




Reports
      to
      Security Holders





Effective
      October 17, 2002 we became a fully reporting company under the requirements
      of
      the Exchange Act, and to date we have filed the necessary quarterly and other
      reports with the Securities and Exchange Commission. Although we are not
      required to deliver our annual or quarterly reports to security holders, we
      would be pleased to forward this information to security holders upon receiving
      a written request to receive such information. The reports and other information
      filed by us will be available for inspection and copying at the public reference
      facilities of the Securities and Exchange Commission located at 450 Fifth
      Street, N. W., Washington, D.C. 20549.





Copies
      of
      such material may be obtained by mail from the Public Reference Section of
      the
      Securities and Exchange Commission at 450 Fifth Street, N. W., Washington,
      D.C.
      20549, at prescribed rates. Information on the operation of the Public Reference
      Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the
      Commission maintains a World Wide Website on the Internet at: http://www.sec.gov
      that contains reports, proxy and information statements and other information
      regarding registrants that file electronically with the Securities and Exchange
      Commission.




12




ITEM
      2. DESCRIPTION OF PROPERTY.





We
      currently have an agreement to lease office premises until August 31, 2007.
      We
      have committed to leasing approximately 2,304 rentable square feet and are
      obligated to pay basic rent and operating costs for a total cost of $1,650
      per
      month. The real property utilized by Advanced ID is in good condition, adequate
      for present operations and adequately covered by insurance. We also maintain
      insurance coverage for commercial general liability including blanket
      contractual liability, tenant's legal liability, non-owned automobile and cross
      liability coverage.





ITEM
      3. LEGAL PROCEEDINGS.





There
      are
      currently no pending or threatened legal proceedings which involve us or against
      any of our officers or directors as a result of their capacities with Advanced
      ID.





ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





None.








**PART
      II**





ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.




Market
      Information





Our
      common stock is traded over the counter and is quoted by the Over The Counter
      Bulletin Board (OTCBB) under the trading symbol AIDO. Our common stock began
      trading on the OTCBB effective October 17, 2002 upon conclusion of our reverse
      merger with USA Sunrise Beverages, Inc. The market prices noted below were
      obtained from the OTCBB and reflect inter-dealer prices, without retail mark-up,
      mark-down or commission and may not represent actual transactions.





Fiscal
                2005
            
            Fiscal
                2004High
            
            Low
            
            High
            
            LowFirst
                Quarter
            
            $
            0.49
            
            $
            0.27
            
            $
            1.23
            
            $
            0.65Second
                Quarter
            
            $
            0.39
            
            $
            0.21
            
            $
            0.72
            
            $
            0.27Third
                Quarter
            
            $
            0.30
            
            $
            0.18
            
            $
            0.45
            
            $
            0.22Fourth
                Quarter
            
            $
            0.19
            
            $
            0.12
            
            $
            0.77
            
            $
            0.17




Holders





As
      of
      March 23, 2006, the approximate number of shareholders of common stock of
      Advanced ID was 1,819




Dividends





We
      have
      not declared any cash dividends on our common stock since our inception and
      do
      not anticipate paying any dividends in the foreseeable future. We plan to retain
      any future earnings for use in our business. Any decisions as to future payment
      of dividends will depend on our earnings and financial position and such other
      factors as the board of directors deems relevant.




13





Securities
      Authorized For Issuance under Equity Compensation Plans





Plan
                Category
            Number
                of Securities to be Issued Upon Exercise of Outstanding Options,
                Warrants
                and Rights
            Weighted
                Average Exercise Price of Outstanding Options, Warrants and
                Rights
            Number
                of Securities Remaining Available for Future Issuance(a)
            (b)
            (c)Equity
                Compensation Plans Approved by Security Holders
            n/a
            n/a
            n/aEquity
                Compensation Plans Not Approved by Security Holders
            2,730,000
            $0.33
            1,716,034Total
            2,730,000
            
            1,716,034





Recent
      Sales of Unregistered S ecurities




**(ii)
      Fiscal 2004 Transactions**





On
      January 12, 2004, we issued a total of 500,000 shares of our common stock and
      a
      total of 122,500 warrants to four investors, Virginia Brown, David Wagner,
      Blake
      Communications, Inc. and Kelly Simon who purchased such shares pursuant to
      a
      Section 4(2) subscription agreement.





On
      January 12, 2004, we issued 25,000 shares of our common stock to FA Ventures
      Inc. as a finder’s fee rendered in connection with the execution of the above
      noted subscription agreements.





On
      January 14, 2004, we issued 75,000 shares of our common stock to Lebed &
Lara, LLC for consulting services rendered in connection with corporate
      communications.





On
      January 20, 2004, as part of an agreement and plan of merger among Advanced
      ID
      Corporation, Universal Pet Care, Inc. (UPC) and AIDO Acquisition, Inc., Advanced
      ID assumed the rights and obligations of a Convertible Debenture Purchase
      Agreement previously entered into by UPC under a private placement, including
      gross proceeds raised through the sale of two debentures for $995,500 and
      $4,500. As part of our assumed obligations, we issued 50,000,000 shares of
      our
      common stock to HEM Mutual Assurance LLC pursuant to the Convertible Debenture
      Purchase Agreement to satisfy conversion obligations under the debentures.
      Advanced ID consequently placed 50,000,000 shares of Common Stock into escrow
      for potential issuance to HEM Mutual Assurance LLC upon conversion of the
      Debentures. On the following dates we issued shares of our common stock upon
      notices received from HEM Mutual Assurance LLC to effect conversions of the
      debentures plus accrued interest: February 4, 2004 - 450,184 shares for
      $4,501.84; February 12, 2004 - 800,504 shares for $400,252.05; May 11, 2004
      -
      813,298 shares for $300,920.54; May 24, 2004 - 600,002 shares for $175,980.61;
      and June 29, 2004 - 411,353 shares for $120,649.84. Effective June 29, 2004,
      the
      $995,500 debenture and the $4,500 debenture, plus accrued interest, had been
      fully converted thereby terminating this Debenture Agreement. A total of
      3,075,341 common shares were issued to pay back both debentures. The remaining
      46,924,659 shares held in escrow were returned to Advanced ID's transfer agent
      and canceled. These common shares were issued pursuant to an exemption from
      registration under Rule 504 of Regulation D.





During
      March through December 2004, we issued a total of 300,000 shares of our common
      stock to Financial Capital Consultants for consulting services rendered in
      connection with financial public relations and business
      development.





On
      April
      22, 2004, we issued a total of 1,150,000 options to the directors which included
      Hubert Meier, Che Ki Li, Todd Noble, Seymour Kazimirski and Barry Bennett for
      services performed as directors.





On
      April
      22, 2004, we issued a total of 50,000 shares of our common stock to the
      directors which included Hubert Meier, Che Ki Li, Todd Noble, Seymour Kazimirski
      and Barry Bennett for services performed as directors.





On
      May 3,
      2004, we issued 50,000 shares of our common stock to Seymour Kazimirski who
      exercised 50,000 of his options at $0.10 per share for total proceeds of
      $5,000.





On
      May
      18, 2004, we issued a total of 30,000 options to six employees.





On
      November 5, 2004, we issued 150,000 shares of our common stock to Hubert Meier
      who exercised 150,000 of his options at $0.10 per share for total proceeds
      of
      $15,000.





On
      December 1, 2004, we issued 230,832 shares of our common stock to Sohan Jeerh
      to
      payoff a loan agreement with an outstanding principal balance of
      $57,708.





Except
      as
      noted, all of the securities issued in 2004 were issued pursuant to an exemption
      from registration under Section 4(2) of the Securities Act of 1934 to
      sophisticated investors.




14


**(i** **ii)
      Fiscal 2005 Transactions**





On
      January 4, 2005, we issued 100,000 options to one of our employees with an
      exercise price of $0.38, the closing bid price on the date the options were
      issued. One half of the options will vest on the first anniversary date and
      the
      balance will vest on the second anniversary date of issuance.





During
      January and February 2005, we issued a total of 60,000 shares of our common
      stock to Financial Capital Consultants for consulting services rendered in
      connection with financial public relations and business
      development.


On
        July
        1, 2005, Advanced ID issued 291,667 shares and 58,333 shares of Common Stock
        to
        Gottfried Auer and Mayuree Moonros to acquire a 60% interest in AFG Asia
        Engineering Co., Ltd. (See Note 4).
 
 On
        July
        21, 2005, Advanced ID issued a total of 400,000 shares of Common Stock to
        Financial Capital Consultants for consulting services rendered in connection
        with financial public relations and business development. Advanced ID recorded
        a
        non-cash expense of $84,000 related to these shares. The shares were valued
        based on the closing price on the date they were awarded.
 
 On
        July
        21, 2005, Advanced ID issued a total of 730,000 shares of Common Stock to
        five
        employees and consultants as compensation for past services. Advanced ID
        recorded a non-cash expense of $153,300 related to these shares. The shares
        were
        valued based on the closing price on the date they were awarded.
 
 On
        July
        21, 2005, Advanced ID issued a total of 100,000 shares of Common Stock to
        the
        directors as compensation for services performed. Advanced ID recorded a
        non-cash expense of $21,000 related to these shares. The shares were valued
        based on the closing price on the date they were deemed awarded.
 
 On
        September 29, 2005, Advanced ID issued a total of 375,000 shares of Common
        Stock
        to three investors for cash proceeds totaling $75,000. In connection with
        the
        sale of the 375,000 shares of common stock, Advanced ID issued warrants to
        acquire 375,000 shares of common stock at $0.40 per share for a period of
        three
        years. No expense was recorded in the quarter related to the issuance of
        these
        warrants or common stock because the issuances related to fund raising
        costs.
 
 On
        October 17, 2005, Advanced ID issued a total of 125,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $25,000. In connection with the
        sale
        of the 125,000 shares of common stock, Advanced ID issued warrants to acquire
        125,000 shares of common stock at $0.40 per share for a period of three
        years.
 
 On
        October 20, 2005, Advanced ID amended its subscription agreements with the
        four
        investors noted above. As a result, each investor received an additional
        41,667
        shares of Common Stock and an additional 41,667 warrants. The exercise price
        of
        the warrants was also amended to $0.30 per share.
 
 On
        October 27, 2005, Advanced ID issued a total of 286,667 shares of Common
        Stock
        to four investors for cash proceeds totaling $43,000. In connection with
        the
        sale of the 286,667 shares of common stock, Advanced ID issued warrants to
        acquire 286,667 shares of common stock at $0.30 per share for a period of
        three
        years.
 
