UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                                   (Mark One)

[X]  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934

                   For the fiscal year ended December 31, 2002

[ ]  Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

        For the transition period from _______________ to _______________

                          Commission File No. 000-27365

                         ELECTRONIC IDENTIFICATION, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in its Charter)


             Nevada                                              88-0440528
--------------------------------------------------------------------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

   #411 - 1200 West Pender Street, Vancouver, BC, Canada          V6E 2S9
--------------------------------------------------------------------------------
       (Address of principal executive offices)                (Postal Code)

                    Issuer's telephone number: (604) 684-8002

      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                      None

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

                         Common Stock, $0.001 Par Value
                                (Title of Class)

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during the  preceding  12 months (or for such
shorter period that the Company was required to file such reports),  and (2) has
been subject to such filing requirements for the past 90 days. Yes [  ] No [X]

Check if  there is no  disclosure  contained  herein  of  delinquent  filers  in
response to Item 405 of Regulation  S-B, and will not be contained,  to the best
of the  Company's  knowledge,  in  definitive  proxy or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

The Issuer's revenues for its year ended December 31, 2002 were $nil.

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<PAGE>

As of June 30, 2003,  the  aggregate  market value of the voting and  non-voting
common equity held by non-affiliates  was approximately  $247,940 based upon the
closing price per share as reported on the Nasdaq Pink Sheets Market.

There were 3,542,283 outstanding shares of the issuer's Common Stock on June 30,
2003


DOCUMENTS INCORPORATED BY REFERENCE

None.


FORWARD-LOOKING STATEMENTS

Statements  contained  in this  report  which are not  historical  in nature are
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act  of  1995.  These  forward-looking   statements  include
statements  in Item 1.  Business,  Item 5. Market for Common  Equity and Related
Stockholder  Matters,  and  Item 6.  Management's  Discussion  and  Analysis  of
Financial  Condition and Results of  Operations,  which can be identified by the
use of forward-looking  terminology such as believes, expects, plans, estimates,
predicts, potential, continue, may, will, should, or anticipates or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy. These statements are only predictions and involve known and unknown
risks,  uncertainties  and other  factors,  including  the risks in the  section
entitled "Risk  Factors",  that may cause our or our industry's  actual results,
levels of activity,  performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied  by these  forward-looking  statements.  Although  we  believe  that the
expectations  reflected in the forward  looking  statements are  reasonable,  we
cannot   guarantee   future   results,   levels  of  activity,   performance  or
achievements.  Except as required be applicable  law,  including the  securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.

Such  forward-looking  statements  involve certain risks and uncertainties  that
could cause actual results to differ materially from anticipated results.  These
risks and  uncertainties  include  regulatory  constraints,  changes  in laws or
regulations  governing  the  Company's  products and  international  trade,  the
ability of the Company to market  successfully  its products in an  increasingly
competitive  worldwide market,  changes in the Company's  operating or expansion
strategy,  failure to  consummate or  successfully  integrate  proposed  product
developments,  the ability of the Company to manage growth,  the general economy
of the  United  States and the  specific  global  markets  in which the  Company
competes,  the  availability of financing from internal and external sources and
other  factors as may be identified  from time to time in the Company's  filings
with the Securities and Exchange Commission or in the Company's press releases.


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                         ELECTRONIC IDENTIFICATION, INC.

                                   FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                                                            PAGE

ITEM 1 DESCRIPTION OF BUSINESS ................................................4

ITEM 2 DESCRIPTION OF PROPERTIES .............................................15

ITEM 3 LEGAL PROCEEDINGS .....................................................15

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...................15

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............16

ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION .............17

ITEM 7 FINANCIAL STATEMENTS...................................................24

ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
       AND FINANCIAL DISCLOSURE ..............................................45

ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
       COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 35 ..................45

ITEM 10 EXECUTIVE COMPENSATION ...............................................46

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .......48

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......................48

ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K .....................................49

ITEM 14 CONTROLS AND PROCEDURES ..............................................49

SIGNATURES ...................................................................49



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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

COMPANY OVERVIEW

The Company was incorporated in Nevada on May 14, 1992 and is in the development
stage  with  its  principal  business  activities  being  directed  towards  the
development and marketing of contactless smart ID card systems (Smart Card(s) or
Smart ID Card  System(s)).  Generally the size of a credit card, Smart Cards add
the ability and  intelligence to store and process  information  with a computer
chip embedded inside the card. Smart Cards are used in a number of corporate and
government applications including (i) access to restricted areas (replacing keys
and paper  identification  cards),  (ii) public  transportation  fare collection
(replacing bus tokens, taxi cab charge cards, airline or railway tickets), (iii)
point of sale  purchases.  Smart  Card  technology  is also  used in  industrial
applications  such as attaching a Smart Tag containing the Smart Card technology
to a  manufactured  product in order to track the product from the assembly line
through  quality  control,  warehousing,  inventory  control,  distribution  and
warranty.

The Company's  Smart Card systems  utilize  contact and  contactless  as well as
batteryless systems and therefore do not require the use of a magnetic stripe or
insertion into a terminal as required by contacted  cards  (Contacted  Card(s)),
such as credit cards and ATM cards.  Contacted  Cards in use today are typically
limited to storing information as opposed to intelligent Smart Cards, which have
processing  capabilities  similar to that of a personal computer.  The Company's
Smart Card System involves direct  wireless radio frequency  communications  and
magnetic  induction  between a chip in the Smart Card and a terminal.  Moreover,
the  Company's  contactless  Smart Card  Systems do not require  insertion  in a
terminal or the use of a keypad and  therefore may be used by all members of the
population  regardless of age or physical ability and in both indoor and outdoor
locations.

For consumers and  providers of goods and  services,  the Company's  Smart Cards
offer the convenience and accuracy of high speed transaction  processing without
the requirement of carrying cash,  checks or credit cards,  thereby reducing the
threat of theft,  inventory  shrinkage,  and payment  fraud  resulting  from the
handling  of cash or the  counterfeiting  of cash or  credit  cards.  Goods  and
services  providers do not risk loss from (i) accepting  cash or checks that may
be  subsequently  stolen from them after payment by consumers or (ii)  accepting
credit cards which may have been stolen prior to such payment.  Consumer loss is
limited  because the Smart Card is programmed to purchase only specific goods or
services.  Thus, the Smart Card is not as attractive to a thief when compared to
stolen cash, checks or credit cards.

The Smart Card is designed to  complement  credit cards rather than replace them
in  that  Smart  Card   applications   involve  the  storage  and   handling  of
substantially  more data than credit  cards and can  therefore be used for other
applications  (rather  than  just  purchase  and  sale  transactions),  such  as
identification of the user, loyalty programs and other portable data functions.

The Company markets its Smart Card Systems through its own direct sales force, a
combination  of joint ventures and strategic  alliances and selective  licensing
and  distributorship  arrangements and agreements with independent Agents in the
United States and in foreign countries.

On October 25,  2002 the Company  entered  into an  Agreement  And Plan Of Share
Exchange with Advanced Biometrics, Inc. ("ABI"), in which all outstanding common
stock of ABI will be exchanged for 95% of the total outstanding shares and share


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<PAGE>

equivalents of the common stock of the Company. The Closing Date was extended to
May 30,  2003.  Upon  closing,  the former ABI  shareholders  will  control  the
combined  entity.  Additional  terms of the  agreement  required  ABI to advance
$25,000 in interim  financing  by October 28, 2002,  ABI to raise an  additional
$500,000 at closing or within a  reasonable  period  thereafter,  the Company to
issue  1,000,000  common  stock at a price of $0.10 per share to settle debts in
the amount of $100,000, and obtain director and shareholder approvals.

On March 1, 2000,  the Company  acquired,  through a  reorganization  agreement,
Girne Acquisition  Corporation ("Girne").  Girne was a corporation organized and
existing  under the laws of the State of  Delaware.  At that date,  Girne was an
inactive  shell company.  Under the terms and  conditions of the  reorganization
agreement,  each  issued  and  outstanding  share of  common  stock of Girne was
exchanged  pro rata for an aggregate  of 1,000 shares of voting  common stock of
the  Company at $0.001  par value per share.  As a result,  the  Company  issued
300,000 shares of common stock for the acquisition of Girne.  Immediately  after
the transaction,  the former shareholders of the Company controlled the combined
entity. For accounting  purposes,  this transaction has been accounted for as an
issuance of common  shares by the Company for the net monetary  assets of Girne,
which were nominal.  Pursuant to the reorganization  agreement,  the Company was
the  surviving  corporation  and  was  continued  under  its  present  name as a
corporation in the State of Nevada.

On May 3, 1999,  the Company  merged with RFID Systems Corp.  ("RFID").  At that
date, the Company was an inactive shell company.  RFID was a developmental stage
enterprise  and was  developing  automatic  identification  and data  collection
systems  utilizing radio  frequency  identification  technology.  The Company is
continuing  in this line of  business.  The Company  had 1,000  shares of common
stock outstanding.  Under the terms and conditions of the Agreement, each issued
and  outstanding  share of common stock of RFID was converted  into one share of
common  stock of the  Company.  Immediately  after the  transaction,  the former
shareholders of RFID controlled the combined  entity.  This transaction has been
accounted for as a recapitalization  of RFID,  effectively as if RFID had issued
common  shares  to  acquire  the  net  monetary  assets  of the  Company.  Under
recapitalization  accounting,  these  financial  statements  reflect the assets,
liabilities,  revenues and  expenses of RFID from its  inception on May 14, 1992
combined with those of the Company from the date the merger was completed.


SUBSEQUENT EVENTS

On January 27, 2003, the Company received  subscription  agreements from ABI for
the  acquisition  of 1,000,000  Series A Convertible  Preferred  Stock for total
proceeds of $10,000.

On January 27, 2003, the Company completed a private placement offering with ABI
consisting  of  125,000  units at a price of $0.04  per unit to net the  Company
proceeds  of $5,000.  Each unit  consists  of one share of common  stock and one
common stock share purchase warrant. Each warrant entitles the holder to acquire
one additional  share of common stock  exercisable at a price of $0.06 per share
on or before January 27, 2005.

On April 3, 2003, the director of the Company waived all rights to debts owed by
the  Company in the amount of  $147,849.  This amount is included in the balance
owing by the Company as of December  31, 2002 since  conditions  relating to the
forgiveness of debt occurred after year-end.

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<PAGE>

On April 3, 2003 the Company and  Alternative  Technologies  ("AT")  agreed to a
cancellation  of the exclusive,  worldwide  License  Agreement  dated October 4,
2001. An amount of $10,000 which was accrued at December 31, 2002 for fees owing
to AT was forgiven.

On June 6, 2003,  an amount  owing of  $106,495  to a vendor of the  Company for
professional fees was settled for $50,000.  The full amount owing is included in
accounts payable as of December 31, 2002 since conditions  relating to the final
settlement occurred after year-end.

DESCRIPTION OF DEMONSTRATIONS

Since 1998, the Company has conducted numerous  demonstrations of its technology
and may have the potential for  implementation on a larger scale. In some cases,
these  demonstration  phases  often take 6-12 months or longer.  Examples of the
Company's Smart Card demonstration projects (two of which are discussed below as
representative of the Company's potential) include the following:

The  Kingdom  of  Saudi  Arabia  -  Dammam:   Electronic  Visa,  Hajj  visa  and
identification  cards,  expatriate  visa and  identification  cards  and  access
control and identification for prisons.

The Kingdom of Saudi Arabia expressed  interest in smart ID cards for use in the
following areas:

1. Fraud proof  identification of prisoners,  detainees and staff in the prisons
systems: The use of the company's smart cards will enable the prison authorities
to monitor  prisons  within the facility,  monitor their  movements,  record and
track the movement of prisoners from one prison facility to another. There are a
total of 92 prisons in the Kingdom of Saudi Arabia. The intent is to monitor the
prisoners within each prison from a central  headquarters  location.  All of the
prisons will be integrated to a central monitoring location.

2. The use of the Company's  identification  and visa cards for Hajj (The annual
Muslim  pilgrimage):  Hardware  and  software  would be  installed  at all major
embassies  throughout  the world.  Pilgrims  would get their visas issued on the
smart card at the  embassies  and this smart card would double as a visa card at
the same time.  This card would  enable the bearer to enter the  country for the
sole purpose of attending  the Hajj.  When the card is issued at the  embassies,
the  fingerprint  and photo of the bearer is embedded  onto the chip in the card
and recorded on the integrated  database residing in the Saudi Arabia.  When the
bearer lands in Saudi  Arabia,  the card is read through the use of a reader and
the identity of the bearer can be verified by taking another fingerprint to find
a match to the fingerprint on the card. If a match is found the bearer is waived
through, thus speeding the process at immigration. The bearer holds the card for
further  verification  at  other  points  at the Hajj  locations  if  needed  or
required. When exiting, the bearer of the card is required to return the card in
order to record the exit of the person in the database.

3. The Kingdom needs a tamper and fraud proof system of  identification  for the
expatriates in the country:  The  expatriates are brought in to work on employer
sponsored  visas that are valid for  anywhere  from 1-3 years and can be renewed
annually  or longer.  Our Smart  Cards can  provide  this tamper and fraud proof
system, with the information residing on the database.

United Arab Emirates ("UAE") - Abu Dhabi: National and Expatriate identification
cards, electronic visa cards.

The UAE issued a contract for consultancy on  identification  cards for both its
nationals and expatriates to Ernst & Young, an international accounting firm, in


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<PAGE>

September 2000. The UAE requires 2  identification  cards, one for the nationals
and the  other for the  expatriates.  The smart  cards  will be fraud  proof and
tamperproof.  These  cards  will be used to  identify  the  person,  have  their
identification on the national  database.  The expatriates will probably have an
expiry date on their cards and the cards will specify what  benefits they are or
are  not  entitled  to as  compared  to  the  nationals.  There  may  also  be a
requirement  for the smart cards to serve as e-visas  between  the Arabian  Gulf
Cooperation  Council (AGCC) countries of Bahrain,  Kuwait,  Oman,  Qatar,  Saudi
Arabia and United Arab Emirates.

SMART CARD INDUSTRY OVERVIEW

Smart Card products,  including the Company's Smart Card (collectively  referred
to as generic  smart cards),  are  typically the size of a plastic  credit/debit
card  containing an  integrated  circuit chip (chip) which can process and store
information.  Today's generic smart cards typically have the processing power of
an early 1980's vintage personal computer,  minus a keyboard,  display and power
supply.  Because generic smart cards are really portable computers,  they can be
programmed to perform virtually any function that can be implemented by software
in the available memory space. Generic smart cards benefit directly from ongoing
advances in semiconductor  technology making available  continuously  increasing
performance and features at declining cost.

There  are  two  basic  types  of  generic   smart   cards,   memory  cards  and
microprocessor cards, each of which can interface between the generic smart card
and a terminal on a contacted or contactless  basis.  Memory cards are typically
used to store and retrieve  information  only and do not have the  capability of
performing  complex  processing of  information.  Microprocessor  cards are true
smart cards in that they contain a central  processing  unit within a chip which
can  perform a number of  functions,  including  complex  arithmetic  operations
required for security.  In excess of 90% of all generic smart cards sold in 1995
were memory cards with contacted interfaces requiring alignment and insertion of
the generic  smart card into a terminal to complete an  electrical  circuit with
the metal  contacts on the surface of the card.  While  contacted  generic smart
cards have found broad use in high volume, cost sensitive applications,  such as
pay phone systems which use contacted generic smart cards, they are expensive to
maintain,  less reliable and may be considered too slow for applications such as
transportation.  To address the perceived  shortcomings of the contacted generic
smart card, a contactless  generic smart card was first developed and introduced
in the early 1990's.  According to the  consulting  firm Frost & Sullivan,  more
than 676 million generic smart cards were issued in 1996.