 On
        November 7, 2005, Advanced ID issued a total of 26,667 shares of Common Stock
        to
        one investor for cash proceeds totaling $4,000. In connection with the sale
        of
        the 26,667 shares of common stock, Advanced ID issued warrants to acquire
        26,667
        shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        November 18, 2005, Advanced ID issued a total of 100,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $15,000. In connection with the
        sale
        of the 100,000 shares of common stock, Advanced ID issued warrants to acquire
        100,000 shares of common stock at $0.30 per share for a period of three
        years.
  On
        November 21, 2005, Advanced ID issued a total of 100,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $15,000. In connection with the
        sale
        of the 100,000 shares of common stock, Advanced ID issued warrants to acquire
        100,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        November 24, 2005, Advanced ID issued a total of 200,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $30,000. In connection with the
        sale
        of the 200,000 shares of common stock, Advanced ID issued warrants to acquire
        200,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        December 7, 2005, Advanced ID issued a total of 15,000 shares of Common Stock
        to
        one investor for cash proceeds totaling $2,250. In connection with the sale
        of
        the 15,000 shares of common stock, Advanced ID issued warrants to acquire
        15,000
        shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        December 16, 2005, Advanced ID issued a total of 200,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $30,000. In connection with the
        sale
        of the 200,000 shares of common stock, Advanced ID issued warrants to acquire
        200,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 Except
        as
        noted, all of the securities issued in 2005 were issued pursuant to an exemption
        from registration under Section 4(2) of the Securities Act of 1934 to
        sophisticated investors.
  15
  **(iv)
        Fiscal 2006 Transactions**
 
 On
        February 10, 2006, Advanced ID issued a total of 200,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $30,000. In connection with the
        sale
        of the 200,000 shares of common stock, Advanced ID issued warrants to acquire
        200,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        February 10, 2006, Advanced ID issued a total of 100,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $15,000. In connection with the
        sale
        of the 100,000 shares of common stock, Advanced ID issued warrants to acquire
        100,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        February 10, 2006, Advanced ID issued a total of 100,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $15,000. In connection with the
        sale
        of the 100,000 shares of common stock, Advanced ID issued warrants to acquire
        100,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        February 10, 2006, Advanced ID issued a total of 100,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $15,000. In connection with the
        sale
        of the 100,000 shares of common stock, Advanced ID issued warrants to acquire
        100,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        February 14, 2006, Advanced ID issued a total of 300,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $30,000. In connection with the
        sale
        of the 300,000 shares of common stock, Advanced ID issued warrants to acquire
        300,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        February 20, 2006, Advanced ID issued a total of 100,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $15,000. In connection with the
        sale
        of the 100,000 shares of common stock, Advanced ID issued warrants to acquire
        100,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        February 20, 2006, Advanced ID issued a total of 20,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $3,000. In connection with the
        sale
        of the 20,000 shares of common stock, Advanced ID issued warrants to acquire
        20,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        February 22, 2006, Advanced ID issued a total of 100,000 shares of Common
        Stock
        to one investor for cash proceeds totaling $15,000. In connection with the
        sale
        of the 100,000 shares of common stock, Advanced ID issued warrants to acquire
        100,000 shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        March
        2, 2006, Advanced ID issued a total of 100,000 shares of Common Stock to
        one
        investor for cash proceeds totaling $15,000. In connection with the sale
        of the
        100,000 shares of common stock, Advanced ID issued warrants to acquire 100,000
        shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        March
        6, 2006, Advanced ID issued a total of 100,000 shares of Common Stock to
        one
        investor for cash proceeds totaling $15,000. In connection with the sale
        of the
        100,000 shares of common stock, Advanced ID issued warrants to acquire 100,000
        shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        March
        9, 2006, Advanced ID issued a total of 100,000 shares of Common Stock to
        one
        investor for cash proceeds totaling $15,000. In connection with the sale
        of the
        100,000 shares of common stock, Advanced ID issued warrants to acquire 100,000
        shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        March
        23, 2006, Advanced ID issued a total of 100,000 shares of Common Stock to
        one
        investor for cash proceeds totaling $15,000. In connection with the sale
        of the
        100,000 shares of common stock, Advanced ID issued warrants to acquire 100,000
        shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        March
        23, 2006, Advanced ID issued a total of 100,000 shares of Common Stock to
        one
        investor for cash proceeds totaling $15,000. In connection with the sale
        of the
        100,000 shares of common stock, Advanced ID issued warrants to acquire 100,000
        shares of common stock at $0.30 per share for a period of three
        years.
 
 On
        March
        23, 2006, Advanced ID issued a total of 200,000 shares of Common Stock to
        one
        investor for cash proceeds totaling $30,000. In connection with the sale
        of the
        200,000 shares of common stock, Advanced ID issued warrants to acquire 200,000
        shares of common stock at $0.30 per share for a period of three
        years.
  16
 Except
        as
        noted, all of the securities issued in 2006 were issued pursuant to an exemption
        from registration under Section 4(2) of the Securities Act of 1934 to
        sophisticated investors.
 
 Advanced
        ID and Salmon Creek Public Relations entered into an agreement dated August
        31,
        2005 where Salmon Creek is to provide public relations services to Advanced
        ID
        from August 31, 2005 through November 30, 2005. Should both parties renew
        this
        agreement prior to November 30, 2005, Advanced ID will compensate Salmon
        Creek
        15,000 shares of its common stock. The agreement was renewed and Advanced
        ID
        plans to issue Salmon Creek 15,000 shares of common stock.





ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS .





Results
      of Operations for the Fiscal Years Ended December 31, 200 5
      and
      December 31, 2004.





The
      net
      loss of $1,050,205 for the year ended December 31, 2005 was smaller by $817,110
      or 43.7% versus last year due to lower operating expenses attributed largely
      to
      a reduction a significant reduction in non-cash interest charges related to
      a
      convertible debt financing and a reduction in Research and development
      expenditures. The specific details of these changes are discussed
      below.





Revenues





Revenues
      of $1,027,723 during the year ended December 31, 2005 increased by $131,602
      or
      14.6% over last year. The increase in revenues for the year ended December
      2005
      was a result of the initialization of inanimate RFID tag sales to Goodyear
      Tire
      and Rubber Company and a smaller increase in bulk chip sales to non companion
      animal sectors provided the overall increase. Continued strong competition
      in
      our companion animal business segment resulted in a sales decline in this
      sector. This increase in competition started in 2004 when Pethealth Inc., a provider
      of insurance and integrated health related information services to the North
      American companion animal market, entered the market as a reseller of Allflex’s
      RFID microchips and readers. Pethealth has used the sale of microchips to the
      companion animal industry to secure additional clients in which to sell its
      pet
      insurance.


On
      September 28, 2005, National Companion Animal Coalition’s (NCAC) approval was
      received for our ISO companion animal microchips, as well the national coalition
      recognized our national database which already carries the approval of the
      Canadian Veterinarian Medical Association (CVMA). Although FECAVA microchips
      are
      being phased out for companion animals by the NCAC in Canada, we continue to
      sell them for use in non-companion animals and to veterinarians who continue
      to
      prefer FECAVA to ISO microchips. Of the total revenues earned of $1,027,723
      for
      the year ended December 31, 2005, $888,022 or 86% were from our companion
      animal/biological sciences division in Canada and $139,701 or 14% were from
      our
      ultra high frequency (UHF) division with all such revenues located in the United
      States. All revenues earned for the year ended December 31, 2004 were from
      our
      companion animal/biological sciences division in Canada with the exception
      of
      $50,000 from our UHF division with all such revenues from
      Argentina.





We
      expect
      that the continued acceptance by owners to microchip their pets, increased
      activity by the biological science community and government agencies for the
      tracking of non-domestic species, increased frequency by various municipal
      animal control agencies to set policy and by-laws for the permanent tagging
      of
      pets in their respective communities, and the actions by government and industry
      officials to implement identification and trace back systems in the livestock
      industry to minimize or eliminate the spread of diseases and ensure food safety
      will continue to elevate our market presence and translate into higher revenues
      for future reporting periods.





Cost
      of Revenues





Cost
      of
      Revenues of $582,171 for the year ended December 31, 2005 increased by $123,004
      or 26.7% over the previous year. The increase in Cost of Revenues is attributed
      to a higher volume of products sold during the current year ended December
      2005.
      It is noted that while revenues increase by 14.6% cost of sales increased by
      26.7%, this is due mainly to reduced margins from increased competition in
      the
      companion animal sector.





Research
      and Development





Research
      and development expenses of $236,445 for the year ended December 2005 decreased
      by $227,256 or 49% over last year’s comparable period. This decrease is due to
      the completion of our second generation DataTRAC(TM) RFID tags for large sized
      livestock and for the development of our first generation DataTRAC(TM) RFID
      tags
      for small to medium sized livestock. Continued engineering development will
      be
      ongoing but focused mainly in the areas of antenna tuning and material
      selection.





17





Selling,
      General and Administrative





For
      the
      year ended December 31, 2005, selling, general and administrative expenses
      of
      $1,229,538 were higher by $392,415 or 46.9% over last year largely because
      of a
      one time personnel severance expense, increased salary costs with the addition
      of a new president and CEO as well as public relations contract of $206,940.
      Travel costs increased $20,386; professional fees related to legal and audit
      services increased by $19,879, director’s costs fees increased by $25,740;
      Employee non-cash compensation costs increased by $186,688. The higher costs
      in
      the above noted areas were offset by a reduction of $84,206 in consulting
      expenses. It is our expectation that our consulting expenses will stay at these
      current levels for future reporting periods.





Our
      consultants include Seymour Kazimirski, Hubert Meier, both of whom also serve
      as
      directors, Gottfried Auer, Saran Yimsrijalernkit, and Keith Taite. For Messrs.
      Kazimirski, Meier, please refer to the section titled “Business Experience of
      Officers and Directors” for their qualifications. Messrs. Auer and
      Yimsrijalernkit of Advanced ID Asia Engineering AFG Co., Ltd. are professional
      engineers who have led the design, development, testing and implementation
      of
      our RFID livestock tags and readers. Mr. Taite is a professional engineer
      specializing in software development for Honeywell Inc., a
      diversified technology and manufacturing leader of aerospace products and
      services; control technologies for buildings, homes and industry; automotive
      products; power generation systems; specialty chemicals; fibers; plastics and
      advanced materials. Mr.
      Taite has led the development of our software system to manage data from our
      RFID readers to computers.





Insurance





During
      the year insurance costs increased $6,195 or 240% as a result of requirements
      of
      one of our clients. It is anticipated there will be no further increases in
      future reporting periods.