According to the U.S.  Federal  Reserve,  68% of the  approximately  360 billion
financial  transactions  completed  in 1995 were for  transactions  of less than
$2.00 each. Electronic commerce using electronic funds transfer, magnetic stripe
cards and generic  smart cards  accounted  for less than ten percent of all such
transactions,  but  grew  at  an  annual  rate  of  17%  versus  1%  growth  for
transactions  using  cash,  coin  and  checks.  The  Company  believes  that the
evolution of personal computers,  the Internet and generic smart cards represent
technologies  that will  contribute to the growth of electronic  commerce in the
future.  According  to a report by Killen &  Associates,  "Non-Banks  Smart Card
Strategies:  New Opportunities To Increase Sales and Profits", the generic smart
card market will triple to 30 billion transactions by 2005.

Asia,  Latin  America and North  America are areas  generally  believed to be of
greatest potential for generic smart card growth.

Costs  play an  important  role in this  emerging  industry.  Reports  in  "Card
Technology" magazine (September 1997) indicate that price competition is fierce.
Frost & Sullivan  reported average selling prices of Contactless  Smart Cards in


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mid-1996 at $5.50 per unit at high volume.  During 1997,  the Company's  largest
Contactless Smart Card competitors sold these cards at $2.50 per unit and lower,
affecting profit margins on the products.

Generic smart card products and markets have only recently begun to develop, are
rapidly  evolving  and are  characterized  by an  increasing  number  of  market
entrants who have developed or are developing a wide variety of products.  As is
typical in a new and rapidly evolving industry, demand and market acceptance for
new products are subject to a high level of  uncertainty.  There is no assurance
that the Company's Smart Cards will become widely accepted.  If the market fails
to  develop,  develops  more  slowly  than  expected,   becomes  saturated  with
competitors,  or if the Company's Smart Cards do not achieve market  acceptance,
the  Company's  business,  operating  results  and  financial  condition  may be
materially adversely affected.

STRATEGY

The Company's  mission is to achieve  sustained  leadership  in  developing  and
delivering  contactless and the new combi-card  (contact and contactless)  Smart
Card  solutions for  electronic  identification,  access  control,  security and
immigration,  while securing worldwide acceptance and usage of its technology in
Smart Card chips.  The following  discussions  represent the Company's  business
strategy.

PRODUCT DEVELOPMENT

The Company believes its compression  technology  provides  distinct  advantages
over known  competing  Smart Card  Systems  including:  (i) higher  speed making
possible  real-time  processing;  (ii) lower power  consumption  with no battery
requirements;  and (iii)  reliability with a virtually  unlimited card life. The
Company  continues to demonstrate its abilities in the fields of radio frequency
(RF) analog and digital circuit design.  The Smart Card Systems developed by the
Company offer a level of security and flexibility in contactless  operation that
could only previously be achieved in contacted operation.

Key to the success of new  generations  of Smart Card  Systems is the  Company's
strength in both the front end and back end protocol  implementation.  This core
competency  is  important  because  of the  continuous  evolution  of Smart Card
standards.  The Company's product development team strives to develop Smart Card
Systems  which will not only comply with the evolving  standards,  but will also
continue to communicate with existing legacy systems.

The Company  intends to continue to develop  Smart Card Systems  utilizing  next
generation  architecture.  Next generation architecture evolves into an Internet
oriented interface that is both browser and micro browser (wireless  application
protocol  or WAP)  based.  This will  allow the new  system to operate in a much
smaller  technology  footprint  moving  toward the PDA or  handheld  size with a
wireless  backbone.  The next  generation  will also  include the  creation of a
driver  library to  provide  support  for  several  card / reader and  biometric
devices.  This will assure compatibility with the political as well as technical
interests of the customer base.

The back end  integration  problems  will also be solved in the next  generation
architecture.  Customers  are  looking  for a  single  smart  card to be able to
interface with several back end legacy service delivery  systems.  These include
passports,  driver  licenses,  healthcare,  etc. To achieve  this  capability  a
layered  e-business  integration  backbone  will be created.  This will  include
support for:

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1. A formal architecture and development methodology,
2. A distributed application development environment,
3. An integrated management and monitoring capability,
4. Required transport technologies (messaging, IIOP, etc),
5.Formatting,
6. Routing,
7. Transformation (including but not limited to XML),
8. Application and legacy technology connectors (adapters),
9. Business process design and automated tracking.


The  Company  incurred  R&D  expenses  of nil in 2002 and  $27,008 in 2001.  The
majority  of  the  costs  of  R&D  activities  were  incurred  in  prior  years.
Approximately  $20,000  in prior year R&D costs were  incurred  pursuant  to the
terms of a licensing agreement with Alternative Technologies as disclosed in the
financial  statements.  The  remaining  $7,000  was  paid for  certain  software
development services.

MARKETING

The Company promotes its Smart Card Systems using a multi-faceted  marketing and
sales  strategy.  The  Company's  near term  strategy  is  designed  to  address
primarily  systems in the  identification,  access  control and security  market
segments.

The  Company's  Smart Card Systems are custom based systems  requiring  software
modification  for varied  users.  The Company  believes that these custom system
applications  offer the greatest  opportunity  for its  technology  for the next
several years.

A key  component  of  the  Company's  marketing  strategy  will  be to  leverage
strategic alliances to develop new users and obtain market share in its targeted
markets.

The Company  plans to market its Smart Card  Systems  technology  to  commercial
organizations in the Middle East, which is the Company's  primary market for its
systems and technology. The Company has established an Internet web site and has
electronic mail capability.

The Company has not recorded any sales to date but is pursuing  opportunities in
the Middle East.

MANUFACTURING AND ASSEMBLY

The Company will subcontract  substantially all of its manufacturing operations.
The Company will contract with third parties to manufacture  the Company's Smart
Card products in order to avoid capital  intensive  investments and to focus the
Company's limited resources on product applications and software development.

The  Company  will  subcontract  assembly  of Smart  Cards,  terminals  and card
lamination to several  companies which  specialize in this area. With increasing
production   volumes,   the  Company  will   consolidate  its  outside  contract
manufacturing  in  order  to gain  economies  of scale  and to  improve  product
quality.

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<PAGE>

COMPETITION

The  market for Smart  Card  products  is new,  intensely  competitive,  quickly
evolving  and subject to rapid  technological  change.  Competitors  may develop
superior  products  or products  of similar  quality  for sale at lower  prices.
Moreover,  there can be no assurance  that the Company's  Smart Card will not be
rendered obsolete by changing technology or new industry standards.  The Company
expects competition to persist and increase in the future. The Company's current
and potential competitors are primarily companies with established contacted and
contactless  Smart Card products that have longer operating  histories,  greater
name  recognition,  larger customer bases and significantly  greater  financial,
technical  and  marketing  resources  than the Company.  This  intense  level of
competition  could  materially  adversely  affect the Company's future business,
operating results and financial condition.

Competitive  factors in the industry include  transaction  speed, the extent and
flexibility of Smart Card memory,  reliability,  transaction  accuracy and cost,
all of which are  discussed  below.  There can be no assurance  that the Company
will be able to compete  successfully  against current or future  competitors or
that  competitive  pressures faced by the Company will not materially  adversely
affect its  business,  operating  results and financial  condition.  Many of the
Company's  competitors have the financial  resources necessary to enable them to
withstand  substantial  price and  product  competition,  which are  expected to
increase, and to implement extensive advertising and promotional programs,  both
generally and in response to efforts by other competitors to enter into existing
markets or introduce new products.

The industry is also  characterized  by frequent  introductions of new products.
The Company's  ability to compete  successfully will be largely dependent on its
ability to anticipate and respond to various  competitive  factors affecting the
Smart Card industry. These competitive factors include new products which may be
introduced,  changes  in  customer  preferences,   demographic  trends,  pricing
strategies  by  competitors  and  consolidation  in the industry  where  smaller
companies with leading edge technologies may be acquired by larger multinational
companies.

Contacted  Cards  represent  the  Company's  primary  competition  in electronic
commerce  applications.  Contacted Card competitors  include such  multinational
firms as Gemplus,  Schlumberger and Group Bull. The Company believes that it can
compete against  Contacted Cards because the Company's  contactless  Smart Cards
(i) operate at higher speeds,  (ii) do not require the time and effort  involved
in  inserting  the Smart Card in a terminal  or  removing  the Smart Card from a
wallet or purse,  (iii) use  reliable  solid  state  electronics  with no moving
parts,  exposed  contact  points or  magnetic  stripes  which can be erased by a
magnetic field, and (iv) are lower in cost over the product life.

The Company also competes  against  contactless  Smart Cards designed by Philips
GmbH, Sony Corporation, Gemplus, Motorola and Micron Communications, Inc., which
use contactless  technologies similar to the Company's  technology.  The Company
believes that its Smart Card Systems can compete against these other contactless
technologies because the Company's contactless Smart Cards (i) operate at higher
speeds,  (ii)  have  higher  endurance  and  (iii)  the  Company's   proprietary
compression  technology has the ability to compress and store a higher volume of
information.  This  includes  having a photo and  fingerprint  on the Smart Card
which does not require batteries for power.

PATENTS AND TRADE SECRETS

The Company will rely on its own patents,  trade secrets and  copyrights as well
as the patents,  trade  secrets and  copyrights  of its licensors to protect its


                                       10
<PAGE>

Smart Card technology and compression. Due to rapid changes in the generic smart
card  industry,  the Company  believes  that  development  of trade  secrets and
unpatented   proprietary   knowledge  in   connection   with  new  products  and
technologies  are generally as important as patent and  copyright  protection in
establishing and maintaining a competitive  advantage.  To date, the Company has
one Canadian patent pending. There can be no assurance that any of the Company's
future patent applications will be granted, that any current or future patent or
patent  application  will  provide  significant  protection  for  the  Company's
products or  technology,  be of commercial  benefit to the Company,  or that the
validity  of  such  patents  or  patent  applications  will  not be  challenged.
Furthermore,  there can be no  assurance  that any  patent  underlying  licensed
technology  will not be  challenged.  Moreover,  there can be no assurance  that
foreign  patent,  trade  secret or  copyright  laws will  protect the  Company's
technologies  or that the Company  will not be  vulnerable  to  competitors  who
attempt to copy or use the Company's Smart Card products or processes.

EMPLOYEES

As of June 30, 2003, the Company has no consultants or employees.

RISK FACTORS

Much of the information included in this annual report includes or is based upon
estimates,    projections   or   other   "forward-looking    statements".   Such
forward-looking  statements  include any projections or estimates made by us and
our  management  in  connection  with  our  business  operations.   While  these
forward-looking  statements,  and any assumptions upon which they are based, are
made in good faith and reflect our current  judgment  regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any  estimates,   predictions,   projections,   assumptions,   or  other  future
performance   suggested   herein.   We   undertake  no   obligation   to  update
forward-looking  statements to reflect events or  circumstances  occurring after
the date of such statements.

Such  estimates,  projections  or  other  "forward-looking  statements"  involve
various risks and  uncertainties  as outlined  below. We caution readers of this
annual  report that  important  factors in some cases have affected and , in the
future,  could  materially  affect  actual  results and cause actual  results to
differ materially from the results expressed in any such estimates,  projections
or other  forward-looking  statements.  In  evaluating  us, our business and any
investment  in our business,  readers  should  carefully  consider the following
factors.

Limited  operating  history,  limited  revenues,  and  continuing  losses  raise
substantial doubt about our ability to continue as a going concern.

The Company  began  operations in May 1992 and has a limited  operating  history
upon which potential investors may base an evaluation of its performance.  Since
inception,  the Company has focused its efforts and resources on  development of
its technology and on identifying  products and  applications  for  introduction
into the market.  During the period since  inception on May 14, 1992 to December
31, 2002, the Company incurred operating losses aggregating $16,153,151.  In the
three years ended December 3,1 2002, the Company has generated no sales revenue.
At December 31, 2002, the Company has a working  capital  deficiency of $856,996
and a  stockholders'  deficit of  $834,150.  The  Independent  Auditors'  Report
covering  the  Company's  December  31,  2002  financial  statements,   included
elsewhere in this Annual  Report,  contains an explanatory  paragraph  about the
Company's  ability to continue as a going concern.  The financial  statements do
not include any  adjustments  as a result of this  uncertainty.  There can be no
assurance that the Company's  operations  will generate  sufficient  revenues to
fund its operations and to allow it to become profitable.

                                       11
<PAGE>

Developing and unproven market for the Company's Smart Card products.

Smart card products and markets have only recently begun to develop, are rapidly
evolving and are  characterized  by an increasing  number of market entrants who
have developed or are developing a wide variety of products.  As is typical in a
new and rapidly evolving industry, demand and market acceptance for new products
are subject to a high level of  uncertainty.  There can be no assurance that the
Smart Card Systems designed by the Company will become widely accepted.  Because
the  market  for the  Company's  Smart  Cards  is new and  evolving,  it is also
difficult to predict with any assurance the future growth rate, if any, and size
of the market. If a market fails to develop,  develops more slowly than expected
or becomes  saturated with  competitors,  or if the Company's Smart Cards do not
achieve  market  acceptance,  the  Company's  business,  operating  results  and
financial condition may be materially adversely affected.

Competition, and frequent product introductions.

The  market for Smart  Card  products  is new,  intensely  competitive,  quickly
evolving  and subject to rapid  technological  change.  Competitors  may develop
superior  Smart Card  products or products of similar  quality for sale at lower
prices.  Moreover, there can be no assurance that the Company's Smart Cards will
not be rendered obsolete by changing technology or new industry  standards.  The
Company expects competition to persist and increase in the future. The Company's
current and potential  competitors are primarily  subsidiaries of  multinational
companies with established  Contacted Card and contactless Smart Card businesses
which have longer operating histories, greater name recognition, larger customer
bases and significantly  greater  financial,  technical and marketing  resources
than the Company.  This intense level of competition could materially  adversely
affect the Company's future business, operating results and financial condition.

Competitive  factors in the industry include  transaction  speed, the extent and
flexibility of Smart Card memory,  reliability,  transaction  accuracy and cost.
Current competitors  include such multinational  firms as Gemplus,  Schlumberger
and Group Bull,  which  primarily  offer  Contacted  Cards,  and  Philips  GmbH,
Motorola,  Sony  Corporation  and  Micron  Communications,   Inc.,  which  offer
primarily contactless Smart Cards.

There can be no assurance that the Company will be able to compete  successfully
against current or future competitors or that competitive pressures faced by the
Company will not materially adversely affect its business, operating results and
financial  condition.  Many of the  Company's  competitors  have  the  financial
resources  necessary to enable them to withstand  substantial  price and product
competition,  which  are  expected  to  increase,  and  to  implement  extensive
advertising and promotional programs,  both generally and in response to efforts
by other  competitors to enter into existing  markets or introduce new products.
The industry is also  characterized  by frequent  introductions of new products.
The Company's  ability to compete  successfully will be largely dependent on its
ability to anticipate and respond to various  competitive  factors affecting the
industry,  including new products which may be  introduced,  changes in customer
preferences,  demographic  trends and pricing  strategies by competitors,  which
could adversely affect the Company's operating margins.

New Product Development.

The  Company  may  experience  difficulties  that  could  delay or  prevent  the
development,  introduction and marketing of new Smart Card products. The Company
will be substantially dependent in the near future upon Smart Card products that
are currently being developed.  There can be no assurance that,  despite testing
by the Company,  errors will not be found in the Company's  Smart Card products,
or, if errors are  discovered,  corrected in a timely manner.  If the Company is


                                       12
<PAGE>

unable to develop on a timely  basis  existing  or new Smart  Card  products  or
enhancements to existing products,  or if its Smart Card products do not achieve
market  acceptance,  the  Company's  business,  operating  results and financial
condition may be materially adversely affected.