Minority
      Share of Net Income





On
      July
      1, 2005 Advanced ID acquired a 60% interest in AFG Asia Engineering Co. Ltd.
      The
      minority of net income of $12,771 represents an adjustment to deduct the 40%
      non-owned interest in AFG Asia Engineering.




Interest
      Expense





During
      the year ended December 31, 2005, interest expense of $17,913 was lower by
      $989,919 or 98% over last year. Of the total of $17,913 in interest expense
      during 2005, $12,552 is attributed to non-cash interest related a Note Payable
      owing to one of our Directors, $5,000 is accrued interest related to the
      Director’s note payable.





As
      at
      December 31, 2005, we had only one remaining note payable outstanding which
      accrues interest at 10% per annum and to which non-cash interest is charged
      (See
      Note 8 of our audited financials).




Liquidity
      and Capital Resources





As
      at
      December 31, 2005, we had cash and cash equivalents of $198,814.





During
      the year ended December 2005, net cash used in operating activities of $617,042
      was lower by $54.360 or 6% as compared to the year ended December 2004. Cash
      used by operating activities during 2005 resulted primarily from a smaller
      net
      loss during the reporting period and an overall decrease in research and
      development expenses.





During
      the year ended December 2005, net cash provided by
      investing activities of $110,697 was lower by $28,136 or 161% over the prior
      year ended December 2004. Cash used by investing activities resulted from our
      purchase of office furniture and equipment, computer hardware, and software.  We
      have
      no commitments for future purchases of capital assets.





During
      the year ended December 2005, net cash provided by financing activities of
      $233,384 was lower by $940,733 or 80% as compared to the previous year ended
      December 2004. During 2005, cash has been provided through, completed
      subscription agreements with 13 investors for $239,250, whereas we secured
      two
      private placements, received cash from exercised options and paid off certain
      notes payable in the comparable period in 2004.




18





Currently
      in the global livestock industry, countries such as the United States, European
      Union, Canada, Taiwan, Australia, New Zealand, Thailand, Argentina and Brazil
      are considering or have expressed their intent to make the identification of
      livestock mandatory. The primary reasons for this action is to employ a system
      to improve the speed and accuracy of tracing livestock to minimize or eliminate
      the impact of food safety issues from human consumption of meat products, and
      because importing nations such as the European Union, Asia and North America
      are
      demanding that an identification and trace back system is in place from the
      countries in which they import meat products and livestock from. This trend
      is
      reasonably likely to have a material positive impact on our long term revenues,
      results of operations and liquidity.




Our
      internal and external sources of liquidity have included cash generated from
      the
      exercise of options and warrants, proceeds raised from subscription agreements
      and private placements, and advances from related parties. We are currently
      not
      aware of any trends that are reasonably likely to have a material impact on
      our
      liquidity. Our current cash balance is estimated to be sufficient to fund our
      current operations over the next three to four months and will not be sufficient
      to fund our long term needs. The
      basis
      that our cash balance is expected to be sufficient to fund our current
      operations over the next seven to ten months is based on our current net cash
      usage rate (cash used offset by cash received) which we estimate to be $50,000
      to $60,000 per month. It
      is our
      intent to secure a market share in the livestock and inanimate identification
      industry which we feel will require additional capital over the long term to
      undertake sales and marketing initiatives, further our research and development,
      and to manage timing differences in cash flows from the time product is
      manufactured to the time it is sold and cash is collected from the sale.
      Our capital
      strategy is to increase our cash balance through financing transactions,
      including the issuance of debt and/or equity securities. On May 12,2005, the
      SEC
      declared our form SB-2 registration statement effective whereby we registered
      common shares and warrants for the purpose of raising capital.No firm commitment
      arrangements have been entered into for future financing and no assurances
      can
      be given that adequate levels of additional funding can be obtained on favorable
      terms, if at all.


19





ITEM7.
      FINANCIAL STATEMENTS AND NOTES TO FINANCIALS.








REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Board
      of
      Directors and Stockholders


Advanced ID Corporation


Calgary, Alberta, Canada





We
      have
      audited the accompanying consolidated balance sheet of Advanced ID Corporation
      (“Advanced ID”) as of December 31, 2005, and the related consolidated statements
      of operations, stockholders’ equity (deficit) and comprehensive loss and cash
      flows for each year in the two-year period ended December 31, 2005. These
      financial statements are the responsibility of Advanced ID’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). 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
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Advanced ID Corporation as of
      December 31, 2005 and the results of its operations and its cash flows for
      each
      year in the two-year period ended December 31, 2005 in conformity with
      accounting principles generally accepted in the United States of
      America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      Advanced ID will continue as a going concern. As discussed in Note 3 to the
      consolidated financial statements, Advanced ID has incurred losses of $1,050,205
      and $1,867,315 for each of the years ended December 31, 2005 and 2004. Advanced
      ID will require additional working capital to develop its business until
      Advanced ID either (1) achieves a level of revenues adequate to generate
      sufficient cash flows from operations; or (2) obtains additional financing
      necessary to support its working capital requirements. These conditions raise
      substantial doubt about Advanced ID’s ability to continue as a going concern.
      Management's plans in regard to this matter are also described in Note 3. The
      accompanying financial statements do not include any adjustments that might
      result from the outcome of these uncertainties.






Lopez,
      Blevins, Bork & Associates, LLP


Houston,
      Texas





March
      17,
      2006


20


ADVANCED
      ID CORPORATION


CONSOLIDATED
      BALANCE SHEET


DECEMBER
      31, 2005








ASSETSCURRENT
                ASSETS:Cash
            
            $
            198,814Trade
                accounts receivable, net of allowance for doubtful accounts of
                $4,906
            
            
            123,857Inventory
            
            
            42,142Prepaid
                expenses
            
            
            5,967Total
                current assets
            
            
            370,780Property
                and equipment, net
            
            
            48,064Goodwill
            
            
            55,486Total
                other assets
            
            
            103,550Total
                assets
            
            $
            474,330


LIABILITIES,
                MINORITY INTEREST AND
              STOCKHOLDERS’
                EQUITYCURRENT
                LIABILITIES:Accounts
                payable
            
            $
            145,839Accounts
                payable - related parties
            
            
            137,305Loans
                payable - related parties, short term
            
            
            72,026Accrued
                liabilities
            
            
            17,744Total
                current liabilities
            
            
            372,914Loans
                payable - related parties
            
            
            12,709Total
                liabilities
            
            
            385,623MINORITY
                INTEREST IN AFG ASIA ENGINEERING
            
            
            24,780COMMITMENTSSTOCKHOLDERS’
                EQUITY:Series
                A preferred stock, $0.01 par; 500,000 shares authorized; none
                issued
            
            
            —Common
                stock, $0.01 par; 100,000,000 shares authorized;  45,370,343
                shares outstanding
            
            
            453,703Additional
                paid-in capital
            
            
            3,667,163Accumulated
                deficit
            
            
            (4,072,856
            )Accumulated
                other comprehensive income
            
            
            15,917Total
                stockholders’ equity
            
            
            63,927Total
                liabilities, minority interest and stockholders’ equity
            
            $
            474,330




See
      accompanying summary of accounting policies and notes to financial
      statements.


21




ADVANCED
      ID CORPORATION


CONSOLIDATED
      STATEMENTS OF OPERATIONS


FOR
      THE
      YEARS ENDED DECEMBER 31, 2005 and 2004




2005
            
            2004REVENUES
            
            $
            1,027,723
            
            $
            896,121COST
                OF REVENUES
            
            
            582,171
            
            
            459,167Gross
                profit
            
            
            445,552
            
            
            436,954RESEARCH
                AND DEVELOPMENT EXPENSE
            
            
            236,445
            
            
            463,701SELLING,
                GENERAL AND ADMINSTRATIVE EXPENSE
            
            
            1,229,538
            
            
            837,123Loss
                from operations
            
            
            (1,020,431
            )
            
            (863,870
            )OTHER
                INCOME (EXPENSE):Gain
                on sale of investment
            
            
            —
            
            
            3,781Interest
                income
            
            
            —
            
            
            576Other
                income
            
            
            910
            
            
            30Interest
                expense
            
            
            (17,913
            )
            
            (1,007,832
            )Total
                other income (expenses)
            
            
            (17,003
            )
            
            (1,003,445
            )Loss
                before minority interest
            
            
            (1,037,434
            )
            
            (1,867,315
            )Minority
                interest
            
            
            (12,771
            )
            
            —Net
                Loss
            
            $
            (1,050,205
            )
            $
            (1,867,315
            )Comprehensive
                Loss:
              Foreign
                currency translation
            
            
            (9,537
            )
            
            24,322Comprehensive
                Loss
            
            $
            (1,059,742
            )
            $
            (1,842,993
            )Basic
                and diluted loss per share
            
            $
            (0.02
            )
            $
            (0.05
            )Basic
                and diluted weighted average shares outstanding
            
            
            43,248,255
            
            
            40,741,674





See
        accompanying summary of accounting policies and notes to financial
        statements.


22




ADVANCED
      ID CORPORATION


CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)


AND
      COMPREHENSIVE LOSS


FOR
      THE
      YEARS ENDED DECEMBER 31, 2005 and 2004




**Common
                Stock****Shares**
            
            
            **Amounts**
            
            
            **Additional**
              **Paid
                -in**
              **Capital**
            
            
            **Accumulated
                ComprehensiveIncome**
            
            
            **Retained**
              **Deficit**
            
            
            **Total**
              **Stockholders’**
              **Equity**
              **(Deficit)**BALANCE,
                December 31, 2003
            
            
            37,699,168
            
            $
            376,992
            
            $
            652,082
            
            $
            1,132
            
            $
            (1,155,336
            )
            $
            (125,130
            )Comprehensive
                loss:Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,867,315
            )
            
            (1,867,315
            )Foreign
                currency
            
            
            —
            
            
            —
            
            
            —
            
            
            24,322
            
            
            —
            
            
            24,322Total
                comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,842,993
            )Shares
                issued for:Services
            
            
            425,000
            
            
            4,250
            
            
            220,100
            
            
            —
            
            
            —
            
            
            224,350Cash
            
            
            500,000
            
            
            5,000
            
            
            245,000
            
            
            —
            
            
            —
            
            
            250,000Options
                Exercised
            
            
            200,000
            
            
            2,000
            
            
            18,000
            
            
            —
            
            
            —
            
            
            20,000Beneficial
                conversion and discount amortization
            
            
            —
            
            
            —
            
            
            969,180
            
            
            —
            
            
            —
            
            
            969,180Financing
                Commission - Cash
            
            
            
            
            
            
            
            
            (17,500
            )
            
            
            
            
            
            
            
            (17,500
            )Financing
                Commission - Stock
            
            
            25,000
            
            
            250
            
            
            (250
            )
            
            —
            
            
            —
            
            
            —Conversion
                of Debt to Equity
            
            
            3,306,173
            
            
            33,061
            
            
            1,026,951
            
            
            —
            
            
            —
            
            
            1,060,012BALANCE,
                December 31, 2004
            
            
            42,155,341
            
            
            421,553
            
            
            3,113,563
            
            
            25,454
            
            
            (3,022,651
            )
            
            537,919Comprehensive
                loss:Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,050,205
            )
            
            (1,050,205
            )Foreign
                currency
            
            
            —
            
            
            —
            
            
            —
            
            
            (9,537
            )
            
            —
            
            
            (9,537
            )Total
                comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,059,742
            )Shares
                issued for:Services
            
            
            540,000
            
            
            5,400
            
            
            114,300
            
            
            —
            
            
            —
            
            
            119,700Cash
            
            
            1,595,002
            
            
            15,950
            
            
            223,300
            
            
            —
            
            
            —
            
            
            239,250Stock
                issued on acquisition
            
            
            350,000
            
            
            3,500
            
            
            70,000
            
            
            —
            
            
            —
            
            
            73,500Stock
                issued for compensation
            
            
            730,000
            
            
            7,300
            
            
            146,000
            
            
            —
            
            
            —
            
            
            153,300BALANCE,
                December 31, 2005
            
            
            45,370,343
            
            $
            453,703
            
            $
            3,667,163
            
            $
            15,917
            
            $
            (4,072,856
            )
            $
            63,927


See
      accompanying summary of accounting policies
      and notes to financial statements.