Expansion.

The Company will seek to develop and expand its Smart Card products and increase
its  marketing  operations.  Expansion  will  place  substantial  strains on the
Company's management and its operational,  accounting and information  resources
and systems. Successful management of growth will require the Company to improve
its financial controls,  operating  procedures and information  systems,  and to
hire,  train,  motivate and manage its employees and consultants.  The Company's
failure to manage growth effectively would have a material adverse effect on its
results of operations and its ability to execute its business strategy.

Obsolescence and technological change.

The  markets  for Smart Card  products  are  characterized  by rapidly  changing
technology and evolving industry  standards that result in product  obsolescence
and short product life cycles.  Accordingly,  the Company's success is dependent
upon its ability to  anticipate  technological  changes in the  industry  and to
continually  identify,  develop and successfully  market new Smart Card products
that  satisfy   evolving   technologies,   customer   preferences  and  industry
requirements.  There can be no assurance that  competitors will not market Smart
Card products which have perceived advantages over those of the Company or which
render the Company's Smart Card products obsolete or less marketable.

Impediments to market acceptance of products.

As with other new  products  designed  to replace  existing  products  or change
product designs, potential customers may be reluctant to integrate the Company's
Smart Card products into their systems unless the products are proven to be both
reliable  and  available at a  competitive  price in an assured  quantity.  Even
assuming product acceptance, the Company's customers may be required to redesign
their systems to effectively use the Company's Smart Card products. The time and
costs  necessary for such redesign could delay or prevent  market  acceptance of
the Company's Smart Card products.  A lack of, or delay in, market acceptance of
one or more of the Company's  Smart Card  products  could  adversely  affect the
Company's operations.

Dependence on manufactures and suppliers.

The Company's  reliance upon outside  manufacturers and suppliers is expected to
continue  and  involves  several  risks,  including  limited  control  over  the
availability of components, delivery schedules, pricing and product quality. The
Company  may also  experience  delays,  expenses  and lost  sales  should  it be
required to locate and qualify alternative suppliers.

Reliance upon patents and trade secrets.

The Company  relies on its patents,  trade secrets and copyrights to protect its
Smart Card  technology.  Although  the Company  intends to enforce its  patents,
trade secrets and copyrights  aggressively,  there can be no assurance that such
protection will be available in any particular instance or that the Company will
have the financial  resources  necessary to adequately  enforce its rights.  The
unavailability  of such  protection or the inability to enforce  adequately such
rights could materially  adversely  affect the Company's  business and operating
results. The Company operates in a competitive environment in which it would not
be unlikely for a third party to claim that certain of the Company's  present or


                                       13
<PAGE>

future Smart Card  products or licensed  technology  may infringe the patents or
rights of such third parties.  If any such  infringements  exist or arise in the
future,  the Company may be exposed to liability for damages and may be required
to obtain  licenses  relating  to  technology  incorporated  into the  Company's
products. The Company's inability to obtain such licenses on acceptable terms or
the  occurrence of related  litigation  could  materially  adversely  affect the
Company's operations.

Need for additional financing.

The Company  anticipates,  based on  currently  proposed  plans and  assumptions
relating to its  operations,  that its current cash on hand plus  projected cash
flow from its Rights  Offering will be  sufficient  to satisfy its  contemplated
cash  requirements for at least 12 months following the date of this Report.  In
the  event  that  the  Company's  plans  change,  its  assumptions  prove  to be
inaccurate  or its cash  flow  prove to be  insufficient  (due to  unanticipated
expenses, inadequate revenues, difficulties, problems or otherwise), the Company
may be required to seek  additional  financing  or curtail its  activities.  Any
issuance of equity  securities  would result in dilution to the interests of the
Company's  stockholders  and any issuance of debt  securities  would subject the
Company  to  risks  that  interest  rates  may  increase  or  cash  flow  may be
insufficient  to repay such  indebtedness.  The Company has no  arrangements  or
understandings  for  additional  financing  and there can be no  assurance  that
additional financing will be available to the Company if required.

Dependence upon custom system development projects.

The Company will rely upon custom system development  projects for a significant
part of its revenues. The inability of the Company to replace completed projects
with new projects will adversely affect the Company's operations.

Dependence upon qualified personnel and executive officers.

The  Company's  operations  depend in part upon its  ability  to retain and hire
qualified  personnel,  of  which  there  can  be  no  assurance.  The  Company's
operations are also dependent  upon the continued  services of Terry Kirby,  its
Chairman and Chief Executive Officer, and certain other consultants. The loss of
services of the Company's  executive officer or any of its consultants,  whether
as a result of death,  disability  or otherwise,  could have a material  adverse
effect  upon the  Company's  operations.  The Company  does not have  employment
agreements with its executive officers.

Control by  principal  stockholders;  authorization  and  issuance of  preferred
stock; prevention of changes in control.

There is no one single  shareholder who owns 10% or more of the Company's Common
Stock. The Company's Certificate of Incorporation  authorizes the issuance of up
to 5,000,000  shares of Preferred  Stock with such rights and preferences as may
be determined  from time to time by the Board of Directors.  Accordingly,  under
the  Certificate  of   Incorporation,   the  Board  of  Directors  may,  without
shareholder  approval,   issue  Preferred  Stock  with  dividend,   liquidation,
conversion,  voting, redemption or other rights which could adversely affect the
voting power or other rights of the holders of the Common Stock. The issuance of
any shares of  Preferred  Stock  having  rights  superior to those of the Common
Stock may result in a decrease in the value or market  price of the Common Stock
and could  further  be used by the Board of  Directors  as a device to prevent a
change  in  control  of the  Company.  The  Company  has not  issued  any of the
Preferred Shares to date but has received  subscriptions for 5,000,000 shares of
Preferred  Stock.  The  Company  has no other  anti-takeover  provisions  in its
Certificate of Incorporation or Bylaws.  Holders of the Preferred Stock have the


                                       14
<PAGE>

right to receive  dividends,  certain  preferences in liquidation and conversion
rights.

No dividends.

The Company has not paid any  dividends  on its Common Stock and does not intend
to pay dividends in the foreseeable future.

Possible volatility of securities prices.

The market price of the Common Stock may be highly volatile. Factors such as the
Company's  operating  results  or public  announcements  by the  Company  or its
competitors may have a significant effect on the market price of the securities.
In  addition,  market  prices for the  securities  of many small  capitalization
companies  have  experienced  wide  fluctuations  due to variations in quarterly
operating  results,  general  economic  conditions  and other factors beyond the
Company's control.

Limitations on liability of directors.

The Company's Certificate of Incorporation substantially limits the liability of
the  Company's  directors  to the  Company  and its  stockholders  for breach of
fiduciary or other duties to the Company.

ITEM 2. DESCRIPTION OF PROPERTIES

The Company's  headquarters  are located in a 3,000 square foot rented  facility
that it shares with an unrelated company in Vancouver, British Columbia, Canada.
The Company was charged a base  monthly  amount of $13,600 up to June 30,  2002,
that included  accounting,  secretarial  and  consulting  services.  The Company
believes  its  existing  facility  is adequate  for its  current  needs and that
suitable  additional  or  substitute  space  will  be  available  as  needed  on
commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

During 1997,  the Company  contracted  with  Chemoco to provide  services to the
Company.  As advance  consideration  of the  services to be provided by Chemoco,
individuals  related  to the  Company  transferred  19,445  common  stock of the
Company to Chemoco.  It is the Company's belief that Chemoco did not fulfill its
obligations  for the  services to be provided  and as a result,  the transfer of
common stock from individuals related to the Company to Chemoco was canceled. On
September 15, 1999, Chemoco commenced an action against the Company and a former
officer  of the  Company  claiming  for the  delivery  of  87,500  shares of the
Company, or in the alternative,  damages for the Company not delivering the said
shares to the Plaintiff.  Since the commencement of the action and the filing of
the Statement of Defense in November 1999, the solicitors for the Plaintiff have
filed a Notice of  Intention  to  withdraw as  solicitors  in this  matter.  The
outcome of this claim is unknown.  It is management's belief that any claim that
may arise from this situation is without merit.

On June 29, 1999, a former  director of the Company  commenced an action against
the Company  claiming,  inter alia,  for a  declaration  that he was entitled to
12,500  warrants  of the  Company  exercisable  at $3.00 per share and a further
declaration  that he was entitled to 75,000  warrants  exercisable  at $2.00 per
share  which were issued and  subsequently  cancelled.  The claim also  includes
damages for breach of contract and interest with costs.  The Company has filed a
defense  denying  any  claims  of the  former  director  in and to the  warrants
alleged.  To date,  no further  activity has been  commenced  and the outcome is
unknown.

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

There are no such matters submitted during the fourth quarter of fiscal 2002.

                                       15
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is quoted on NASD Pink Sheet market under the symbol
EIDT. The Company's Common Stock was previously quoted on NASD Over-The-Counter
Bulletin Board under the symbol EISQ, until May 22, 2002.

The following table sets forth, for the periods indicated the range of high and
low sales prices per share of the Company's Common Stock, as reported on NASD
Over-The-Counter Bulletin Board, retroactively adjusted for the 1:8 reverse
split of common shares on March 20, 2002.

                                     Low Bid            High Ask
                                     -------            --------
        1st Qtr. 2001                 $1.52               $4.32
        2nd Qtr. 2001                 $1.12               $2.16
        3rd Qtr. 2001                 $0.72               $3.28
        4th Qtr. 2001                 $0.64               $2.00

        1st Qtr. 2002                 $0.70               $2.64
        2nd Qtr. 2002                 $0.05               $0.51
        3rd Qtr. 2002                 $0.001              $0.51
        4th Qtr. 2002                 $0.01               $0.65

As of June 30, 2003 the last reported  sale price of the Company's  Common Stock
was $0.07 per share.

The  source  of  this  information  is  Yahoo  Finance  quotation  services  and
broker-dealers  making a market in the  Company's  common  stock.  These  prices
reflect inter-dealer prices,  without retail markup,  markdown or commission and
may not represent actual transactions.

The Company  underwent a 1:8 reverse split of its common stock for  shareholders
of record at March 20, 2002, and is reflected in the above table.

Holders

On June 30, 2003,  the Company's  common stock was held by  approximately  7,000
shareholders of record and an indeterminate  number of investors through nominee
or street name accounts with brokers.

Dividends

The Company has not  declared or paid  dividends  on its Common  Stock since its
formation,  and  the  Company  does  not  anticipate  paying  dividends  in  the
foreseeable  future.  Although  the  Company  does not  currently  have a credit
facility,  future credit facilities,  if any, are likely to prohibit the payment
of dividends.  Declaration or payment of dividends,  if any, in the future, will
be at the  discretion of the Board of Directors and will depend on the Company's
then current financial  condition,  results of operations,  capital requirements
and other factors deemed relevant by the Board of Directors.

Transfer Agent and Registrar

The transfer  agent and registrar  for our common stock is Olde  Monmouth  Stock
Transfer Company Inc., 200 Memorial Parkway, Atlantic Highlands, New Jersey, USA
07716.

                                       16
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following table outlines certain selected financial data, which should be
read in conjunction with, and are qualified in their entirety by, the financial
statements and related notes thereto.

STATEMENT OF OPERATIONS DATA FOR THE YEAR ENDED DECEMBER 31
<table>
      ------------------------------------------ ------------ ------------ ------------
                                                      2002         2001          2000
      ------------------------------------------ ------------ ------------ ------------
      <S>                                             <C>         <C>            <C>
      Revenues                                          $ nil        $ nil        $ nil
      ------------------------------------------ ------------ ------------ ------------
      Interest income                                       2            5          nil
      ------------------------------------------ ------------ ------------ ------------
      Loss from operations                           (475,980)  (1,873,556)  (2,711,506)
      ------------------------------------------ ------------ ------------ ------------
      Net loss                                       (475,980)  (1,971,005)  (2,711,506)
      ------------------------------------------ ------------ ------------ ------------
      Net loss per share - basic and diluted            (0.14)       (0.71)       (1.18)
      ------------------------------------------ ------------ ------------ ------------
      Weighted average shares outstanding           3,478,353    2,759,874    2,300,549
      ------------------------------------------ ------------ ------------ ------------
</table>
BALANCE SHEET DATA AS AT DECEMBER 31

      ------------------------------------------ ------------ ------------
                                                      2002         2001
      ------------------------------------------ ------------ ------------
      Cash                                               $ 46        $ 112
      ------------------------------------------ ------------ ------------
      Working capital deficit                        (856,996)    (719,556)
      ------------------------------------------ ------------ ------------
      Total assets                                     23,310       41,164
      ------------------------------------------ ------------ ------------
      Total liabilities                               857,460      723,334
      ------------------------------------------ ------------ ------------
      Stockholders' deficit                          (834,150)    (682,170)
      ------------------------------------------ ------------ ------------

PLAN OF OPERATION

Assuming the  Company's  proposed  transaction  with Advanced  Biometrics,  Inc.
("ABI")  completes  as  expected,  over the next twelve month period the Company
will  continue  implementing  a strategic and focused  operations  plan focusing
primarily  on the  perfection  of its Live  Grip  technology,  specifically  for
release with the Company's  (currently  named) Chronolog 2.0 time and attendance
application.  The  Company  will also  endeavor  to build  out its  intellectual
property  portfolio via the filing of derivative  patents,  new and  provisional
patents,  and  other  related  intellectual   property  right  filings  such  as
trademarks and copyrights.  From a marketing standpoint,  the next twelve months
will consist of a period of brand  introduction and brand building such that the
Company's  brand is  recognizable  in its  target  market  segment,  namely  the
national and international security market.

Overview of Plan

In the next twelve-month  period,  ABI will implement an aggressive  development
strategy for its biometrics technologies and applications, specifically its Live


                                       17
<PAGE>

Grip  technology  and the  Chronolog  2.0. The  foundation  of the strategy will
center  on  the  development,  testing,  acquisition,   licensing  and  sale  of
biometrics  technologies and security products. ABI envisions its development in
three  strategic  phases:  Development,  Beta Period,  and Product  Introduction
concurrent with Intellectual Property Integration.

Phase I ~ Development

In  this  initial  phase,   continuing  in  and  throughout  2003,  and  lasting
approximately  into the  first  and/or  the  second  quarter  of 2004,  ABI will
continue to assemble a core scientific  engineering  team required for designing
and  building the most cost  effective,  feature-laden  commercial  applications
utilizing ABI's core proprietary patented Live Grip technology. This will entail
further product  design,  testing,  and prototype  development for the Chronolog
2.0.  Aligned with these efforts will be ABI's  securing of  additional  related
patents and trademarks,  the filing of extensions on existing  patents,  and the
filing of additional  international patent and trademark  applications where not
already filed.

Concurrently during this phase, ABI will continue to aggressively  establish and
formalize business  relationships with potential customers and manufacturers for
technology  applications.  Specifically,  this will entail the  creation of long
term domestic and international licensing, joint venture and sales relationships
in multiple areas such as government  agencies,  security  sensitive  industries
(chemical,  biological,  radiological),  airports,  public  utilities  and power
related  business,  medical  research  facilities,  weapons  manufacturers,  and
electronic commerce related ventures.  ABI has been in advanced discussions with
several  companies  and  organizations,  including  but  not  limited  to,  Time
Equipment  Company,  Boeing,  Singapore  Technologies,  various  branches of the
United  States  Armed  Forces,  the FAA, as well as others,  all  interested  in
implementing ABI's Live Grip(TM) Technology.