23




ADVANCED
      ID CORPORATION


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


FOR
      THE
      YEARS ENDED DECEMBER 31, 2005 AND 2004




2005
            
            
            2004CASH
              FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (1,050,205
            )
            $
            (1,867,315
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            14,672
            
            
            8,494Stock
                issued for services
            
            
            119,700
            
            
            224,350Non-cash
                compensation
            
            
            153,300
            
            
            —Non-cash
                interest
            
            
            12,552
            
            
            969,180Minority
                interest
            
            
            12,771
            
            
            —Change
                in assets and liabilities:Trade
                accounts receivable
            
            
            (64,818
            )
            
            (16,581
            )Other
                receivables
            
            
            —
            
            
            7,197Inventory
            
            
            39,584
            
            
            (40,740
            )Prepaid
                expenses
            
            
            4,538
            
            
            824Accounts
                payable
            
            
            61,811
            
            
            15,364Accounts
                payable - related parties
            
            
            119,304
            
            
            (13,916
            )Accrued
                liabilities
            
            
            (40,251
            )
            
            41,741Net
                cash used in operating activities
            
            
            (617,042
            )
            
            (671,402
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Investment
                in AFG Asia Engineering Co., Ltd.
            
            
            18,343
            
            
            —Purchase
                of fixed assets
            
            
            (7,646
            )
            
            (17,439
            )Net
                cash from investing activities
            
            
            10,697
            
            
            (17,439
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:


Proceeds
                from convertible debenture
            
            
            —
            
            
            1,000,000Proceeds
                from sale of stock
            
            
            239,250
            
            
            250,000Proceeds
                from options exercised
            
            
            —
            
            
            20,000Financing
                commissions
            
            
            —
            
            
            (17,500
            )Principal
                payments on loans payable - related parties
            
            
            (5,866
            )
            
            —Principal
                payments on notes payable
            
            
            —
            
            
            (78,383
            )Net
                cash from financing activities
            
            
            233,384
            
            
            1,174,117Effect
                of Exchange Rate Changes on Cash
            
            
            (4,709
            )
            
            30,636NET
                (DECREASE) INCREASE IN CASH
            
            
            (377,670
            )
            
            515,912CASH
                AND CASH EQUIVALENTS, beginning of year
            
            
            576,484
            
            
            60,572CASH
                AND CASH EQUIVALENTS, end of year
            
            $
            198,814
            
            $
            576,484SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:Payment
                of interest
            
            $
            —
            
            $
            16,126NON
                CASH FINANCING ACTIVITIES:Acquisition
                of AFG Asia Engineering for stock, net of cash received
            
            $
            55,157
            
            $
            —Note
                Payable exchanged for common stock
            
            $
            —
            
            $
            57,708Debt
                and accrued interest converted into common shares
            
            $
            —
            
            $
            1,002,305




See
      accompanying summary of accounting policies and
      notes to financial statements.


24




ADVANCED
      ID CORPORATION


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS




NOTE
      1 -
      NATURE OF OPERATIONS




Advanced
      ID Corporation (“Advanced ID” or the “Company”) was originally incorporated in
      South Dakota on August 13, 1990. Advanced ID is in the business of marketing
      Radio Frequency Identification (“RFID”) products for the purpose of
      identification and trace back of animals in the companion animal, biological
      sciences and agricultural sectors. Advanced ID is the Canadian re-seller of
      products manufactured by Avid Marketing Inc. In 2004, Advanced ID began
      commercializing its proprietary ultra high frequency DataTRAC(TM) tags, readers,
      and trace back management solutions to minimize or eliminate the spread of
      disease, and the resulting impact of biosecurity and food safety issues related
      to the livestock industry.





NOTE
      2 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





These
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States of America and
      include the following significant accounting policies:





Basis
      of Consolidation





The
      consolidated financial statements include the accounts of Advanced ID
      Corporation, its wholly-owned subsidiaries Avid Canada Corporation, Universal
      Pet Care, Inc. (“UPC”) and a sixty percent owned subsidiary Advanced ID Asia
      Engineering Co. Ltd. (“AFG”). All significant inter-company accounts and
      transactions have been eliminated in consolidation.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts reported in these financial
      statements and accompanying notes. Actual results could differ from these
      estimates.





Foreign
      Currency Translation





Since
      Advanced ID is located in Canada, the Canadian dollar has been designated as
      the
      functional currency. All balance sheet accounts have been translated at the
      current exchange rate as of December 31, 2005. Statement of operations items
      have been translated at average currency exchange rates. The resulting
      translation adjustment is recorded as a separate component of comprehensive
      loss
      within stockholders’ equity (deficit).





Revenue
      Recognition





Advanced
      ID recognizes revenue when persuasive evidence of an arrangement exists,
      shipment has occurred, the sales price is fixed or determinable and
      collectibility is probable.





Product
      sales are recognized by Advanced ID generally at the time product is shipped.
      At
      the time revenue is recognized, Advanced ID provides for the estimated cost
      of
      product warranties and reduces revenue for estimated product
      returns.





When
      other significant obligations remain after products are delivered, revenue
      is
      recognized only after such obligations are fulfilled. Shipping and handling
      costs are included in cost of goods sold.





Research
      and Development Costs





Research
      and development costs are expensed as incurred.




25





Recent
      Accounting Pronouncements





In
      December 2004, the FASB, issued a revision to SFAS 123, also known as SFAS
      123R, that amends existing accounting pronouncements for share-based payment
      transactions in which an enterprise receives employee and certain non-employee
      services in exchange for (a) equity instruments of the enterprise or
      (b) liabilities that are based on the fair value of the enterprise’s equity
      instruments or that may be settled by the issuance of such equity instruments.
      SFAS 123R eliminates the ability to account for share-based compensation
      transactions using APB 25 and generally requires such transactions be accounted
      for using a fair-value-based method. SFAS 123R’s effective date would be
      applicable for awards that are granted, modified, become vested, or settled
      in
      cash in interim or annual periods beginning after December 15, 2005. SFAS 123R
      includes three transition methods: one that provides for prospective application
      and two that provide for retrospective application. The Company intends to
      adopt
      SFAS 123R prospectively commencing in the first quarter of the fiscal year
      ending December 31, 2006. It is expected that the adoption of SFAS 123R
      will cause the Company to record, as expense each quarter, a non-cash accounting
      charge approximating the fair value of such share based compensation meeting
      the
      criteria outlined in the provisions of SFAS 123R.





Cash
      and Cash Equivalents





For
      the
      purposes of presenting cash flows, Advanced ID considers all highly liquid
      investments with original maturities of three months or less to be cash
      equivalents.





Allowance
      for Doubtful Accounts





The
      Company provides an allowance against accounts receivables for estimated losses
      that may result from our customers inability to pay. The allowance is determined
      by analyzing known uncollectible accounts, aged receivables, economic
      conditions, historical losses and changes in customer’s cycles and customer’s
      credit-worthiness. Amounts later determined and specifically identified to
      be
      uncollectible are charged and written off against this allowance. To minimize
      the likelihood of uncollectibility, the Company reviews our customer’s credit
      worthiness periodically based on independent credit reporting services, the
      Company’s experience with the customer and the economic condition of the
      customer’s industry. Material differences may result in the amount and timing of
      expense for any period if the Company were to make different judgements or
      utilize different estimates. If the financial condition of our customers
      deteriorates resulting in an impairment of their ability to make payments,
      additional allowances may be required. The Company has not experienced
      significant variances in the past between our estimated and actual doubtful
      accounts and anticipate that we will be able to continue to make reasonable
      estimates in the future.





Inventory





Inventory
      consists of finished goods held for resale and is recorded at the lower of
      cost
      or net realizable value. Cost is determined on a first in-first out basis.





Long-lived
      Assets





Fixed
      assets are stated on the basis of historical cost less accumulated depreciation.
      Depreciation is provided using the straight-line method over the two to five
      year estimated useful lives of the assets.





Impairment
      losses are recorded on long-lived assets used in operations when indicators
      of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets’ carrying amount. No impairment losses
      have been recorded since inception. Expenditures for repairs and maintenance
      are
      expensed as incurred. Expenditures for major renewals or betterments that extend
      the useful lives of existing property and equipment are capitalized and
      depreciated. Upon retirement or dispositions of property and equipment, any
      resulting gain or loss is recognized consolidated statement of
      operations.





Fair
      Value of Financial Instruments





The
      Company’s financial instruments consist of cash and cash equivalents,
      receivables and debt. The carrying amount of these financial instruments
      approximates fair value due either to length of maturity or interest rates
      that
      approximate prevailing market rates unless otherwise disclosed in these
      consolidated financial statements.




26





Income
      Taxes





Income
      taxes are computed using the asset and liability method. Under the asset and
      liability method, deferred income tax assets and liabilities are determined
      based on the differences between the financial reporting and tax bases of assets
      and liabilities and are measured using the currently enacted tax rates and
      laws.
      A valuation allowance is provided for the amount of deferred tax assets that,
      based on available evidence, are not expected to be realized.