Phase II - Beta Period

This phase is  expected to begin  approximately  Q1 2004 and may last as long as
six months,  whereby all  prototypes  for the Chronolog 2.0 time and  attendance
application are expected to be completed and the Company will  intensively  beta
test each internally and with selected customers such that the completed product
will be wholly  functional,  user  friendly  and  capable of  receiving  outside
technical support.

Concurrently  with this  phase,  the Company  will  continue  to  establish  and
formalize  business  relationships  with customers and manufacturers for further
technology  applications,  including  door  access  devices,  as well as medical
diagnostic  uses.  This will  include  the  creation of  potential  distribution
alliances,   manufacturing  alliances,   customer  relationships  and  licensing
relationships.


Phase III - Product Introduction & Intellectual Property Integration

In  this  phase,   beginning  from  approximately  Q2  2004,  the  Company  will
aggressively  introduce  is  Chronolog  2.0 time and  attendance  device  in the
domestic  market.  This will include the  marketing and promotion of the product
via print,  traditional and electronic  media. The Company is expected to have a
significant  presence at select trade  conferences  and related  security themed
events.  The  company  will  also  actively  work  with  both in house  and sub-
contracted sales executives to open various sales  opportunities for the product
line.

                                       18
<PAGE>

With the  introduction  of the Chronolog  2.0 time and  attendance  device,  the
Company will also begin to integrate  other  applications  it has  developed and
patented utilizing its Live Grip technology. This is expected to initially focus
on the door  access  device  market.  During  this  phase  the  company  and its
scientific team will create full spec breakdowns for such future products, model
and then beta test. The Company will also begin to actively facilitate licensing
relationships  for the  exploitation  of such  applications  in areas  where the
Company desires to co-venture and/or partner with other  strategically  situated
ventures to  manufacture  and  distribute  said Live Grip  equipped  door access
devices.

Product Research & Development

The  technology  group within the company is mandated by  management to initiate
multiple  research and  development  projects  specifically  focused on creating
improved  models of its Chronolog 2.0 time and attendance  device and developing
its  Live  Grip  technology  for  use in  door  access  devices,  as well as the
potential  for medical  diagnostic  applications.  Such  product  research  will
necessarily  include  investigation into improved  technologies that can deliver
the requisite  authenticating data in a more expedient and less intrusive manner
than  delivered by  competitive  applications.  Laboratory  testing,  scientific
evaluation,   and  beta  model  creation  for  demonstration   versions  of  the
applications  will also be undertaken at the Company's  facilities in Kennewick,
Washington.

Employees

Assuming the Company raises the required funding and closes its transaction with
ABI, the Company  foresees  significant  changes in the number of employees over
the next twelve months.  When the Company formally  introduces its Chronolog 2.0
product to the time and attendance  market,  concurrent  with the development of
the door access  device  product  line,  the Company  expects to be staffed with
approximately 20 individuals.

Plant & Equipment

The Company foresees no expected purchase or sale of property or equipment other
than the items  required  to create the stand  alone  Chronolog  2.0 beta tested
demonstration  product,  as well as  equipment  necessary  for the  door  access
devices.  The creation of any devices will be outsourced such that the company's
only equipment costs will be those related  facilitating  its initial design for
manufacture.

Satisfaction of Cash Requirements/Next 12 Months

The Company does not currently have  sufficient cash on hand to fund its plan of
operations  for the next 12 months.  Additional  funds will be required  through
additional  sales of the  Company's  common  shares  and/or loans from  existing
shareholders.  However,  there can be no assurance that the Company will be able
to obtain additional funds to support the Company's  liquidity  requirements or,
that such  financing,  if available,  will be obtained on terms  favorable to or
affordable by the Company.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

REVENUES.  Revenues  were  nil in 2002  and  2001.  The  Company  has  conducted
demonstrations of its technology that may have the potential for  implementation
on a larger scale. In some cases,  these  demonstration  projects are rolled out
for full-scale implementation, however the demonstration phase often takes 6- 12
months or longer.

                                       19
<PAGE>

RESEARCH  AND  DEVELOPMENT  EXPENSES  (R&D).  R&D  decreased to nil in 2002 from
$27,008 in 2001.  The majority of the costs of R&D  activities  were incurred in
prior  years.  Approximately  $20,000 in the prior year R&D costs were  incurred
pursuant to the terms of a licensing agreement with Alternative  Technologies as
disclosed in the financial statements. The remaining $7,000 was paid for certain
software development services

GENERAL AND  ADMINISTRATIVE  EXPENSES  (G&A).  G&A decreased to $316,612 in 2002
from $1,148,877 in 2001. This change is due largely to the reduction in expenses
incurred  for G&A  consulting  and  contract  services.  In  2001,  the  Company
maintained strong business  relationships with its key consultants and hired new
consultants to form strategic partnerships and alliances.

SALES AND MARKETING  EXPENSES (S&M).  Sales and marketing  expenses decreased to
$144,830  in 2002 from  $671,534  in 2001.  This  change is due  largely  to the
reduction in expenses  incurred for S&M  consulting and contract  services.  The
company  continues to work with its S&M consultants to demonstrate the Company's
technology and market its products.

DEPRECIATION AND  AMORTIZATION  EXPENSE.  Depreciation and amortization  expense
decreased  slightly to $14,540 in 2002 from $15,819 in 2001. There were no fixed
asset additions in the current year or prior year. Current year depreciation and
amortization  is comprised of continuing  amortization of existing  assets.  The
Company's  primary assets are its compression  technology and the  demonstration
and testing equipment that includes computers and equipment.

INTEREST  ON LONG TERM DEBT.  During  2002,  the  Company  incurred  no interest
expense.  During 2001, the Company incurred $10,323 in interest expense due to a
consultant of the Company.

NET LOSS. As of December 31, 2002, the Company has approximately $9.9 million in
net operating  losses that may be deducted in the  calculation  of United States
taxable  income of future  periods until their expiry on years ranging from 2011
to 2021.  As of December 31, 2002,  the Company has  approximately  $3.3 million
non-capital  losses that may be deducted in the calculation of Canadian  taxable
income of future  periods until their expiry on years ranging from 2006 to 2008.
Net loss for the year ended  December  31,  2002 was  $475,980  as  compared  to
$1,971,005  for the year ended  December 31, 2001.  The majority of the decrease
resulted from the reduction in consulting and contract  services from $1,663,072
in fiscal 2001 to $302,424 in fiscal 2002.  Also the loss due to  settlement  of
debt by issuance of common  stock was reduced from $97,449 in fiscal 2001 to nil
in fiscal 2002.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  primary  need for capital is for the sales and  marketing of its
products.

The  Company has a working  capital  deficiency  of $856,996 as of December  31,
2002.  The Company also has short-term  debt of $857,460,  long-term debt of nil
and stockholders' deficit of $834,150 as at December 31, 2002.

The Company has generated  substantial  operating losses since inception and has
yet to generate sufficient revenues to fund its operations.  The Company has not
yet completed a significant  number of substantial sales  transactions  covering
the  application of its products and, as a result,  an uncertainty  exists as to
whether the Company will be able to successfully market and sell its products to
third parties at sufficient prices and volumes to fund its operations. From 1996
to 2002, the Company  experienced  significant  cash flow deficits and liquidity
shortages and funded its operations primarily through the issuance of its common
stock for debt and related party borrowings.

                                       20
<PAGE>

During 2002, the Company did not generate  operating revenues from product sales
or development  contracts.  In addition,  the Company  significantly reduced its
level  of  operating  expenses.  There  is no  assurance  the  Company  will  be
successful  in  developing  and  marketing  its  products or that the  Company's
operations will generate sufficient revenues to fund its operations and to allow
it to become profitable.

Management of the Company  funded its 2002  operations  through a combination of
related party loans and offerings of its preferred stock.  There is no assurance
that sufficient product sales or future sales of common stock or preferred stock
will occur or that  additional  proceeds  will be received  from such  potential
offerings.  The  Company  currently  does  not  have  an  available  source  for
short-term borrowings.

These factors,  among others,  raise  substantial doubt about the ability of the
Company to continue as a going concern.  The financial statements do not include
any adjustments relating to the recoverability of assets and carrying amounts of
liabilities  that might be necessary should the Company be unable to continue as
a going concern.

CASH FLOW

The Company  had cash and cash  equivalents  of $46 and $112 as of December  31,
2002 and 2001, respectively.

During 2002, the Company raised  $38,151 from financing  activities  compared to
$219,046  during  the 2001  fiscal  year.  The  Company  received  $40,000  from
subscriptions for shares of preferred stock and repaid $1,849 towards short-term
debt for the year ended  December 31, 2002.  The Company  received  $77,100 from
subscriptions  for shares of common  stock and  $141,946  from the  issuance  of
short-term debt for the year ended December 31, 2001.

The Company  used $342 in  investing  activities  during the 2001 fiscal year as
compared  to nil during  the 2002  fiscal  year.  The use of funds  during  2001
related to the costs incurred with the Company's patent pending.

The Company reduced cash used in operating  activities to $38,217 in fiscal 2002
from  $219,466  in  fiscal  2001.  The  Company  incurred  less  cash  operating
expenditures as a result of generating  less cash from financing  sources during
the year.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial  statements are prepared in accordance with accounting  principles
generally  accepted  in the  United  States  of  America.  We have not  produced
significant  revenues from our principal business and we are a Development Stage
Company as defined by Statement of Financial Accounting Standard ("SFAS") No. 7.
Preparing financial  statements in accordance with generally accepted accounting
principles  requires  management to make estimates and assumptions  which affect
the reported  amounts of assets and liabilities and the disclosure of contingent
assets and  liabilities  at the balance  sheet  dates,  and the  recognition  of
revenues and expenses for the reporting periods. These estimates and assumptions
are affected by management's application of accounting policies.

Property and Equipment

Fixed assets are carried at cost less accumulated amortization.  Amortization is
calculated  annually for furniture and equipment on the straight line basis at a
rate  of 20%  per  annum,  and  for  computers  and  technology  equipment  on a
declining-balance  basis at a rate of 30% per  annum.  We review  and assess the


                                       21
<PAGE>

underlying value of fixed assets as the situation  dictates to determine whether
a provision for impairment  should be recorded.  Such  determination  is made by
comparing  the  carrying   value  of  fixed  assets  to  the  future  cash  flow
(undiscounted)  expected  to  result.  When  these  cash flows are less than the
carrying  value,  impairment is calculated by reference to the fair value of the
specific assets.

Intangible Assets

Patents are recorded at cost and amortized using the straight-line method over a
period of five years.

Income Taxes

Income taxes are accounted for under the asset and  liability  method.  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carry  forwards.  Deferred tax assets and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date. To
the extent that the  realization  of deferred tax assets is not considered to be
more likely than not, a valuation allowance is provided.

Recent Accounting Pronouncements

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation - Transition and Disclosure",  which amends SFAS No. 123 to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  SFAS
No. 148  expands the  disclosure  requirements  of SFAS No. 123 to require  more
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.  The transition  provisions of SFAS No. 148 are
effective  for fiscal  years ended  after  December  15,  2002.  The  disclosure
provisions of SFAS No. 148 are effective  for financial  statements  for interim
periods  beginning after December 15, 2002. The Company does not expect adoption
of  this  standard  to  have a  material  effect  on the  Company's  results  of
operations or financial position.

In October 2002, the FASB issued SFAS No. 147 "Acquisitions of Certain Financial
Institutions--an   amendment  of  FASB  Statements  No.  72  and  144  and  FASB
"Interpretation  No. 9", but it does not have any relationship to the operations
of the Company and therefore a description of such and its respective  impact on
the Company's operations has not been disclosed.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with  Exit  or  Disposal  Activities".  The  provisions  of this  Statement  are
effective for exit or disposal  activities that are initiated after December 31,
2002, with early  application  encouraged.  This Statement  addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and  nullifies  Emerging  Issues Task Force (EITF)  Issue No.  94-3,  "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)".  This Statement
requires  that a  liability  for a cost  associated  with an  exit  or  disposal
activity be recognized when the liability is incurred.  The Company adopted SFAS
No. 146 on January 1, 2003 and its impact did not have a material  effect on its
financial position or results of operations.

                                       22
<PAGE>

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections".
The  Company  elected the early  adoption  of SFAS 145 in fiscal year 2001.  The
provisions of SFAS 145 have been applied  retroactively.  Under Statement 4, all
gains and losses from extinguishment of debt were required to be aggregated and,
if material,  classified as an  extraordinary  item,  net of related  income tax
effect. SFAS No. 145 eliminates Statement 4 and, thus, the exception to applying
Opinion 30 to all gains and  losses  related to  extinguishments  of debt.  As a
result,  gains and losses from  extinguishment  of debt should be  classified as
extraordinary  items only if they meet the criteria in Opinion 30.  Accordingly,
as losses  resulting from the settlement of debt by issuance of common stock did
not meet the criteria for  extraordinary  items under Opinion 30, they have been
presented  as  a  component  of  continuing  operations  on  the  statements  of
operations.


                                       23
<PAGE>


ITEM 7. FINANCIAL STATEMENTS




Index to Financial Statements
                                                                            PAGE

Independent Auditors' Report .................................................25

Balance Sheets as at December 31, 2002 and 2001 ..............................26

Statement of Operations for the years ended December 31, 2002, 2001
and 2000 and for the period from May 14, 1992 (inception)
through December 31, 2002.....................................................27

Statement of Stockholders' Deficit for the period from May 14, 1992
(inception) through December 31, 2002......................................28-29

Statement of Cash Flows for the years ended December 31, 2002, 2001
and 2000 and for the period from May 14, 1992 (inception)
through December 31, 2002..................................................30-31

Notes to Financial Statements..............................................32-43

Schedule of General and Administrative, Sales and Marketing, and
Research and Development Expenses for the years ended December 31,
2002, 2001 and 2000 and for the period from May 14, 1992
(inception) through December 31, 2002.........................................44


                                       24
<PAGE>

Chartered Accountants
11th floor, 1050 West Pender Street
Vancouver, BC, Canada V6E 3S7
604-714-3600

Independent Auditor's Report

To the Stockholders and Director
Electronic Identification, Inc.
(A Development Stage Company)

We have audited the  accompanying  balance sheet of  Electronic  Identification,
Inc. (a Nevada  corporation) as of December 31, 2002, and the related  statement
of  operations,  stockholders'  deficit  and cash flows for the year then ended.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audit. The accompanying balance sheet of Electric Identification, Inc. as
of December 31, 2001, and the related  statements of  operations,  stockholders'
deficit  and cash flows  accumulated  for the period  from May 14, 1992 (Date of
Inception) to December 31, 2001 and the years ended  December 31, 2001 and 2000,
were audited by other auditors.  Those auditors expressed an unqualified opinion
on those financial statements in their report dated March 22, 2002.

We conducted our audit in accordance with auditing standards  generally accepted
in the 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 audit  provides a  reasonable  basis for our
opinion.