Loss
      per Common Share





Advanced
      ID is required to provide basic and dilutive earnings (loss) per common share
      information.





The
      basic
      net loss per common share is computed by dividing the net loss applicable to
      common stockholders by the weighted average number of common shares outstanding.





Diluted
      net loss per common share is computed by dividing the net loss applicable to
      common stockholders, adjusted on an "as if converted" basis, by the weighted
      average number of common shares outstanding plus potential dilutive securities.
      For 2005 and 2004, potential dilutive securities had an anti-dilutive effect
      and
      were not included in the calculation of diluted net loss per common share.
      Total
      shares issuable upon the exercise of options, warrants, and the conversion
      of
      debt for the years ended December 31, 2005 and 2004, were 51,067,845and
      44,357,841, respectively.





Stock
      Options





The
      Company has elected to follow APB No. 25, and related Interpretations in
      accounting for its employee stock options because, as discussed below, the
      alternative fair value accounting provided for under SFAS No. 123 requires
      the
      use of option valuation models that were developed for use in valuing stock
      options. Under APB No. 25, no compensation expense is recognized if the exercise
      price of the Company's employee stock options equals the market price of the
      underlying stock on the date of grant.





For
      purposes of pro forma disclosures, the estimated fair value of the options
      is
      amortized to expense over the options' vesting period. Set forth below is a
      summary of the Company's net income and earnings per share as reported and
      pro
      forma as if the fair value-based method of accounting defined in SFAS No. 123
      had been applied. The pro forma compensation expense may not be representative
      of future amounts because options vest over several years and generally expire
      upon termination of employment, and additional options may be granted in future
      years.





The
      following table illustrates the effect on net income and earnings per share
      if
      Advanced ID had applied the fair value recognition provisions of FASB Statement
      No. 123, *Accounting
      for Stock-Based Compensation,* to
      stock-based employee compensation.


Year
                Ended
              December
                31,2005
            
            2004Net
                loss, as reported
            
            $
            (1,050,205
            )
            $
            (1,867,315
            )Deduct:
                Total stock-based employee compensation expense determined under
                the fair
                value based method for all awards
            
            
            (745,736
            )
            
            (37,773
            )Pro
                forma net loss
            
            $
            (1,795,941
            )
            $
            (1,905,088
            )Pro
                forma net loss per share:Basic
                and diluted - as reported
            
            $
            (0.02
            )
            $
            (0.05
            )Basic
                and diluted - pro forma
            
            $
            (0.04
            )
            $
            (0.05
            )


The
      fair
      value of each option granted is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following weighted average
      assumptions: dividend yield $0, expected volatility of 100%, risk-free interest
      rate of 4.0%, and expected lives of 10 years.




27


Reclassifications





Certain
      2004 amounts have been reclassified to conform to 2005
      presentation.





NOTE
      3 -
      FINANCIAL CONDITION AND GOING CONCERN





Advanced
      ID has incurred losses for the years ended December 31, 2005 and 2004 of
      $1,050,205 and $1,867,315, respectively. Because of these losses, Advanced
      ID
      will require additional working capital to develop its business
      operations.





Advanced
      ID intends to raise additional working capital through private placements,
      public offerings and/or bank financing. As of March 17, 2005, Advanced ID issued
      a total of 1,820,000 shares for cash proceeds of $273,000. Management estimates
      that this fundraising will not be sufficient for all of 2006.





There
      are
      no assurances that Advanced ID will be able to either (1) achieve a level of
      revenues adequate to generate sufficient cash flow from operations; or (2)
      obtain additional financing through either private placements, public offerings
      and/or bank financing necessary to support Advanced ID’s working capital
      requirements. To the extent that funds generated from operations and any private
      placements, public offerings and/or bank financing are insufficient, Advanced
      ID
      will have to raise additional working capital. No assurance can be given that
      additional financing will be available, or if available, will be on terms
      acceptable to Advanced ID.





These
      conditions raise substantial doubt about Advanced ID’s ability to continue as a
      going concern. The financial statements do not include any adjustments relating
      to the recoverability and classification of asset carrying amounts or the amount
      and classification of liabilities that might be necessary should Advanced ID
      be
      unable to continue as a going concern.





NOTE
      4 -
      ACQUISITION OF AFG ASIA ENGINEERING





On
      July
      1, 2005, Advanced ID acquired a 60% interest in AFG, located in Chiang Mai,
      Thailand, for 350,000 shares of Advanced ID common stock. AFG is a leader in
      the
      design and development of ultra high frequency (UHF) radio frequency
      identification technology. The results of operations of AFG have been included
      in these financial statements from the date of acquisition. This acquisition
      has
      been valued at $73,500 based on the company’s closing share price of $0.21 on
      July 1, 2005.




The
                  fair value of net assets acquired:Cash
              
              $
              18,343Non-cash
                  working capital
              
              
              3,779Fixed
                  assets
              
              
              29,190Loan
                  from related parties
              
              
              (21,289
              )Minority
                  interest
              
              
              (12,009
              )Fair
                  value of net assets acquired
              
              
              18,014Purchase
                  price
              
              
              73,500Goodwill
              
              $
              55,486






28


NOTE
      5 -
      PROPERTY AND EQUIPMENT





Property
      and equipment consists of the following:




2005Equipment
                and furniture
            
            $
            23,055Computer
                hardware and research and development equipment
            
            
            30,432Vehicles
            
            
            22,044Computer
                software
            
            
            4,682Total
                assets
            
            
            80,213Less
                accumulated depreciation
            
            
            (32,149
            )Net
                book value
            
            $
            48,064





Depreciation
      expense for 2005 was $14,672 (2004 - $8,494).





NOTE
      6 -
      INCOME TAXES





Advanced
      ID has had losses since inception and therefore has no income tax liability.
      The
      net deferred tax asset generated by the loss carry-forward has been fully
      reserved. The cumulative Canadian net operating loss carry-forward is
      approximately $2,805,000 at December 31, 2005, and will expire in various years
      through 2015. Advanced ID recorded a (decrease) increase in the valuation
      allowance of $ (6,000) and $630,000 for the years ended December 31, 2005 and
      2004, respectively.





Deferred
      income taxes consist of the following at December 31, 2005:


2005Long-term:Deferred
                tax assets
            
            $
            960,000Valuation
                allowance
            
            
            (960,000
            )$
            -


NOTE
      7 -
      COMMON STOCK





During
      2005, Advanced ID issued a total of 3,215,002 shares of common stock.





On
      July
      1, 2005, Advanced ID issued 350,000 shares of Common Stock to acquire a 60%
      interest in AFG Asia Engineering Co. Ltd.





On
      July
      21, 2005, Advanced ID issued a total of 730,000 shares of Common Stock to five
      employees as compensation for past services. Advanced ID recorded a non-cash
      expense of $153,300 related to these shares. The shares were valued based on
      the
      closing price on the date they were awarded.





During
      2005, Advanced ID issued 460,000 shares and 80,000 of Common Stock for
      consulting services and director fees, respectively. Advance ID recorded a
      total
      non-cash expense of $119,700 (Consulting - $ 102,900, Director Fees $16,800)
      related to these shares. The shares were valued based on the closing price
      on
      the date they were awarded.





During
      2005, Advanced ID issued a total of 1,595,002 shares (200,000 to a Director)
      of
      Common Stock for cash proceeds totaling $239,250. In connection with the
      issuance of these shares, 1,595,002 warrants were issued with a fair value
      of
      $140,031.





During
      2004, Advanced ID issued a total of 4,456,173 shares of common stock valued
      at
      $1,577,613 using the closing bid price of the company’s stock on the date issued
      to the following: 500,000 shares to four parties related to a private placement
      for $250,000; 25,000 shares as a finder’s fee for $23,250; 375,000 shares for
      consulting services valued at $199,350; 50,000 shares to five members of the
      Board of Directors for $25,000 in services; 200,000 shares related to the
      exercise of options resulting in proceeds of $20,000; 3,075,341 shares related
      to the conversion of a debenture valued at $1,002,305 in principal and interest;
      and 230,832 shares related to the conversion of a note payable valued at
      $57,708.





On
      January 20, 2004, Advanced ID, AIDO Acquisition, Inc., a Hawaii corporation
      and
      a wholly-owned subsidiary of Advanced ID, and Universal Pet Care, Inc., a Hawaii
      corporation (“UPC”) entered into an Agreement and Plan of Merger (the “Merger
      Agreement”). The merger contemplated by the Merger Agreement (the “Merger”) was
      also completed on January 20, 2004. As a result of the Merger, UPC became a
      wholly-owned subsidiary of Advanced ID and all outstanding shares of UPC’s
      capital stock held by its sole stockholder were converted into 100 shares of
      Advanced ID common stock. UPC is a private, development stage company formed
      to
      pursue opportunities related to identifying and tracking companion animals
      utilizing radio frequency identification microchips.




29





Immediately
      prior to the Merger, UPC entered into a Convertible Debenture Purchase Agreement
      (the “Purchase Agreement”), dated as of January 20, 2004, with HEM Mutual
      Assurance LLC, an accredited investor located in Denver, Colorado (“HEM”),
      pursuant to which it sold and issued convertible debentures to HEM in an
      aggregate principal amount of $1,000,000 in a private placement pursuant to
      Rule
      504 of Regulation D under the Securities Act of 1933, as amended. Two debentures
      in the aggregate principal amount of $1,000,000 were issued for gross proceeds
      of $1,000,000 in cash (the “Debentures”). Each of the Debentures has a maturity
      date of January 20, 2009, subject to earlier conversion or redemption pursuant
      to its terms, and bears interest at the rate of 1% per year, payable in cash
      or
      shares of common stock at the option of the holder of the Debentures. As a
      result of the Merger, Advanced ID assumed the rights and obligations of UPC
      in
      the private placement, including gross proceeds raised through the sale of
      the
      Debentures, the Note issued by HEM to UPC, and UPC’s obligations under the
      Debentures and Purchase Agreement.





As
      a
      result of the Merger, $995,500 in principal amount of the First Debenture is
      now
      convertible into unrestricted shares of Advanced ID common stock (the “Common
      Stock”) at a conversion price that is the lower of $0.95 or the average of the
      three lowest closing per share bid prices for the Common Stock during the 40
      trading days prior to conversion. $4,500 in principal amount of the Second
      Debenture is also now convertible into unrestricted shares of Common Stock
      at a
      conversion price of $0.01 per share. In February 2004, the $4,500 debenture
      was
      converted into 450,184 shares of common stock and $400,000 of the $995,000
      debenture was converted into 800,504 shares of common stock.





In
      June
      29, 1004 in the convertible debentures plus accrued interest were converted
      into
      a total of 3,075,341 shares of Advanced ID common stock, and the Convertible
      Debenture Purchase Agreement was terminated.


NOTE
      8 -
      STOCK OPTIONS AND WARRANTS





*Options:*





Advanced
      ID recognized $0 and $0 of compensation in 2005 and 2004, respectively under
      APB
      No. 25.





On
      April
      22, 2004, Advanced ID’s Board of Directors approved the issuance of options to
      acquire 1,150,000 shares of common stock at $0.50 per share to five directors
      with original vesting of 50% on April 22, 2005 and 50% on April 22, 2006.





On
      May
      18, 2004, Advanced ID’s Board of Directors approved the issuance of options to
      acquire 30,000 shares of common stock at $0.38 per share to six
      employees/consultants with original vesting of 50% on May 18, 2005 and 50%
      on
      May 18, 2006.





During
      2005, Advance ID’s Board of Directors approved the issuance of options to
      acquire 1,100,000 shares of common stock at $0.23 per share to consultants
      and
      Board members. The Board also approved the acceleration of the vesting of all
      options. As a result, 1,280,000 previously issued options became vested
      effective April 20, 2005.




The
      following table summarizes stock option activity:





Outstanding,
                January 1, 2005
            
            
            1,630,000Granted
            
            
            1,100,000Outstanding,
                December 31, 2005
            
            
            2,730,000Exercisable
                at December 31, 2005
            
            
            2,730,000Weighted-average
                grant-date fair value of
              options,
                granted during the year
            
            $
            0.20Weighted-average
                remaining, years of contractual life
            
            
            8.55





*Warrants:*





In
      connection with private placements in 2005, warrants to acquire an additional
      1,595,002 shares of common stock were issued. These warrants are exercisable
      at
      $0.30 per common stock and expire three years from issuance.




30





During
      2004, Advanced ID issued warrants to acquire 122,500 shares of Advanced ID
      common stock at $1.00 per share in conjunction with a private placement to
      raise
      $250,000 among four investors. These warrants expire on January 12, 2007. In
      2005, the Warrant Agreement to acquire 100,000 of these shares of common stock
      was replaced. A new Warrant Agreement to acquire 900,000 shares of common stock
      was issued. These warrants are exercisable at $0.40 per share and expire on
      January 12, 2009.





During
      2003, Advanced ID issued warrants to acquire 250,000 shares of Advanced ID
      common stock at $0.25 per share in conjunction with a $50,000 note payable.
      The
      warrants expire on April 28, 2006. The note was discounted by $37,641, which
      is
      the fair value on the date issued. The fair value was calculated using the
      Black-Scholes option-pricing model with the following weighted average
      assumptions: dividend yield $0, expected volatility of 100%, risk-free interest
      rate of 4.0%, and expected lives of 2 years.





As
      of
      December 31, 2005, the Company had 2,767,502 warrants outstanding of which
      250,000 expire in 2006, 22,500 expire in 2007, 1,595,002 expire in 2008 and
      900,000 expire in 2009.








NOTE
      9 -
      RELATED PARTY TRANSACTIONS





On
      April
      28, 2003, Advanced ID signed a convertible debenture agreement with Mr. Li,
      a
      Director. The lender provided a loan for $100,000, with $50,000 received upon
      execution and the balance to be received upon satisfaction of specific
      conditions. At December 31, 2005, Advanced ID had received $50,000 under the
      agreement. The outstanding note is due on April 28, 2006 and bears interest
      at
      10% per annum. The note is convertible into common stock at $0.25 per share,
      the
      fair value on the date of the note. In addition, Advanced ID issued third party
      warrants to acquire 250,000 shares of Advanced ID common stock at $0.25 per
      share. The warrants expire on April 28, 2006. The note was discounted by
      $37,641, which is the fair value assigned to the warrants. The discount is
      being
      amortized over the term of loan. During the twelve months ended December 31,
      2005 and 2004, Advanced ID recorded $12,552, of interest expense related to
      the
      discount on the note. The net balance of the note and accrued interest at
      December 31, 2005 was $66,161.





In
      addition to being a director of Advanced ID, Mr. Kazimirski provides consulting
      services to Advanced ID for the purposes of assisting with product and market
      development. Specifically, Mr. Kazimirski has been responsible for establishing
      distribution partners in countries located outside of North America, assisting
      the company in finding and negotiating supplier partnership agreements, and
      other general business tasks as requested by the company. There exists no
      written consulting agreement in place but it has been mutually agreed that
      Mr.
      Kazimirski will receive $175 per hour for his services for an undefined term,
      and which began January 3, 2003. During 2005 and 2004, consulting fees totaled
      $79,643 and $92,551 for his services, respectively.





In
      addition to being a director of Advanced ID, Mr. Meier provides consulting
      services to Advanced ID for the purposes of assisting with product and supplier
      development. Specifically, Mr. Meier has been responsible for development,
      manufacturing and testing of our DataTRAC(TM) RFID tags, sourcing microchip
      manufacturers, sourcing reader manufacturers, sourcing antennae design
      suppliers, and overall product development. His contract began on May 21, 2002
      and expires in three years or May 21, 2005. The contract was not renewed however
      Mr. Meier continues to provide services based on his hourly rate. During 2005
      and 2004 consulting fees totaled $4,725 and $33,867 for his services,
      respectively.





In
      addition to being a director of Advanced ID, Mr. Goldenberg provides consulting
      services to Advanced ID for the purpose of Corporate reporting and is the
      Interim CFO and Secretary. During 2005 and 2004 consulting fees totaled $4,466
      and $0 for his services, respectively.





As
      part
      of the acquisition with AFG Asia on July 1, 2005, $21,289 of loan from a related
      party were acquired. Interest on the loan is 3.6%. As of December 31, 2005
      the
      balance on the loan is $18,575. $5,866 of the loan is scheduled to be paid
      back
      in 2006 with the remaining $12,709 to be paid back over the following three
      years. The collateral on this loan is a company car that was purchased in 2004
      with the proceeds.




31





NOTE
      10 -
      COMMITMENTS





On
      September 15, 2005, Advanced ID entered into an employment agreement with Dan
      Finch to act the President and Chief Executive Officer. Under the terms of
      this
      agreement, Mr. Finch is to receive an annual base salary of $94,200 with a
      bonus
      to be determined annually by the Board of Directors.





On
      November 15, 2005, Advanced ID entered into an employment agreement with Barry
      Bennett. The agreement has no specific term and may be terminated by Advanced
      ID
      or Mr. Bennett, subject to the other provisions of the agreement. Mr. Bennett
      shall receive an annual salary of $92,000 Canadian dollars and a bonus
      determined at the sole discretion of the board of directors.





On
      April
      15, 2003, Advanced ID entered into a consulting agreement with Gottfried Auer
      related to the development and engineering of the company’s various RFID
      products. Under the terms of the consulting agreement, compensation is based
      on
      a retainer of $5,000 per month for an initial term that expired December 31,
      2003, and which is currently month to month. The consultant is entitled to
      receive a bonus of up to $50,000 upon satisfaction of certain conditions. This
      agreement may be terminated by either party upon prior written notice of 30
      working days.





The
      Company has a number of lease commitments related to office space and equipment.
      Estimated future minimum lease payments under these leases are as
      follows:





2006
            
            $
            26,9132007
            
            
            20,0352008
            
            
            6,2772009
            
            
            6,2772010
            
            
            4,708$
            64,210


NOTE
      11 -
      CONCENTRATIONS OF CREDIT RISK





As
      of
      December 31, 2005 and 2004, amounts due from customers which exceeded 10% of
      trade accounts receivables amounted to $106,156 from one customer and $31,727
      from two customers, respectively.





We
      had
      two customers which each accounted for 10% of our total revenues in 2005 and
      one
      customer that accounted for 21% of our total revenues in 2004.





Two
      suppliers accounted for 100% of our total purchases of inventory for both 2005
      and 2004.





NOTE
      12 -
      SUBSEQUENT EVENTS (UNAUDITED)





During
      the first three months of 2006, Advanced ID issued a total of 1,820,000 shares
      for cash proceeds of $273,000.


ITEM
      8.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.





There
      have been no disagreements between Advanced ID and our accountants as to matters
      which require disclosure.




32





ITEM
      8A. CONTROLS AND PROCEDURES.





Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Securities Exchange Act of 1934, as of the end of the  period
      covered by this report (the “Evaluation Date”).  Based on this evaluation,
      our principal executive officer and principal financial officer concluded as
      of
      the Evaluation Date that our disclosure controls and procedures were effective
      such that material information relating to Advanced ID Corporation, including
      our consolidated subsidiaries, required to be included in our Securities and
      Exchange Commission (“SEC”) reports is recorded, processed, summarized and
      reported within the time periods specified in SEC rules and forms and was made
      known to them by others within Advanced ID Corporation and its consolidated
      subsidiaries, particularly during the period when this report was being
      prepared.




There
      were no significant changes in our internal control over financial reporting
      that occurred during our last fiscal quarter (our fourth fiscal quarter in
      the
      case of an annual report) that has materially affected, or is reasonably likely
      to materially affect, our internal control over financial
      reporting.





With
      the
      resignation of Todd Noble as Chief Financial effective October 31, 2005, David
      Goldenberg will manage internal control over financial reporting on an interim
      basis until a new Chief Financial Officer is hired.








ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
      PERSONS.




Directors,
      Officers
      and Significant Employees





Our
      Bylaws provide that the number of directors who shall constitute the whole
      board
      shall be such number as the board of directors shall at the time have
      designated. We confirm that the number of authorized directors has been set
      at
      five pursuant to our bylaws. Each director shall be selected for a term of
      one
      year and until his successor is elected and qualified. Vacancies are filled
      by a
      majority vote of the remaining directors then in office with the successor
      elected for the unexpired term and until the successor is elected and qualified.
      The directors, officers and significant employees are as follows:





NAME
                AND ADDRESS
            
            AGE
            
            POSITIONS
                HELD
            
            SINCEDan
                Finch
            
            63
            
            President
                & CEO
            
            September
                2005Barry
                Bennett, Calgary, Alberta
            
            54
            
            Executive
                VP & COO
            
            September
                2005Bill
                Hoffman, Oxford, Michigan
            
            56
            
            VP,
                Business Development
            
            October
                2004Seymour
                Kazimirski, Honolulu, Hawaii
            
            59
            
            Director
            
            October
                2002Che
                Ki Li, Shenzhen, China
            
            59
            
            Director
            
            May
                2003Hubert
                Meier, Kowloon, Hong Kong
            
            59
            
            Director
            
            February
                2003David
                Goldenberg, Calgary, Alberta
            
            53
            
            Director,
                Interim CFO & Secretary
            
            July
                2005Terry
                Fields, Honolulu, Hawaii
            
            63
            
            Director
            
            July
                2005




Business
      Experience of Officers ,
      D irectors
      and Significant Employees





Dan
      Finch, President & CEO - has 20 years of executive level management
      experience in wireless HSIA and VoIP phone technology, high-speed internet
      infrastructure and  financial services for small pre IPO high tech
      companies. Dan Finch lead a division of DSC that designed and manufactured
      all
      the cell switches for Motorola, under the Motorola brand. While serving at
      C-COR/COMLUX  he was responsible for the turnaround of this subsidiary, and
      realized three-fold growth. Dan Finch’s educational background includes an MBA,
      Finance and Economics from University of Chicago, a BS in Physics from the
      Indiana Institute of Technology and certification in Technical Management from
      the University of California, Berkeley.