In our  opinion,  the  aforementioned  financial  statements  referred  to above
present fairly, in all material  respects,  the financial position of Electronic
Identification,  Inc. as of December 31, 2002, and the results of its operations
and its  cash  flows  for the year  then  ended in  conformity  with  accounting
principles generally accepted in the United States.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 1 to the  financial
statements,  the Company has not obtained profitable  operations since inception
and will need additional  financing to sustain  operations.  These factors raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also discussed in Note 1. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


/s/ Manning Elliott
---------------------
    Manning Elliott

CHARTERED ACCOUNTANTS

Vancouver, Canada

May 23, 2003, except as to Note 13(e)

which is as of June 6, 2003

                                       25
<PAGE>

                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Balance Sheets
(Expressed in US dollars)

<table>
<caption>
                                                                   December 31,    December 31,
                                                                        2002            2001
                                                                         $               $
<S>                                                                     <S>             <C>
Assets

Current Assets

  Cash and cash equivalents                                                  46             112
  Accounts receivable                                                       418           3,666
-----------------------------------------------------------------------------------------------

Total Current Assets                                                        464           3,778

Property and Equipment (Note 3)                                          20,884          32,940

Patents (Note 4)                                                          1,962           4,446
-----------------------------------------------------------------------------------------------

Total Assets                                                             23,310          41,164
===============================================================================================

Liabilities and Stockholders' Deficit

Current Liabilities

  Accounts payable & accrued liabilities                                428,528         378,142
  Due to director (Note 5(a))                                           185,448         183,869
  Due to stockholder (Note 5(c))                                        233,387         114,377
  Short-term debt (Note 6)                                               10,097          46,946
-----------------------------------------------------------------------------------------------

Total Liabilities                                                       857,460         723,334
-----------------------------------------------------------------------------------------------


Contingencies and Commitments (Notes 9 and 11)

Stockholders' Deficit

Preferred Stock (Note 8)
  Authorized: 5,000,000 shares, with a $0.001 par value; none issued          -               -
  Preferred Stock Subscribed, 4,000,000 shares                              400               -

Common Stock (Note 7)
  Authorized: 8,750,000 shares, with a $0.001 par value;
  Issued: 3,542,283 shares (2001 - 3,090,908 shares)                      3,542           3,091

Additional Paid-In Capital                                           15,315,059      14,991,910

Deficit Accumulated During The Development Stage                    (16,153,151)    (15,677,171)
-----------------------------------------------------------------------------------------------

Total Stockholders' Deficit                                            (834,150)       (682,170)
-----------------------------------------------------------------------------------------------

Total Liabilities And Stockholders' Deficit                              23,310          41,164
===============================================================================================
</table>
    The accompanying note are an integral part of these financial statements


                                       26
<PAGE>

                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Operations
(Expressed in US dollars)

<table>
<caption>


                                                                                               Accumulated from
                                                                                                 May 14, 1992
                                                                                                   (Date of
                                                                Years Ended December 31,         Inception) to
                                                         --------------------------------------   December 31,
                                                        2002            2001            2000          2002
                                                          $               $               $            $
<S>                                                      <C>            <C>              <C>          <C>
Revenue                                                       -               -               -         254,996
Interest and other income                                     2               5               -           5,003
---------------------------------------------------------------------------------------------------------------
                                                              2               5               -         259,999
---------------------------------------------------------------------------------------------------------------

Expenses

Amortization                                             14,540          15,819          16,743         177,939
General and administrative (Schedule)                   316,612       1,148,877         753,339       5,740,987
Sales and marketing (Schedule)                          144,830         671,534         685,468       3,883,748
Research and development (Schedule)                           -          27,008           3,914       1,628,490
Interest on long-term debt                                    -          10,323       1,252,042       2,287,977
Write-off of leasehold improvements                           -               -               -          32,131
---------------------------------------------------------------------------------------------------------------

Total Expenses                                          475,982       1,873,561      2 ,711,506      13,751,272
---------------------------------------------------------------------------------------------------------------

Operating Loss                                         (475,980)     (1,873,556)     (2,711,506)    (13,491,273)

 Loss due to settlement of debt by issuance of common
   stock                                                      -         (97,449)              -      (2,018,840)

Equity loss in and write-down of investment in and
  advances to RFID Datachip Technologies Inc.                 -               -               -        (358,835)

Write-off of advances to Infotag Corporation                  -               -               -        (284,203)
---------------------------------------------------------------------------------------------------------------

Net Loss for the Period                                (475,980)     (1,971,005)     (2,711,506)    (16,153,151)
===============================================================================================================

Net Loss Per Share - Basic                                (0.14)          (0.71)          (1.18)
===============================================================================================================


Weighted Average Shares Outstanding                   3,478,353       2,759,874       2,300,549
===============================================================================================================

(Diluted loss per share has not been presented as the result is anti-dilutive)
</table>
    The accompanying note are an integral part of these financial statements

                                       27
<PAGE>

                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Stockholders' Deficit
(Expressed in US dollars)
<table>
<caption>

                                                                                                Deficit
                                 Preferred Stock                                              Accumulated
                                    Subscribed              Common Stock         Additional     during the       Total
                              --------------------------------------------------   Paid in     Development   Stockholders'
                                 Shares     Amount       Shares        Amount      Capital        Stage    Equity (Deficit)
                                              $                         $              $            $               $
                              --------------------------------------------------
<S>                                <C>        <C>         <C>            <C>         <C>             <C>            <C>
Balance, May 14, 1992
  (inception)                           -          -           -              -            -             -              -
Net loss for the period                 -          -           -              -            -          (185)          (185)
Stock issued for cash                   -          -     389,153            389          311             -            700
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1992              -          -     389,153            389          311          (185)           515
Net loss for the year                   -          -           -              -            -           (80)           (80)
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1993              -          -     389,153            389          311          (265)           435
Net loss for the year                   -          -           -              -            -           (80)           (80)
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1994              -          -     389,153            389          311          (345)           355
Net loss for the year                   -          -           -              -            -       (25,627)       (25,627)
Stock issued for cash                   -          -      55,556             56       19,944             -         20,000
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1995              -          -     444,709            445       20,255       (25,972)        (5,272)
Net loss for the year                   -          -           -              -            -    (1,312,673)    (1,312,673)
Stock returned for
  cancellation                          -          -    (284,445)          (284)         284             -              -
Stock issued for secured
  notes receivable                      -          -      27,778             28      183,782             -        183,810
Stock issued for cash                   -          -      26,751             27      963,096             -        963,123
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1996              -          -     214,793            216    1,167,417    (1,338,645)      (171,012)
Net loss for the year                   -          -           -              -            -    (3,521,956)    (3,521,956)
Stock issued for cash                   -          -      27,778             27      999,973             -      1,000,000
Stock issued on settlement of
  convertible debentures                -          -      79,879             80      499,919             -        499,999
Stock issued to settle
  expenses                              -          -       6,298              6       24,994             -         25,000
Intrinsic value of beneficial
  conversion of liabilities             -          -           -              -      316,000             -        316,000
Stock issue costs                       -          -           -              -     (225,112)            -       (225,112)
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1997              -          -     328,748            329    2,783,191    (4,860,601)    (2,077,081)
Net loss for the year                   -          -           -              -            -    (3,082,864)    (3,082,864)
Stock issued on settlement of
  accounts payable                      -          -      47,917             48      344,368             -        344,416
Stock issued for cash                   -          -     325,667            326      769,917             -        770,243
Stock issued on settlement of
  notes payable                         -          -      37,255             37      152,553             -        152,590
Stock issued on settlement of
  convertible debentures                -          -     243,074            243      687,388             -        687,631
Stock issued on settlement of
  legal claims                          -          -      31,250             31      132,828             -        132,859
Stock issued on settlement of
  loan payable                          -          -      44,445             44      116,458             -        116,502
Stock issued to settle
  expenses                              -          -     126,153            126      439,738             -        439,864
Intrinsic value of beneficial
  conversion of liabilities             -          -           -              -      175,653             -        175,653
Settlement of debt by
  issuance of common stock              -          -           -              -      663,068             -        663,068
Cancellation of redeemable
  common stock issued to RFID
  Datachip Technologies Inc.            -          -           -              -      226,670             -        226,670
Stock issue costs                       -          -           -              -     (174,056)            -       (174,056)
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1998              -          -   1,184,509          1,184    6,317,776    (7,943,465)    (1,624,505)
=========================================================================================================================

                                       28
<PAGE>

Balance, December 31, 1998              -          -   1,184,509          1,184    6,317,776    (7,943,465)    (1,624,505)
Net loss for the year                   -          -           -                           -    (3,051,195)    (3,051,195)
Stock issued on the
  settlement of subscriptions
  received for common stock             -          -     430,000            430    1,059,570             -      1,060,000
Stock issued to settle
  expenses                              -          -     251,500            252      375,061             -        375,313
Stock issued on settlement of
  notes payable                         -          -      62,500             62       99,938             -        100,000
Stock issued on settlement of
  convertible debentures                -          -     249,020            249      401,783             -        402,032
Intrinsic value of beneficial
  conversion of liabilities             -          -           -              -      474,117             -        474,117
Settlement of debt by
  issuance of common stock              -          -           -              -    1,258,323             -      1,258,323
Stock issue costs                       -          -           -              -      (48,474)            -        (48,474)
Compensatory benefit of stock
  options                               -          -           -              -      485,828             -        485,828
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1999              -          -   2,177,529          2,177   10,423,922   (10,994,660)      (568,561)
Net loss for the year                   -          -           -              -            -    (2,711,506)    (2,711,506)
Stock issued to settle
  expenses                              -          -     113,500            114    1,131,686             -      1,131,800
Stock issued to settle debt             -          -     120,834            121      425,879             -        426,000
Stock issued on
  recapitalization
  transaction of Girne
  Acquisition Corporation               -          -      37,500             37          263             -            300
Stock cancelled                         -          -     (31,250)           (31)        (219)            -           (250)
Intrinsic value of beneficial
  conversion of liabilities             -          -           -              -    1,249,335             -      1,249,335
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2000              -          -   2,418,113         2,418    13,230,866   (13,706,166)      (472,882)
Net loss for the year                   -          -           -             -             -    (1,971,005)    (1,971,005)
Stock issued to settle
  expenses                              -          -     475,512           476       902,674             -        903,150
Stock issued to settle debt             -          -     197,283           197       219,803             -        220,000
Subscriptions for units
  received in cash                      -          -           -              -       77,100             -         77,100
Loss due to settlement of
  debt by issuance of common
  stock                                 -          -           -              -       97,449             -         97,449
Compensatory benefit of stock
  options                               -          -           -              -      464,018             -        464,018
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2001              -          -   3,090,908          3,091   14,991,910   (15,677,171)      (682,170)
Net loss for the year                   -          -           -              -            -      (475,980)      (475,980)
Stock issued on the                                                                                      -
  settlement of subscriptions
  received for common stock             -          -      96,375             96          (96)                          -
Stock issued to settle
  expenses                              -          -     311,250            311      248,689             -        249,000
Stock issued to settle debt             -          -      43,750             44       34,956             -         35,000
Subscriptions for preferred
  stock received in cash        4,000,000        400           -              -       39,600             -         40,000
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2002      4,000,000        400   3,542,283          3,542   15,315,059   (16,153,151)      (834,150)
=========================================================================================================================
</table>
    The accompanying note are an integral part of these financial statements

                                       29
<PAGE>

                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Cash Flows
(Expressed in US dollars)
<table>
<caption>
                                                                                                     Accumulated from
                                                                                                      May 14, 1992
                                                                                                        (Date of
                                                                                                      Inception) to
                                                                    Years Ended December 31,          December 31,
                                                             ----------------------------------------
                                                                 2002         2001         2000           2002
                                                                   $            $            $              $
<S>                                                              <C>          <C>          <C>            <C>
Cash Flows From Operating Activities
   Net loss for the period                                        (475,980)  (1,971,005)  (2,711,506)    (16,153,151)
   Items not involving cash:
      Amortization                                                  14,540       15,819       16,743         177,939
      Loss due to settlement of debt by issuance of common
       stock                                                             -       97,449            -       2,018,840
      Equity loss in and write-down of investment in and
       advances to RFID Datachip Technologies Inc.                       -            -            -         358,835
      Write-off of leasehold improvements                                -            -            -          32,122
      Write-off of advances to Infotag Corporation                       -            -            -         284,203
      Write-down of fixed assets                                         -            -            -          35,252
      Loss on disposal of fixed assets                                   -            -            -          10,771
      Acquisition of in-process research and development                 -            -            -         340,108
      Expenses settled with the issuance of notes payable                -            -            -         154,131
      Expenses settled with the issuance of common stock           249,000      903,150    1,131,800       3,124,126
      Stock issued on recapitalization transaction of Girne
       Acquisition Corporation                                           -            -          300             300
      Stock cancelled                                                    -            -         (250)           (250)
      Intrinsic value of beneficial conversion of
       liabilities into common stock                                     -            -    1,249,335       2,215,114
      Compensatory benefit of stock options                              -      464,018            -         949,846
   Changes in operating assets and liabilities                                        -            -
      Amounts receivable                                             3,248         (170)         783            (419)
      Prepaid expenses and deposits                                      -            -          351               -
      Accounts payable and accrued liabilities                      50,386       86,954     (111,121)        752,153
      Due to director                                                1,579      137,600        6,791         185,448
      Due to stockholder                                           119,010       46,719     (128,492)        233,387
      Accounts payable to be settled with common stock                   -            -            -         291,006
--------------------------------------------------------------------------------------------------------------------

 Net Cash Used In Operating Activities                             (38,217)    (219,466)    (545,266)     (4,990,239)
--------------------------------------------------------------------------------------------------------------------

 Cash Flows From Investing Activities
   Bank overdraft                                                        -            -            -        (262,861)
   Purchase of fixed assets                                              -            -      (11,760)        (14,922)
   Acquisition of patent                                                 -         (342)      (1,171)       (132,165)
   Other advances                                                        -            -            -        (440,501)
--------------------------------------------------------------------------------------------------------------------

 Net Cash Used In Investing Activities                                   -         (342)     (12,931)       (850,449)
--------------------------------------------------------------------------------------------------------------------

Cash Flows From Financing Activities
   Subscriptions received for preferred stock                       40,000            -            -          40,000
   Subscriptions received for common stock                               -       77,100            -       1,137,100
   Net proceeds on issuance of common stock                              -            -            -       2,354,899
   Net proceeds on issuance of convertible debentures                    -            -      426,000       1,938,780
   Issuance (repayment) of short-term debt                          (1,849)     141,946            -         140,097
   Issuance of loan payable                                              -            -      125,000         229,858
--------------------------------------------------------------------------------------------------------------------

 Net Cash Provided By Financing Activities                          38,151      219,046      551,000       5,840,734
--------------------------------------------------------------------------------------------------------------------

 Increase (decrease) in cash                                           (66)        (762)      (7,197)             46
Cash, beginning of period                                              112          874        8,071               -
--------------------------------------------------------------------------------------------------------------------

Cash, end of period                                                     46          112          874              46
====================================================================================================================

                                       30
<PAGE>

                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Cash Flows  (continued)
(Expressed in US dollars)


                                                                                                    Accumulated from
                                                                                                      May 14, 1992
                                                                                                        (Date of
                                                                                                      Inception) to
                                                                    Years Ended December 31,          December 31,
                                                             ----------------------------------------
                                                                 2002         2001         2000           2002
                                                                   $            $            $              $

Supplemental Non-Cash Investing and Financing Activities

   Stock issued on settlement of subscriptions received for
    common stock                                                         -            -            -       1,060,000
   Stock issued on settlement of accounts payable                        -            -            -         344,416
   Stock issued on settlement of notes payable                           -            -            -         252,570
   Stock issued on settlement of convertible debentures                  -            -      426,000       2,015,663
   Stock issued on settlement of legal claims                            -            -            -         132,858
   Stock issued on settlement of loans payable                      35,000      220,000                      371,502
   Stock issued on settlement of expenses                          249,000      903,150    1,131,800       3,124,126
   Stock issued on recapitalization transaction of Girne
    Acquisition Corporation                                              -            -          300             300
   Stock cancelled                                                       -            -         (250)           (250)
   Cancellation of redeemable common stock                               -            -            -         226,670
   Intrinsic value of beneficial conversion of liabilities
    into common stock                                                    -            -    1,249,335       2,215,105
   Loss due to settlement of debt by issuance of common stock            -       97,449            -       2,018,840
   Issuance of common stock in exchange for secured notes                -            -            -         183,810
   Issuance of redeemable common stock                                   -            -            -         226,670
   Authorized par value change resulting in an increase in
    additional paid in capital                                           -            -            -          52,117
====================================================================================================================


Supplemental Disclosures

   Cash paid for taxes                                                   -            -            -               -
   Cash paid for interest                                                -            -        2,707          59,010
====================================================================================================================
</table>
    The accompanying note are an integral part of these financial statements


                                       31
<PAGE>

ELECTRONIC IDENTIFICATION, INC.
(A Development Stage Enterprise)

Notes to Financial Statements
(Expressed in US dollars)



1.   Nature of Operations and Continuance of Business

     The  Company was  incorporated  in the State of Nevada,  U.S.A.  on May 14,
     1992. The Company is in the development  stage with its principal  business
     activities   being  directed  towards  the  development  and  marketing  of
     electronic  identification  issuing and authentication  systems to identify
     people  in  secure,  convenient  and cost  effective  ways.  The  Company's
     identification  systems  combine radio  frequency  technology and biometric
     identification  technologies to effectively  control the flow of people and
     information in offices, over the Internet or across borders; as well as for
     highly sensitive security applications such as passports,  driver licenses,
     credit, banking and access control cards.