Barry
      Bennett, B.Sc., P.Ag. - Executive VP & CO, Prior to joining Advanced ID, Mr.
      Bennett was General Manager of the Canadian Simmental Association from August
      1990 to February 2001 , a
      4,000
      member organization responsible for pedigree business related to Simmental
      cattle. From February 1977 to August 1990, Mr. Bennett was with the Canadian
      Imperial Bank of Commerce where he served in various positions with the
      Agriculture division and with his final posting as the Alberta Regional Manager
      of Agriculture.





Bill
      Hoffman - VP Business Development & Marketing, Prior to joining Advanced ID,
      Mr. Hoffman was the Senior Business Development Manager for radio frequency
      identification from June 2000 to July 2004 for Intermec Technologies
      Corporation, a global supply chain solutions provide and developer, manufacture
      and integrator of wired and wireless automated data collection, radio frequency
      identification and mobile computing systems. From August 1996 to June 2000,
      Mr.
      Hoffman operated his own company, W.J. Hoffman Systems, specializing in barcode
      systems consultation and integration.





33


Seymour
      Kazimirski - Director, In 1995, Mr. Kazimirski established Hawaii Pet Care
      Alliance which is involved in radio frequency identification for companion
      animals, and where he continues to serve as President. From 1995 to 1998, Mr.
      Kazimirski consulted to AVID Inc., a manufacturer of radio frequency
      identification microchips and readers. In 1993, Mr. Kazimirski established
      Global Consulting which houses his consulting operations that specializes in
      finance, administration and marketing. In 1980, Mr. Kazimirski established
      Florexotica International Inc., an import/export business acquiring products
      from Asia and Europe, and resold to U.S. military and major retail
      stores.





Che
      Ki Li
      - Director, Mr. Li is Chairman of the Board and Managing Director of Guide
      Trend
      Technology Company which he founded in 1980. Guide Trend is a leading technology
      plastic manufacturer serving global companies such as Siemens, Philips, Marantz,
      Denon, Daewoo, Bang & Olufsen and Minolta. Guide Trend has over 500
      employees operating in an 11,000 square meter facility that is ISO and UL
      certified.





Hubert
      Meier - Director, Mr. Meier is a graduate of electronic engineering at Oskar
      von
      Miller Polytech in Munich. Mr. Meier has been operating his own consultancy
      firm
      specializing in radio frequency identification technology since May 2002. Prior
      to this Mr. Meier was with Hana Technologies Ltd. in
      Hong
      Kong, a technology company specializing in the development and manufacturing
      of
      integrated circuits, light emitting diodes, smart cards, RFID technology, and
      other electronic components and devices , from
      1997 to 2002 where he served as CEO, Managing Director and Board member. From
      1993 to 1997, Mr. Meier served as the Vice President Sales, Managing Director
      and Board member of Temic Hong Kong , a
      German
      based company supplying
      electronics for applications in power train, safety and body
      electronics .
      From
      1978 to 1993, Mr. Meier was with Eurosil, a German company involved in
      developing and manufacturing integrated circuits, where he served as Sales
      Director, Managing Director and Board member.





David
      Goldenberg - Director, Interim CFO & Secretary, Mr. Goldenberg brings over
      twenty five years of legal experience to the company. During that time, he
      represented both private and public companies, sat on numerous Boards of
      Directors, was involved in various areas of securities law, and has taught
      and
      published in Alberta on many aspects of corporate law. Goldenberg has extensive
      experience and knowledge of the Company and is currently the acting President
      of
      Heritage Ventures Ltd. In addition, Goldenberg is a director for Borealis
      Exploration Limited, Screen Giant Media Corp. and Stanley Park Court
      Ltd.





Terry
      Fields - Director, Mr. Fields practiced law in California for
      over thirty-three years, initially in litigation, but ultimately
      concentrating in corporate and business law. Fields has been a
      director of twelve public corporations over the last twenty years and
      President of six of those, equally distributed between the U.S. and
      Canada. Fields has extensive business experience, especially with public
      corporations and their securities, as well as mergers and acquisitions. Fields
      has strong ties with the financial communities, both domestic and international,
      having lived in Europe for five years. At present, Fields is President and
      Director of Sunburst Acquisitions IV (SBAQ), Bishop Resources Inc. (BIS) and
      Visual Statement Inc., a private Canadian corporation.





The
      above
      named directors will serve in their capacity as director until our next annual
      shareholder meeting to be held within six months of our fiscal year's close.
      Directors are elected for one-year terms.





ITEM
      10. EXECUTIVE COMPENSATION.





We
      may
      elect to award a cash bonus to key employees, directors, officers and
      consultants based on meeting individual and corporate planned objectives.




On
        September 15, 2005, Advanced ID entered into an employment agreement with
        Dan
        Finch, as the company’s CEO & President for an annual salary of $94,200. In
        addition to his salary, Mr. Finch will receive a one-time payment of $5,000
        for
        moving expenses and has an opportunity of earning up to 1,000,000 options
        when
        pre-determined increases in revenues are attained.
 
 On
        November 15,2005, Advanced ID entered into an employment agreement with Barry
        Bennett, as Executive VP and COO. The agreement has no specific term and
        may be
        terminated by Advanced ID or Mr. Bennett, subject to the other provisions
        of the
        agreement. Mr. Bennett shall receive an annual salary of $92,000 Canadian
        dollars and a bonus determined at the sole discretion of the board of directors.
        Advanced ID shall set proposed milestones and proposed bonuses if those
        milestones are met each year.




34




SUMMARY
                COMPENSATION TABLELong-Term
                CompensationAnnual
                Compensation
            Awards
            Payouts(a)
            (b)
            (c)
            (d)
            (e)
            (f)
            (g)
            (h)
            (i)Name
                and Principal Position
            Fiscal
                Year
            Annual
                Salary
              ($)
            Annual
              Bonus
              ($)
            Other
              Annual
                Compensation
              ($)
            Restricted
                Stock Awards
              ($)
            Securities
                Underlying Options/SARs
              (#)
            LTIP
                Payouts
              ($)
            All
                Other Compensation
              ($)Dan
                Finch, CEO
            2005
            $94,200
            $
                0
            $0
            $0
            0
            $0
            $0$
                0
            $0
            $0
            0
            $0
            $0$
                0
            $0
            $0
            0
            $0
            $0Barry
                Bennett,
              COO
            2005
            $75,900
            $
                0
            $0
            $2,100
            0
            $0
            $02004
            $75,400
            $
                0
            $0
            $0
            250,000
            $0
            $02003
            $75,400
            $
                0
            $0
            $0
            250,000
            $0
            $0





We
      do not
      have any standard arrangements by which directors are compensated for any
      services provided as a director. On July 21, 2005 we issued 1,000,000 options
      to
      five directors, also on July 21, 2005 20,000 common shares were issued to one
      director and 10,000 common shares were issued to six other directors. April
      22,
      2004, we issued a total of 1,150,000 options to five directors. Also, on April
      22, 2004, we issued 10,000 restricted common shares to each director in lieu
      of
      a cash payment. No cash has been paid to the directors in their capacity as
      such.





ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.





The
      following table sets forth, as of March 23, 2006, the number and percentage
      of
      outstanding shares of Advanced ID common stock owned by (i) each person known
      to
      us to beneficially own more than 5% of its outstanding common stock, (ii) each
      director, (iii) each named executive officer and significant employee, and
      (iv)
      all officers and directors as a group.





(i)
      Persons Beneficially Owning More Than 5% of Outstanding Common
      Stock





Title
                of Class
            Name
                of Beneficial Owner
            Common
                Stock
              Beneficially
                Owned
            Percentage
                of
              Class
                Owned1Class
                A Common
            Heritage
                Ventures Ltd.
            14,574,347
            30.8%





Heritage
      Ventures Ltd. is a widely held public company that was de-listed from trading
      on
      the Alberta Stock Exchange, predecessor to the TSX Venture Exchange, effective
      May 7, 1999. The largest shareholder that we are aware of controls approximately
      5.3% of the outstanding shares in Heritage Ventures.




35





(ii)
      Directors of Advanced ID Corporation





Title
                of Class
            Name
                of Beneficial Owner
            Common
                Stock
              Beneficially
                Owned
            Percentage
                of
              Class
                Owned1Class
                A Common
            Seymour
                Kazimirski
            1,115,669
            2.4%Class
                A Common
            Che
                Ki Li
            120,000
            0.3%Class
                A Common
            Hubert
                Meier
            810,000
            1.7%Class
                A Common
            David
                Goldenberg
            10,000
            0.0%Class
                A Common
            Terry
                Fields
            10,000
            0.0%







(iii)
      Officers and Significant Employees of Advanced ID Corporation





Title
                of Class
            Name
                of Beneficial Owner
            Common
                Stock
              Beneficially
                Owned
            Percentage
                of
              Class
                Owned1Class
                A Common
            Barry
                Bennett
            511,000
            1.1%Class
                A Common
            Dan
                Finch
            0
            0.0%Class
                A Common
            Bill
                Hoffman
            0
            0.0%





(iv)
      Directors and Officers of Advanced ID Corporation as a Group





Title
                of Class
            Name
                of Beneficial Owner
            Common
                Stock
              Beneficially
                Owned
            Percentage
                of
              Class
                Owned1Class
                A Common
            Directors/Officers
            2,576,669
            5.5%





1 Based
      upon 47,190,343 issued and outstanding as of March 23, 2006.


ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





Heritage
      Ventures Ltd.





Heritage
      is a venture capital company specializing in assisting software and technology
      companies. Upon entering into a reverse merger transaction between AVID Canada
      Corporation and USA Sunrise Beverages, Inc., Heritage sold its ownership in
      AVID
      Canada Corporation in return for 28,000,000 common shares in USA Sunrise
      Beverages, Inc. whose name was changed to Advanced ID Corporation effective
      November 15, 2002. Of the 28,000,000 shares received by Heritage, a portion
      of
      these shares was paid to certain creditors of AVID in exchange for approximately
      $703,581 in debt.





Seymour
      Kazimirski





In
      addition to being a director of Advanced ID, Mr. Kazimirski also provides
      consulting services to Advanced ID for the purpose of assisting with product
      and
      market development. Specifically, Mr. Kazimirski has been responsible for
      establishing distribution partners in countries located outside of North
      America, assisting the company in finding and negotiating supplier partnership
      agreements, and other general business tasks as requested by the company. There
      exists no written consulting agreement in place but it has been mutually agreed
      that Mr. Kazimirski will receive $175 per hour for his services for an undefined
      term, and which began January 3, 2003. For fiscal 2005 Mr. Kazimirski was paid
      $$7,787 in consulting fees and an additional $58,467 in consulting fees was
      accrued. For fiscal 2004, Mr. Kazimirski was paid consulting fees totaling
      $92,551.




36


Hubert
      Meier





In
      addition to being a director of Advanced ID, Mr. Meier also provides consulting
      services to Advanced ID for the purpose of assisting with product and supplier
      development. Specifically, Mr. Meier has been responsible for development,
      manufacturing and testing of our DataTRAC(TM) RFID tags, sourcing microchip
      manufacturers, sourcing reader manufacturers, sourcing antennae design
      suppliers, and overall product development. His contract began on May 21, 2002
      and expires in three years. Mr. Meier receives $175 per hour for his services.
      For fiscal 2005, Mr. Meier was paid $0 in consulting fees an additional $4,462
      in consulting fees were accrued. For fiscal 2004, Mr. Meier was paid consulting
      fees totaling $33,867.





Che
      Ki
      Li





Mr.
      Li is
      a director of Advanced ID. On April 28, 2003, Advanced ID signed a convertible
      debenture agreement with Mr. Li. The lender provided a loan for up to $100,000,
      with $50,000 received upon execution and the balance to be received upon
      approval by the Canadian Cattle Identification Agency for Advanced ID’s
      livestock RFID tag. To date, Advanced ID has received $50,000 under the
      agreement. As of December 31, 2004, a total of $8,403 in interest has been
      accrued. The outstanding balance is due on April 28, 2006 and bears interest
      at
      10% per annum. The note is convertible into common stock at $0.25 per share,
      the
      fair value on the date of the note. In addition, Advanced ID issued third party
      warrants to acquire 250,000 shares of Advanced ID common stock at $0.25 per
      share. The warrants expire on April 28, 2006. The note was discounted by
      $37,641, which is the fair value assigned to the warrants. The discount is
      being
      amortized over the term of loan. During the year ended December 31, 2005, we
      recorded $12,552 of interest expense related to the discount on the
      note.





David
      Goldenberg





Mr.
      Goldenberg is a director of Advanced ID. Mr. Goldenberg also provides consulting
      services to Advanced ID for the purpose of Corporate reporting and is the
      Interim CFO and Secretary. Mr. Goldenberg receives $175 per hour for his
      services. Mr. Goldenberg has an accrued payable for consulting of
      $4,462.50




Terry
      Fields





Mr.
      Fields is a director of Advanced ID. Mr. Fields also provides consulting
      services to Advanced ID for in the area of Investor Relations and Public
      Relations. Mr. Fields receives $175 per hour for his services. $0 in consulting
      fees were paid in fiscal 2005 and 2004.





ITEM
      13. EXHIBITS AND REPORTS ON FORM 8-K.





(a)  Exhibits





(5)  Articles
      of Incorporation, By-Laws and Stock Option Plan.





(i)
              Articles of Incorporation.1
 (ii)
              By-Laws.1
 (iii)
              Stock Option and Incentive Plan revised December
                16, 2004. 8
 (iv)
              Change in Directors filed July 27, 20058
 (v)
              Resignation of Chief Financial Officer files August
                18, 2005 8


(12)  Material
      Contracts.


(i)
              Employment Agreement with Barry Bennett dated
                November 15,20052
 (ii)
              Employment Agreement with Dan Finch dated September
                15, 2005. 8
 (iii)
              Agreement and Plan of Merger between AIDO
                Acquisition, Inc., Advanced ID and Universal Pet Care, Inc. 4
 (iv)
              Authorized Distributor Agreement with Trace
                Australia Pty Ltd.5
 (v)
              Consultant Agreement with Hubert Meier Consultancy
                Co. dated May 21, 2002. 5


(vi)
            Convertible
                Debenture Purchase Agreement between Universal Pet Care, Inc. and
                HEM
                Mutual Assurance LLC.4


(vii)
              $995,500
                  1% Convertible Debenture due January 20, 2009, originally issued
                  by
                  Universal Pet Care, Inc., a Hawaii corporation to HEM Mutual Assurance
                  LLC
                  on January 20, 2004.4
 (viii)
              $4,500 1% Convertible Debenture due January 20,
                2009, originally issued by Universal Pet Care, Inc., a Hawaii corporation
                to HEM Mutual Assurance LLC on January 20, 2004. 4
 (ix)
              Strategic PartnershipAgreement with Applied Wireless Identifications Group, Inc.6
 (x)
              Strategic Partnership Agreement with KSW Microtec
                AG. 6
 (xi)
              Strategic Partnership Agreement with Guide-Trend
                Co., Ltd. 6
 (xii)
              Consulting Agreement with Gottfried Auer dated
                April 15, 2003. 7





37




(11)  Statement
      of Computation of Per Share Earnings. 2





This
      Computation appears in the
      Financial Statements.





(21)  Subsidiaries
      of the Registrant.





(i)
            AVID
                Canada Corporation, an Alberta private company incorporated on November
                26, 1993 is wholly owned by the
                registrant.


(ii)
            Universal
                Pet Care, Inc., a Hawaii private company incorporated on August 25,
                1994
                is wholly owned by the registrant.





(31)  CEO
      and
      CFO Certifications. 2





(32)  CEO
      and
      CFO Certifications Pursuant to Sarbanes-Oxley Act. 2





1 Filed
      previously on Form 10-KSB dated April 28, 1999.


2 Filed
      herewith.


3 Filed
      previously on Form 10-QSB dated May 13, 2004.


4 Filed
      previously on Form 8-K dated February 10, 2004.


5 Filed
      previously on Form SB-2/Amendment 1 dated September 14, 2004.


6 Filed
      previously on Form SB-2/Amendment 2 dated December 1, 2004.


7 Filed
      previously on Form SB-2/Amendment 3 dated January 24, 2005.


8 Filed
      previously on Form 10-QSB dated November 11, 2005


9 Filed
      previously on Form 10-KSB dated March, 2004








(b)  Reports
      on Form 8-K.





On
      November 1, 2002, we filed a Form 8-K to announce our reverse merger transaction
      between USA Sunrise Beverages, Inc. and AVID Canada Corporation. An amendment
      to
      this Form 8-K was filed on January 22, 2003 to disclose the audited financials
      pursuant to this transaction.





On
      January 3, 2003, we filed a Form 8-K to change our auditors to Malone &
Bailey, PLLC. The decision to change auditors was made pursuant to the reverse
      merger transaction.





On
      February 10, 2004, we filed a Form 8-K to announce that Advanced ID Corporation,
      AIDO Acquisition, Inc., a Hawaii corporation and a wholly-owned subsidiary
      of
      Advanced ID, and Universal Pet Care, Inc., a Hawaii corporation, entered into
      an
      Agreement and Plan of Merger.





On
      October 29, 2004, we filed a Form 8-K to change our auditors to Lopez, Blevins,
      Bork & Associates, LLP. The decision to change auditors resulted when Mr.
      Blevins, who was previously a partner at our former auditors, left to establish
      his own firm.





On
      July
      27, 2005, we filed a Form 8-K to change our Directors. The change in directors
      was made as a result of the resignations of Barry Bennett and Todd
      Noble.




On
      August
      18, 2005, we filed a Form 8-K to announce the resignation of Todd Noble, the
      chief Financial Officer of Advanced ID Corporation







ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.





Audit
      Fees. We incurred aggregate fees and expenses of approximately $26,525 and
      $16,480 from our principal accountant for the 2005 and 2004 fiscal years
      respectively. Such fees included work completed for our annual audit and for
      the
      review of our financial statements included in our Forms 10-QSB.




38


Tax
      Fees.
      We incurred aggregate tax fees and expenses of $1,200 and $0 from our accountant
      for the 2005 and 2004 fiscal years respectively, for professional services
      rendered for tax compliance, tax advice, and tax planning.




All
      Other
      Fees. We incurred aggregate fees and expenses of $0 and $400 from our principal
      accountant for the 2005 and 2004 fiscal years respectively, for services
      rendered in regard to the filing of our Form SB-2.




The
      Board
      of Directors, acting as the Audit Committee considered whether, and determined
      that, the auditor’s provision of non-audit services was compatible with
      maintaining the auditor’s independence. All of the services described above for
      fiscal year 2005 and 2004 were approved by the Board of Directors pursuant
      to
      its policies and procedures. We intend to continue using Lopez, Blevins, Bork
      & Associates, LLP solely for audit and audit-related services, tax
      consultation and tax compliance services, and, as needed, for due diligence
      in
      acquisitions.




SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) 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.




Advanced ID
              Corporation(Registrant)Dated:
              March 30, 2006
            By:
            /s/ Dan
              FinchDan
              FinchChief
                Executive Officer and President(As a duly authorized officer on behalf
                of the Registrant and as
              Principal
                Executive Officer)


Dated:
              March 30, 2006
            By:
            /s/ David
              GoldenbergDavid
              GoldenbergInterim
                Chief Financial Officer and Secretary(As a duly authorized officer on
                behalf of the Registrant and as
              Principal
                Financial and Accounting Officer)




Pursuant
      to the requirements of the Securities Exchange
      Act of 1934, this report has been signed below by the following persons on
      behalf of the Registrant and in the capacities and on the dates
      indicated.


/s/ David
              Goldenberg
            
            
            /s/ Seymour
              KazimirskiDavid
                Goldenberg, Director
            
            
            Seymour
                Kazimirski, DirectorMarch
                30, 2006
            
            
            March
                30, 2006




/s/ Che
              Ki
              Li
            
            
            /s/ Hubert
              MeierChe
                Ki Li, Director
            
            
            Hubert
                Meier, DirectorMarch
                30, 2006
            
            
            March
                30, 2006




/s/
                Terry FieldsTerry
                Fields, DirectorMarch
                30, 2006





39