     These  financial  statements  have been prepared on the going concern basis
     under which an entity is considered to be able to realize on its assets and
     satisfy its  liabilities  in the ordinary  course of  business.  During the
     period since  inception  on May 14, 1992 to December 31, 2002,  the Company
     has incurred  operating  losses  aggregating  $16,153,151.  At December 31,
     2002,  the Company has a working  capital  deficiency  of $856,996  (2001 -
     $719,556) and a  stockholders'  deficit of $834,150 (2001 - $682,170).  The
     Company's  ability to meet its  obligations  as they come due is  primarily
     dependent upon securing  additional  financing,  whether from operations or
     otherwise,  and market acceptance of its products.  Management continues to
     pursue  additional  sources of financing;  however no funding  arrangements
     have been made and there can be no guarantee  that the required  additional
     financing  will  be  obtained  or,  if  available,  will  be  available  on
     satisfactory  terms.  Failure to identify  and obtain such  financing  will
     limit the Company's  ability to satisfy its  obligations  as they come due,
     which may,  in turn,  impair the  Company's  ability to continue as a going
     concern.  This  could also  negatively  impact  the  recoverability  of the
     carrying  value of assets.  These  financial  statements do not include any
     adjustments  relating  to the  recoverability  of assets  and  amounts  and
     classification of liabilities that might be necessary should the Company be
     unable to continue as a going concern. If the Company is unable to continue
     as a going concern,  assets and liabilities could require  restatement on a
     liquidation  basis,  which would differ  materially  from the going concern
     basis.  These  factors  cause  there  to be  substantial  doubt  about  the
     Company's ability to continue as a going concern.

     On October 25,  2002,  Advanced  Biometrics,  Inc.  ("ABI") and the Company
     agreed to a share  exchange.  Upon closing,  the share  exchange  agreement
     provides for ABI  shareholders to control the combined  entity.  Conditions
     prior to closing include obtaining shareholder approval,  the resolution of
     certain  outstanding   obligations  of  the  Company,   completing  a  debt
     conversion and the completion of two additional  private  placements of the
     Company. Refer to Note 10.


                                       32
<PAGE>

2.   Significant Accounting Policies

     (a)  Basis of Presentation
          These financial  statements are prepared in accordance with accounting
          principles  generally  accepted in the United  States of America.  The
          Company  has not  produced  significant  revenues  from its  principal
          business and is a Development Stage Company as defined by Statement of
          Financial Accounting Standard ("SFAS") No. 7.

     (b)  Cash and Cash Equivalents
          The Company  considers all highly liquid  instruments with maturity of
          three months or less at the time of issuance to be cash equivalents.

     (c)  Research and Development Costs
          Research and development costs are expensed as incurred.

     (d)  Use of Estimates
          The  preparation  of  financial  statements  in  accordance  with U.S.
          generally accepted  accounting  principles requires management to make
          estimates and assumptions  which affect the reported amounts of assets
          and   liabilities   and  the  disclosure  of  contingent   assets  and
          liabilities  at the  balance  sheet  dates,  and  the  recognition  of
          revenues  and  expenses  for  the  reporting   periods.   Areas  where
          significant  estimates have been applied include the assessment of the
          ultimate  liability  arising  out  of  legal   contingencies  and  the
          recoverability  of fixed  assets and  patents.  Actual  results  could
          differ from these estimates.

     (e)  Foreign Currency Translation

         The Company's functional and reporting currency is the United States
         dollar. The financial statements of the Company are remeasured to
         United States dollars in accordance with SFAS No. 52 "Foreign Currency
         Translation". Monetary assets and liabilities denominated in foreign
         currencies are translated using the exchange rate prevailing at the
         balance sheet date. Gains and losses arising on remeasurement or
         settlement of foreign currency denominated transactions or balances are
         included in the determination of income. Foreign currency transactions
         are primarily undertaken in Canadian dollars. The Company has not, to
         the date of these financials statements, entered into derivative
         instruments to offset the impact of foreign currency fluctuations.

     (f)  Patents
          Patents are  recorded at cost and  amortized  using the  straight-line
          method over a period of five years.

     (g)  Property and Equipment
          Property   and   equipment   is  carried  at  cost  less   accumulated
          amortization.  Amortization is computed on the following  methods over
          the estimated useful life of the asset at the following annual rates:
                Furniture and equipment - 20% Straight-line
                Computers and technology equipment - 30% Declining-balance

     (h)  Stock-Based Compensation
          The Company has elected to apply the  intrinsic  value  principles  of
          Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock
          Issued to  Employees"  ("APB  25"),  and  related  interpretations  in


                                       33
<PAGE>

          accounting  for its stock options  granted to employees and directors.
          Under APB 25, compensation expense is only recorded to the extent that
          the  exercise  price is less than the market  value of the  underlying
          stock on the  measurement  date,  which is usually  the date of grant.
          Stock-based compensation for employees is recognized on an accelerated
          basis over the vesting period of the individual options. Stock options
          granted  to  non-employees  are  accounted  for  under  SFAS  No.  123
          "Accounting  for  Stock-Based  Compensation"  and  are  recognized  as
          compensation expense based on the fair market value of the stock award
          or fair market value of the goods and services received,  whichever is
          more reliably measurable.

     (i)  Financial Instruments
          The  Company's  short-term  financial   instruments  include  accounts
          receivable,  accounts payable, accrued liabilities, and amounts due to
          related  parties.  The  fair  value  of  these  financial  instruments
          approximate   their  carrying  values  due  to  their   short-term  to
          liquidation.

          The fair values of due to  stockholder  and due to director  cannot be
          reasonably  determined  due to their related party nature.  Due to the
          nature of the relationship between the Company and the related parties
          and the  lack of a  ready  market  for  such  indebtedness,  it is not
          possible to estimate the current fair value of this indebtedness.

          The  Company  has  not  entered  into  off-balance   sheet  derivative
          instruments at the date of these financial statements.

     (j)  Comprehensive Loss
          SFAS No. 130, "Reporting  Comprehensive Income," establishes standards
          for the reporting and display of comprehensive loss and its components
          in the financial statements.  As at December 31, 2002, the Company has
          no items that represent  comprehensive  loss and,  therefore,  has not
          included a schedule of comprehensive loss in the financial statements.

     (k)  Basic and Diluted Net Income (Loss) Per Common Share
          The Company  computes net income (loss) per share in  accordance  with
          SFAS No.  128,  "Earnings  per Share"  (SFAS 128).  SFAS 128  requires
          presentation of both basic and diluted earnings per share (EPS) on the
          face of the income  statement.  Basic EPS is computed by dividing  net
          income  (loss)  available to common  shareholders  (numerator)  by the
          weighted  average  number of common shares  outstanding  (denominator)
          during the period.  Diluted EPS gives effect to all dilutive potential
          common shares outstanding during the period.  Diluted EPS excludes all
          dilutive  potential  common  shares if their effect is anti  dilutive.
          Loss  per  share  information  does  not  include  the  effect  of any
          potential common shares, as their effect would be anti-dilutive

     (l)  Long-Lived Assets
          In accordance  with SFAS No. 144,  "Accounting  for the  Impairment or
          Disposal  of Long Lived  Assets",  the  carrying  value of  intangible
          assets and other long-lived  assets is reviewed on a regular basis for
          the existence of facts or circumstances  that may suggest  impairment.
          The  Company  recognizes  impairment  when  the  sum of  the  expected
          undiscounted future cash flows is less than the carrying amount of the
          asset.  Impairment  losses,  if any, are measured as the excess of the
          carrying amount of the asset over its estimated fair value.

                                       34
<PAGE>

     (m)  Income Taxes
          The Company  utilizes the liability  method of  accounting  for income
          taxes as set forth in SFAS No.  109,  "Accounting  for Income  Taxes".
          Under the liability method, deferred taxes are determined based on the
          temporary differences between the financial statement and tax bases of
          assets and liabilities using enacted tax rates. A valuation  allowance
          is recorded  when it is more likely than not that some of the deferred
          tax assets will not be realized.

     (n)  Recent Accounting Pronouncements
          In  December  2002,  the FASB issued  SFAS No.  148,  "Accounting  for
          Stock-Based  Compensation - Transition and  Disclosure",  which amends
          SFAS No.  123 to  provide  alternative  methods  of  transition  for a
          voluntary  change to the fair value  based  method of  accounting  for
          stock-based employee compensation.  In addition,  SFAS No. 148 expands
          the disclosure  requirements of SFAS No. 123 to require more prominent
          disclosures in both annual and interim financial  statements about the
          method of accounting for  stock-based  employee  compensation  and the
          effect  of  the  method  used  on  reported  results.  The  transition
          provisions  of SFAS No. 148 are effective for fiscal years ended after
          December  15,  2002.  The  disclosure  provisions  of SFAS No. 148 are
          effective for financial statements for interim periods beginning after
          December  15,  2002.  The  Company  does not expect  adoption  of this
          standard  to  have a  material  effect  on the  Company's  results  of
          operations or financial position.

          In October 2002, the FASB issued SFAS No. 147 "Acquisitions of Certain
          Financial Institutions--an amendment of FASB Statements No. 72 and 144
          and FASB "Interpretation No. 9", but it does not have any relationship
          to the  operations of the Company and therefore a description  of such
          and its  respective  impact on the Company's  operations  has not been
          disclosed.

          In June 2002,  the FASB  issued SFAS No.  146,  "Accounting  for Costs
          Associated with Exit or Disposal  Activities".  The provisions of this
          Statement  are  effective  for exit or  disposal  activities  that are
          initiated after December 31, 2002, with early application  encouraged.
          This Statement addresses financial  accounting and reporting for costs
          associated  with exit or disposal  activities  and nullifies  Emerging
          Issues Task Force (EITF) Issue No. 94-3,  "Liability  Recognition  for
          Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an
          Activity (including Certain Costs Incurred in a Restructuring)".  This
          Statement requires that a liability for a cost associated with an exit
          or disposal activity be recognized when the liability is incurred. The
          Company  will  adopt SFAS No. 146 on January 1, 2003 and its impact is
          not expected to have a material  effect on its  financial  position or
          results of operations.

          In April  2002,  the FASB issued  SFAS No.  145,  "Rescission  of FASB
          Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and
          Technical Corrections". The Company elected the early adoption of SFAS
          145 in fiscal year 2001.  The provisions of SFAS 145 have been applied
          retroactively.   Under   Statement   4,  all  gains  and  losses  from
          extinguishment  of  debt  were  required  to  be  aggregated  and,  if
          material,  classified as an extraordinary  item, net of related income
          tax  effect.  SFAS No.  145  eliminates  Statement  4 and,  thus,  the
          exception  to applying  Opinion 30 to all gains and losses  related to
          extinguishments   of  debt.  As  a  result,   gains  and  losses  from
          extinguishment  of debt should be  classified as  extraordinary  items
          only if they meet the criteria in Opinion 30.  Accordingly,  as losses


                                       35
<PAGE>

          resulting  from the settlement of debt by issuance of common stock did
          not meet the criteria for  extraordinary  items under Opinion 30, they
          have been  presented as a component of  continuing  operations  on the
          statements of operations.

     (o)  Reclassifications
          Certain reclassifications have been made to the prior year's financial
          statements to conform to the current period's presentation.


3.   Property and Equipment
<table>
<caption>
                                                                                      December 31,     December 31,
                                                                                          2002             2001
                                                                       Accumulated    Net carrying     Net carrying
                                                           Cost       Amortization         value           value
                                                             $             $                $               $
     <S>                                                    <C>           <C>              <C>             <C>
     Computers and technology equipment                    82,363       65,296           17,067           25,251
     Furniture and equipment                               18,062       14,245            3,817            7,689
     ---------------------------------------------------------------------------------------------------------------

                                                          100,425       79,541           20,884           32,940
     ===============================================================================================================
</table>

4.   Patents
<table>
<caption>
                                                                                     December 31,    December 31,
                                                                                         2002            2001
                                                                                     Net carrying    Net carrying
                                                                                         value           value
                                                                                           $               $

     Cost                                                                               16,269          16,269
     Accumulated amortization                                                           14,307          11,823
     --------------------------------------------------------------------------------------------------------------
     <S>                                                                                 <C>             <C>
     Net carrying value                                                                  1,962           4,446
     ==============================================================================================================
</table>


5.   Related Party Transactions/Balances

     (a)  Due to director
          The amount due to a director  represents  a loan  provided  as well as
          expenses  paid on behalf of the  Company  by a  director.  The loan is
          non-interest   bearing,   unsecured  and  has  no  specific  terms  of
          repayment.

     (b)  Transactions with director and officer
          Management and consulting services performed by a director and officer
          of the  Company  charged  to  operations  was $nil  for  2002  (2001 -
          $150,000).

                                       36
<PAGE>

     (c)  Due to stockholder
          The amount due to stockholder  represents loans and services  provided
          to the Company. The loans are non-interest bearing, unsecured and have
          no  specific  terms of  repayment.  Included in this amount is $63,252
          owed  to an  employee  of this  minority  stockholder  for  consulting
          services provided to the Company.

          The Company  entered into a Debt  Settlement  Agreement on October 25,
          2002 with this minority  stockholder  to settle the amount owing as of
          this date for $220,000.  The Company  agreed to repay $100,000 in cash
          or by  issuance  of  common  stock  upon the above  ABI  merger  being
          approved  by the  Company's  and  ABI's  shareholders,  and a  further
          $120,000  at the rate of $10,000  per month.  The  creditor  agreed to
          reduce  the  balance  of  $120,000  to  $75,000  by  acceptance  of an
          immediate cash payment of $15,000.

     (d)  Transactions with stockholders
          During the year ended December 31, 2002, the Company  incurred $76,107
          in office, rent and consulting fees to a minority stockholder.


6.   Short-Term Debt

     Short-term debt consists of non-interest bearing,  unsecured notes payable,
     with no specific terms of repayment.


7.   Common Stock

     (a)  Reverse  stock split On March 20,  2002,  pursuant to the terms of the
          ABI share exchange agreement, the Company completed a reverse split of
          its common stock on an 8 for 1 basis,  such that every eight shares of
          common stock issued and outstanding  immediately  prior to the reverse
          split was changed into and  constitute  one share of fully paid common
          stock  of the  Company.  Additionally,  all  outstanding  options  and
          warrants to acquire  Company  stock,  which have not been exercised or
          cancelled  prior to the closing of the share  exchange,  were adjusted
          and changed to account for the 8 to 1 reverse  stock split.  All share
          amounts have been retroactively adjusted for all periods presented.

     (b)  Non-cash consideration
          Shares issued for non-cash consideration were valued based on the fair
          market value of the services provided.

          On January 17, 2002,  the Company issued 43,750 shares of common stock
          to settle debt with a fair value of $35,000.

          On January 17, 2002,  the Company issued 96,375 shares of common stock
          to settle subscriptions. See Note (c).

          On March 8, 2002,  the Company  issued  311,250 shares of common stock
          for consulting services. These shares were issued at an aggregate fair
          value of $249,000 for services rendered for a term expiring June 2002.
          The Company  charged to  operations  compensation  expense of $249,000
          since all services had been performed as of year end.

     (c)  Subscriptions received
          On October 31, 2001, the Company  received $18,800 for the purchase of
          23,500 units of the Company.  Each unit  consisted of one common share
          of the  Company  and one  common  share  purchase  warrant.  Each full


                                       37
<PAGE>

          warrant  entitled  the holder to purchase one share of common stock of
          the Company at $0.80  expiring on October 31, 2002,  which  expired in
          full without exercise. These units were issued on January 17, 2002.

          On September 6, 2001, the Company received $58,300 for the purchase of
          72,875 units of the Company.  Each unit  consisted of one common share
          of the  Company  and one  common  share  purchase  warrant.  Each full
          warrant  entitled  the holder to purchase one share of common stock of
          the Company at $1.60  expiring on September 6, 2002,  which expired in
          full without exercise. These units were issued on January 17, 2002.

          On October  25,  2002,  November  7, 2002 and  December  6, 2002,  the
          Company received subscription  agreements from ABI for the acquisition
          of 4,000,000  Series A Convertible  Preferred Stock for total proceeds
          of $40,000.

     (d)  Stockholders' Rights Plan
          Pursuant to the  Agreement  and Plan of merger signed and completed on
          May 3,  1999,  each  stockholder  of  RFID  who  sent in  their  stock
          certificates for transfer into certificates  representing stock of the
          Company  prior to May 31, 1999 will receive a right to  purchase,  for
          every ten  pre-consolidation  stocks owned and tendered, an additional
          pre-consolidation  share of common stock at 75% of the market price of
          the  Company  stock as of the date of  exercise.  The  rights  will be
          exercisable for thirty days after filing of the registration statement
          with the Securities Exchange Commission. No registration statement has
          been filed as of December 31, 2002. Rights outstanding at December 31,
          2002 are 150,644.

     (e)  Stock options
          The Company  reserved 400,000 common shares pursuant to the 1999 stock
          option plan. An additional  678,125  common shares were  authorized in
          2001.  The  Company's  Board of Directors  has  discretion  to set the
          price,  term,  vesting  schedules,  and other terms and conditions for
          options  granted under the plan,  subject to the  requirements  of any
          stock exchange on which the Company's  shares are listed.  The options
          granted to date generally vest immediately and expire three years from
          the date of grant.

          On August 22, 2001, the Company re-priced 390,625 vested stock options
          originally  issued  on  February  24,  1999  from  $3.60 to  $0.80.  A
          compensatory  amount of  $63,587  was  recognized  that  reflects  the
          increase in the fair value of the  options,  all of which were granted
          to  non-employees,  due to the  re-pricing.  On November 7, 2001,  the
          Company again  re-priced  these stock options from $0.80 to $3.60.  No
          additional compensation resulted from this re-pricing.

                                       38
<PAGE>

          A summary of the Company's stock option activity is as follows:

                                                                   Weighted
                                                                   average
                                                    Number of   exercise price
                                                      shares         $

            Balance, December 31, 2000                390,625         3.60
            Options granted                           687,500         0.80
            Options exercised                               -            -
            Options cancelled/expired                       -            -
         -----------------------------------------------------------------

            Balance, December 31, 2001              1,078,125         1.81
            Options granted                                 -            -
            Options exercised                               -            -
            Options cancelled/expired                (390,625)        3.60
         -----------------------------------------------------------------

            Balance, December 31, 2002                687,500         0.80
         -----------------------------------------------------------------

            Exercisable at end of year                687,500         0.80
         =================================================================




<PAGE>



7.       Common Stock (continued)

     Additional information regarding options outstanding as at December 31,
2002 is as follows:

<table>
<caption>
                                          Outstanding                                   Exercisable
                      ------------------------------------------------     -----------------------------
Exercise prices                            Weighted
                                           average         Weighted                              Weighted
                                          remaining         average                               average
                          Number of      contractual     exercise price          Number of      exercise price
       $                   shares         life (years)          $                  shares            $
      <S>                    <C>              <C>              <C>                  <C>             <C>
      0.80                 296,875           1.64             0.80                296,875           0.80
      0.80                 390,625           1.85             0.80                390,625           0.80
                       ----------------------------------------------------------------------------------
                           687,500           1.75             0.80                687,500           0.80
                       ==================================================================================
</table>

     No options were granted to employees in 2000,  2001 or 2002,  therefore the
     Company did not have any related compensation expense during these periods.
     As a result,  the Company had no  difference in net loss and loss per share
     as reported  and pro forma  amounts as required by SFAS 123. The fair value
     for options granted in prior years was estimated at the date of grant using
     the Black-Scholes option-pricing model.

                                       39
<PAGE>

8.   Preferred Stock

     The Board of Directors of the Company  authorized  the  classification  and
     issuance of 5,000,000 shares of the Company's  Preferred Stock as "Series A
     Convertible Preferred Stock",  representing all of the authorized shares of
     the Company's Preferred Stock. The Series A Convertible Preferred Stock are
     voting,  redeemable at the Company's option,  8% non-cumulative  and have a
     $0.001  par  value.  Each  ten  Series  A  Convertible  Preferred  Stock is
     convertible into one common stock at the option of the holder. The purchase
     price of the preferred stock is $0.01 per share.

     On October 25,  2002,  November 7, 2002 and  December 6, 2002,  the Company
     received subscription  agreements from ABI for the acquisition of 4,000,000
     Series A Convertible Preferred Stock for total proceeds of $40,000.

9.   Litigation

     The Company has determined  that it is not possible at this time to predict
     the final outcome of the following legal contingencies.

     (a)  Former director claim
          On June 29, 1999, a former director of the Company commenced an action
          against the Company  claiming,  inter alia, for a declaration  that he
          was entitled to 12,500  warrants of the Company  exercisable  at $3.00
          per share and a further  declaration  that he was  entitled  to 75,000
          warrants  exercisable  at  $2.00  per  share  which  were  issued  and
          subsequently cancelled.  The claim also included damages for breach of
          contract and interest with costs.  The Company filed a defense denying
          any claims of the former director in and to the warrants  alleged.  To
          date,  no  further  activity  has been  commenced  and the  outcome is
          unknown.

     (b)  Chemoco NV ("Chemoco")
          During 1997, the Company  contracted with Chemoco to provide  services
          to  the  Company.  As  advance  consideration  of the  services  to be
          provided by Chemoco,  individuals  related to the Company  transferred
          19,445  common  stock of the Company to Chemoco.  It is the  Company's
          belief that Chemoco did not fulfill its  obligations  for the services
          to be provided  and as a result,  the  transfer  of common  stock from
          individuals  related  to the  Company  to Chemoco  was  cancelled.  On
          September 15, 1999,  Chemoco  commenced an action  against the Company
          and a former  officer of the  Company  claiming  for the  delivery  of
          87,500 shares of the Company,  or in the alternative,  damages for the
          Company not  delivering  the said shares to the  Plaintiff.  Since the
          commencement  of the action and the filing of the Statement of Defense
          in November 1999, the solicitors for the Plaintiff have filed a Notice
          of Intention to withdraw as solicitors in this matter.  The outcome of
          this claim is unknown.  It is management's  belief that any claim that
          may arise from this situation is without merit.

10.  Reorganization Transactions

     On October 25, 2002 the Company entered into an Agreement And Plan Of Share
     Exchange with Advanced  Biometrics,  Inc. ("ABI"), in which all outstanding
     common  stock of ABI will be  exchanged  for 95% of the  total  outstanding
     shares  and share  equivalents  of the  common  stock of the  Company.  The
     Closing  Date was extended to May 30, 2003.  Upon  closing,  the former ABI
     shareholders  will control the  combined  entity.  Additional  terms of the
     agreement  required ABI to advance $25,000 in interim  financing by October
     28,  2002,  ABI to raise an  additional  $500,000  at closing or as soon as


                                       40
<PAGE>

     reasonable possible thereafter, the Company to issue 1,000,000 common stock
     at a price of $0.10 per share to settle  debts in the  amount of  $100,000,
     and obtain director and shareholder approvals.

     On March 1, 2000, the Company acquired, through a reorganization agreement,
     Girne Acquisition Corporation ("Girne").  Girne was a corporation organized
     and existing under the laws of the State of Delaware.  At that date,  Girne
     was an  inactive  shell  company.  Under the terms  and  conditions  of the
     reorganization agreement, each issued and outstanding share of common stock
     of Girne was  exchanged pro rata for an aggregate of 1,000 shares of voting
     common stock of the Company at $0.001 par value per share. As a result, the
     Company issued 300,000 shares of common stock for the acquisition of Girne.
     Immediately after the transaction,  the former  shareholders of the Company
     controlled the combined entity. For accounting  purposes,  this transaction
     has been  accounted  for as an issuance of common shares by the Company for
     the net  monetary  assets of Girne,  which were  nominal.  Pursuant  to the
     reorganization agreement, the Company was the surviving corporation and was
     continued under its present name as a corporation in the State of Nevada.

     On May 3, 1999,  the Company  merged with RFID Systems Corp.  ("RFID").  At
     that  date,  the  Company  was  an  inactive  shell  company.  RFID  was  a
     developmental stage enterprise and was developing automatic  identification
     and  data  collection  systems  utilizing  radio  frequency  identification
     technology. The Company is continuing in this line of business. The Company
     had  1,000  shares  of  common  stock  outstanding.  Under  the  terms  and
     conditions of the Agreement,  each issued and  outstanding  share of common
     stock of RFID was converted  into one share of common stock of the Company.
     Immediately  after  the  transaction,   the  former  shareholders  of  RFID
     controlled the combined entity.  This transaction has been accounted for as
     a recapitalization of RFID, effectively as if RFID had issued common shares
     to acquire the net monetary assets of the Company.  Under  recapitalization
     accounting,  these financial  statements  reflect the assets,  liabilities,
     revenues and expenses of RFID from its  inception on May 14, 1992  combined
     with those of the Company from the date the merger was completed.


11.  Commitments

     On  October 4, 2001,  the  Company  entered  into an  exclusive,  worldwide
     license  agreement  with  Alternative  Technologies  ("AT").  The agreement
     allows  the  Company  to make,  use and  sell  products  based  on  certain
     technology  and  intellectual  property  rights held by AT in exchange  for
     royalties of up to three  percent on revenues  derived  from future  sales.
     Additionally,  the  agreement  requires  the Company to  compensate  AT for
     consulting  services at a fixed rate of 2,812.5 free trading  shares of the
     Company's common stock per quarter,  regardless of the number of consulting
     hours  provided.  AT is required to provide up to eight hours of consulting
     services  per month.  The  compensation  must also have a minimum  value of
     $6,750 per  quarter.  In the event the  Company's  share  price falls below
     $2.40 per share,  the number of shares shall be increased to compensate for
     the reduced value. This compensation provision shall terminate at such time
     as the licensed products become commercially viable, defined as the time at
     which the royalties exceed $6,000 per month.

     The initial term of the license  agreement is for five years and,  provided
     that certain conditions are met, can be renewed for additional, consecutive
     five-year  terms.  As at December 31,  2002,  there are no amounts owed for
     royalties  under the terms of this  agreement.  However,  $10,000  has been
     accrued at  December  31, 2002 for fees owed to AT in  connection  with the
     execution of this license agreement.  For the year ended December 31, 2002,
     no fees were  paid to AT and no common  stock  was  issued  for  consulting
     services provided.

                                       41
<PAGE>


12.  Income Taxes

     The  tax  effect  of the  significant  temporary  differences  which  would
     comprise tax assets and liabilities at December 31, 2002 are as follows:

===============================================================================
     Deferred tax assets:
         Amortization of Patents                                     $  116,000
         Operating loss carryforward                                    167,000
-------------------------------------------------------------------------------

     Total deferred tax assets                                          283,000

     Valuation allowance                                               (281,000)
-------------------------------------------------------------------------------

     Net deferred tax assets                                              2,000

     Deferred tax liability:
         Depreciation of Property and Equipment                          (2,000)
-------------------------------------------------------------------------------

     Net deferred tax liability                                      $        -
-------------------------------------------------------------------------------


     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realized.  The ultimate  realization of deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible.  Management
     considers the  scheduled  reversal of deferred tax  liabilities,  projected
     future  taxable  income,  and  tax  planning   strategies  in  making  this
     assessment.  The amount of the  deferred  tax asset  considered  realizable
     could change  materially  in the near term based on future  taxable  income
     during the carryforward period.

     The  Company  has  approximately  $9,900,000  of net  operating  loss carry
     forwards  available for US income tax purposes to reduce  taxable income of
     future  years.  These net  operating  loss carry  forwards  expire in years
     ranging  from 2011 to 2021.  In  addition,  the Company  has  approximately
     $3,300,000 of non-capital losses available for Canadian income tax purposes
     to reduce taxable income of future years.


13.  Subsequent Events

     a)   On January 27, 2003,  the Company  received a  subscription  agreement
          from  ABI  for the  acquisition  of  1,000,000  Series  A  Convertible
          Preferred Stock for total proceeds of $10,000.

     b)   On  January  27,  2003,  the  Company  completed  a private  placement
          offering with ABI  consisting of 125,000 units at a price of $0.04 per
          unit to net the Company proceeds of $5,000.  Each unit consists of one
          share of common  stock and one common  stock share  purchase  warrant.
          Each warrant  entitles the holder to acquire one  additional  share of
          common  stock  exercisable  at a price of $0.06 per share on or before
          January 27, 2005.

                                       42
<PAGE>

     c)   On April 3, 2003,  the  director of the  Company  waived all rights to
          debts owed by the  Company in the amount of  $147,849.  This amount is
          included in the balance  owing by the Company as of December  31, 2002
          since  conditions  relating to the  forgiveness of debt occurred after
          year-end.

     d)   On April 3,  2003 the  Company  and  Alternative  Technologies  ("AT")
          agreed to a cancellation of the exclusive, worldwide License Agreement
          dated  October 4,  2001.  An amount of  $10,000  which was  accrued at
          December 31, 2002 for fees owing to AT was forgiven.

     e)   On June 6,  2003,  an  amount  owing of  $106,495  to a vendor  of the
          Company for professional fees was settled for $50,000. The full amount
          owing is included in  accounts  payable as of December  31, 2002 since
          conditions relating to the final settlement occurred after year-end.


                                       43
<PAGE>

ELECTRONIC IDENTIFICATION, INC.
 (A Development Stage Enterprise)

Schedules of General and Administrative, Sales and Marketing,
and Research and Development Expenses
(Expressed in US dollars)
(unaudited)

<table>
<caption>
                                                                                                Accumulated from
                                                                                                   May 14, 1992
                                                                                                Date of Inception)
                                                            Year Ended December 31,              ( to December 31,
                                                     -------------------------------------
                                                        2002         2001         2000                 2002
                                                           $          $            $                    $
<S>                                                      <C>         <C>          <C>                   <C>
General and Administrative

  Administrative fees                                          -       1,275       16,631                    64,358
  Bad debts                                                    -           -            -                    75,778
  Bank charges and interest                                  197         364          198                    46,047
  Licenses and dues                                            -      12,123            -                    12,123
  Consulting and contract services                       158,031     994,286      498,235                 2,770,111
  Legal and professional                                 126,980      84,816      184,860                 1,161,754
  Office                                                   4,275      12,180       13,675                   165,260
  Rent                                                     4,769       9,690       10,099                   148,039
  Salaries and benefits                                      263           -            -                   766,721
  Stock administration                                    14,626       6,974        5,317                    53,854
  Telephone                                                2,612       2,173        3,207                    59,367
  Travel and accommodation                                    35       6,712       15,610                   302,690
  Foreign exchange (gain) loss                             4,823      18,284        5,507                   114,885
--------------------------------------------------------------------------------------------------------------------
                                                         316,612   1,148,877      753,339                 5,740,987
====================================================================================================================
Sales and Marketing

  Advertising                                                  -           -            -                    16,749
  Consulting and contract services                       144,393     641,778      637,375                 2,402,969
  Entertainment and promotion                                333       4,868       14,522                   159,910
  Investor relations                                           -       3,318        3,367                   388,396
  Office                                                     104       5,983          281                    84,350
  Rent                                                         -           -            -                   137,318
  Salaries and benefits                                        -           -            -                   291,342
  Telephone and internet                                       -       2,172        3,207                    24,680
  Travel and accommodation                                     -      13,415       26,716                   378,034
--------------------------------------------------------------------------------------------------------------------
                                                         144,830     671,534      685,468                 3,883,748
====================================================================================================================

Research and Development

  Acquired in-process research and development                 -           -            -                   340,108
  Consulting and contract services                             -      27,008        2,291                   224,817
  Office                                                       -           -          231                   101,373
  Salaries and benefits                                        -           -            -                   727,739
  Supplies                                                     -           -          798                   183,615
  Travel and accommodation                                     -           -          594                    50,838
--------------------------------------------------------------------------------------------------------------------
                                                               -      27,008        3,914                 1,628,490
====================================================================================================================
</table>


                                       44
<PAGE>

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

On May 23, 2003,  Electronic  Identification,  Inc. (the Company)  dismissed its
independent  accountants,  KPMG LLP, Chartered Accountants ("KPMG"),  and on the
same date  engaged  the  services  of  Manning  Elliott,  Chartered  Accountants
("Manning  Elliott")  as its new  independent  accountants  for the year  ending
December 31, 2002. The Company's Board of Directors recommended and approved the
dismissal of KPMG and the appointment of Manning Elliott.

During the years ended December 31, 2001 and 2000,  there were no  disagreements
between  the  Company  and  KPMG  on any  matter  of  accounting  principles  or
practices,  financial  statement  disclosure,  or auditing  scope or  procedure.
During the year ended December 31, 2002, there were no disagreements between the
Company and Manning Elliott on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.

The members of the Board of Directors of the Company serve until the next annual
meeting of the  stockholders,  or until their successors have been elected.  The
officers are  appointed  by the Board of  Directors  and hold office until their
earlier death, retirement, resignation or removal.

There are no agreements  for any officer or director to resign at the request of
any other person,  and none of the officers or directors  named below are acting
on behalf of, or at the direction of, any other person.

Name            Age  Position                                    Director Since

Terry A. Kirby  54   President, Secretary, Treasurer and Director April 20, 1999

Information as to our officer/director and key employees is as follows:

Terry A. Kirby

Mr.  Kirby  has been  Chairman,  CEO and  Director  of the  Company,  since  its
inception  and was a director of the  predecessor  company,  RFID Systems  Corp.
since 1996.  Mr.  Kirby also serves as the sole  officer and  director of Global
Industrial Services, Inc, a publicly traded reporting company, and has held that
position  since  December  1999.  Mr.  Kirby  served as  President  of Crescendo
Corporate  Development,  Inc.,  a company  involved  in  corporate  development,
promotion  and investor  relations.  From 1996 to 1997,  he was  Vice-President,
Corporate  Development  of Alpine  Exploration  Corporation,  currently  African
Minerals  on the CDNX,  a company  involved in precious  metals  exploration  in
Western  Africa.  From 1994 to 1996,  Mr. Kirby was  responsible  for  Corporate
Development for Kensington  Resources Ltd., a public company involved in a joint
venture diamond  exploration  program in Saskatchewan  with Monopros,  a DeBeers
company.  From  1993 to 1994,  he was  Vice-President,  International  Sales and
Marketing  of Hot  In-Place  Asphalt  Recycling  Inc, an  international  company
providing  rehabilitation  methods to various government agencies, and from 1989
to 1992 he was a  principal  of R.W.  Blacktop  Ltd.,  a company  that  provides
environmentally  and economically sound asphalt highway  resurfacing  solutions.
From 1986 to 1989,  Mr. Kirby was Managing  Partner of First  Marketing  Inc., a
company that developed  Kingman Island, an interactive theme park in Washington,
D.C. and Harbour Front, a redevelopment  project on Toronto's  waterfront.  From
1983 to 1986, he was  Director,  Corporate  Sponsorships  of EXPO '86, the World
Exposition in Vancouver, BC Canada.

                                       45
<PAGE>

Conflicts of Interest Related to Other Business Activities

Terry Kirby, our sole officer and director has existing responsibilities and, in
the future,  may have  additional  responsibilities,  to provide  management and
services to other entities in addition to the Company. As a result, conflicts of
interest between the Company and the other activities of those persons may occur
from time to time.

We will  attempt to resolve any such  conflicts  of  interest in our favor.  Mr.
Kirby devotes approximately 70% of his time to our business.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"),  requires that the Company's officers and directors,  and persons who own
more  than ten  percent  (10%) of a  registered  class of the  Company's  equity
securities,  file  reports of ownership  and changes of ownership  with the SEC.
Officers, directors and greater than ten percent (10%) shareholders are required
by SEC  regulation  to furnish the Company  with copies of all such reports they
file.

Based  solely  on its  review  of the  copies of such  reports  received  by the
Company, and on written  representations by the Company's officers and directors
regarding their  compliance  with the applicable  reporting  requirements  under
Section 16(a) of the Exchange Act, the Company  believes  that,  with respect to
its fiscal year ended December 31, 2001, the Company's sole officer and director
and all of the persons  known to the Company to own more than ten percent  (10%)
of the Company's Common Stock, either failed to file, on a timely basis, or have
yet to file the required beneficial ownership reports with the SEC.


ITEM 10. EXECUTIVE COMPENSATION

Any compensation received by our officers,  directors,  and management personnel
will be determined from time to time by our Board of Directors.  Currently,  our
officers,   directors,   and   management   personnel  are  reimbursed  for  any
out-of-pocket expenses incurred on our behalf.

Summary Compensation Table

The table set forth below  summarizes the annual and long-term  compensation for
services  in all  capacities  to us  payable  to our  President.  None of  other
significant  employees  total annual salary and bonus are  anticipated to exceed
$50,000  during the year ending  December 31, 2003.  Our Board of Directors  has
adopted a  non-qualified  stock  option plan for our  officers,  key  employees,
directors,  agents,  advisors and  consultants  which could result in additional
compensation.

                                       46
<PAGE>

<table>
<caption>
                                                     Annual compensation                  Long term compensation
                                         -------------------------------------------------------------------------------
                                                                                         Awards                Payouts
                                                                              ------------------------------- ----------
                                                                               Securities
                                                                   Other       Restricted       underlying
                                                                  Annual          Stock          options/        LTIP         other
                                           Salary     Bonus        Comp.          Awards           SARs         Payouts       Comp-
Name and Position                Year       ($)        ($)          ($)            ($)              (#)           ($)          ($)
----------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>        <C>        <C>          <C>            <C>              <C>           <C>          <C>
Terry Kirby,                     2000        0          0            0              0                0             0            0
President, Secretary,            2001     150,000       0            0              0             300,000          0            0
Treasurer                        2002        0          0            0              0                0             0            0
----------------------------------------------------------------------------------------------------------------------------------
</table>


Compensation of Directors

Our director, Terry Kirby, receives no extra compensation for his service on our
board of directors.

Employment Contracts

We have no employment contracts with any of our employees.

Stock Option Plan

Under the Stock Option Plan  maintained  by the  Company,  the Company can grant
non-qualified  stock  options to officers,  key  employees,  directors,  agents,
advisors or consultants of the Company.

<table>
<caption>
------------------------------------------------------------------------------------------------------------------------------------
                                                      Percent of total
                                Number of               options/SARs
                             securities                 granted to                Exercise or
                       underlying options/SARS         employees in                base price
 Name                          granted (#)                fiscal year                  ($/Sh)             Expiration Date
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                        <C>                         <C>                     <C>
 Terry Kirby                   66,875                     22.29%                      $0.80                 August 22, 2004
------------------------------------------------------------------------------------------------------------------------------------
 Terry Kirby                   233,125                    77.71%                      $0.80                November 7, 2004
------------------------------------------------------------------------------------------------------------------------------------
</table>

On August 22, 2001,  the Company  granted Mr. Kirby  options to purchase  66,875
shares of the  Company's  common  stock and on  November  7, 2001,  the  Company
granted  Mr.  Kirby  options to  purchase an  additional  233,125  shares of the
Company's  common stock.  The options are  exercisable at $0.80 per share,  vest
immediately and expire when Mr. Kirby ceases to maintain a business relationship
with the Company or subsidiary.

                                       47
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth certain  information  known to the Company with
respect to the beneficial  ownership of its Common Stock as of June 30, 2003, by
(i) each person known by the Company to be the beneficial  owner of more than 5%
of the outstanding  Common Stock, (ii) each director of the Company,  (iii) each
named executive officer,  and (iv) all directors and officers as a group. Except
as otherwise  indicated,  the Company believes that the beneficial owners of the
Common Stock listed below, based on information  furnished by such owners,  have
sole  investment  and voting  power  with  respect  to such  shares,  subject to
community property laws where applicable.

  Name and Address
  of Beneficial Owner (1)    Amount of Ownership (2)       Percent of Class (3)
  -----------------------    -----------------------       --------------------
  Terry Kirby                     301,389 (4)                      8.5%

  Officers and directors
  as a Group (1 person)           301,389                          8.5%

(1)  Unless otherwise indicated, the address of each beneficial owner is that of
     the Company.

(2)  Beneficial ownership is determined in accordance with the rules of the SEC,
     based on factors  including  voting and  investment  power with  respect to
     shares.  Common  stock  subject  to  options  currently   exercisable,   or
     exercisable  within 60 days after June 30, 2003, are deemed outstanding for
     computing the percentage  ownership of the person holding such options, but
     are not deemed  outstanding for computing the percentage  ownership for any
     other person.

(3)  Based on an aggregate of 3,542,283  shares of Company's Common Stock issued
     and outstanding as of June 30, 2003.

(4)  Includes 1,389 shares  directly owned by Mr. Kirby and 300,000 options that
     are currently exercisable.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the fiscal year ended  December 31, 2002, the Company was charged a total
of $76,107 for office, rent and consulting fees to a minority shareholder.

The Company entered into a Debt Settlement  Agreement on October 25, 2002 with a
minority  stockholder  to settle the amount owing as of this date for  $220,000.
The Company agreed to repay $100,000 in cash or by issuance of common stock upon
the ABI merger being  approved by the  Company's and ABI's  shareholders,  and a
further $120,000 at the rate of $10,000 per month. The creditor agreed to reduce
the balance of $120,000 to $75,000 by acceptance of an immediate cash payment of
$15,000.

                                       48
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

      Number   Description
      ------   ------------
      3.1*     Articles of  Incorporation  (incorporated by reference to Exhibit
               3.1 to the  registrant's  Amended  Form  10-QSB,  filed  with the
               Securities and Exchange Commission on June 20, 2000).

      3.2*     Certificate of Change in Number of Authorized Shares.

      3.3*     By-Laws   (incorporated  by  reference  to  Exhibit  3.2  to  the
               registrant's  Amended Form 10-QSB,  filed with the Securities and
               Exchange Commission on June 20, 2000).

      99.1 Section 906 Certifications under Sarbanes-Oxley Act of 2002

     *   Previously filed

     (b)  Reports on Form 8-K.

          No  reports  on Form 8-K were  filed  during  the last  quarter of the
          period covered by this report.

ITEM 14. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure  controls and  procedures.  The issuer's  principal
executive  officer and  principal  financial  officer  have  concluded  that the
effectiveness   of  the  issuer's   controls  and   procedures  (as  defined  in
ss.240.13a-14(c) and 240.15d-14(c)), as of June 30, 2003, are sufficient.

(b) There have been no changes in internal controls in the previous year.

                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                 (Registrant) ELECTRONIC IDENTIFICATION, INC.


                                     By: /s/  Terry A. Kirby
                                     -------------------------------------------
                                     Terry A. Kirby, President

                                      Date:  July 25, 2003


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

                                     By: /s/  Terry A. Kirby
                                     -------------------------------------------
                                     Terry A. Kirby, President,
                                     Secretary/Treasurer and Director

                                     Date:  July 25, 2003

                                       49
<PAGE>
EXHIBIT 99.1
                                  CERTIFICATION

I, Terry A. Kirby, certify that:


1.   I  have   reviewed   this  annual  report  on  Form  10-KSB  of  Electronic
     Identification, Inc.

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   I am responsible for establishing and maintaining  disclosure  controls and
     procedures  (as  defined in Exchange  Act Rules  13a-14 and 15d-14) for the
     registrant and have:

     a.   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to me by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b.   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c.   presented in this annual report my conclusions about the effectiveness
          of the disclosure controls and procedures based on my evaluation as of
          the Evaluation Date;

5.   I have disclosed,  based on my most recent evaluation,  to the registrant's
     auditors and the audit  committee of  registrant's  Board of Directors  (or
     persons performing the equivalent functions):

     a.   All  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified  for the  registrant's  auditors  any  material  weaknesses
          internal controls; and

     b.   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   I have  indicated  in this annual  report  whether  there were  significant
     changes in internal  controls or in other factors that could  significantly
     affect  internal  controls  subsequent  to  the  date  of  my  most  recent
     evaluation,  including any  corrective  actions with regard to  significant
     deficiencies and material weaknesses.



     Date:  July 25, 2003


        /s/   Terry Kirby
        -----------------------------------------
        Terry A. Kirby
        President, Chief Executive Officer
        and Treasurer
        (Principal Executive Officer and
        Principal Financial Officer)


                                       50
<PAGE>


                                  CERTIFICATION


                            CERTIFICATION PURSUANT TO

                             18 U.S.C. SECTION 1350

                             AS ADOPTED PURSUANT TO

                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In  connection  with the Annual  Report  Pursuant  to Section 13 or 15(d) of the
Securities  Exchange  Act of 1934 on Form 10-KSB of  Electronic  Identification,
Inc. .(the  "Company") for the period ended December 31, 2002, as filed with the
Securities and Exchange  Commission on the date hereof (the "Report"),  I, Terry
Kirby, President, Treasurer, Principal Executive Officer and Principal Financial
Officer of the  Company,  certify,  pursuant to 18 U.S.C.  Sec.1350,  as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) the Report fully complies with the  requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and

2) the  information  contained in the Report  fairly  presents,  in all material
respects, the financial condition and results of operations of the Company.



     Date:  July 25, 2003


        /s/   Terry Kirby
        -----------------------------------------
        Terry A. Kirby
        President and Chief Executive Officer
        (Principal Executive Officer and
        Principal Financial Officer)

                                       51
<PAGE>