SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1998
OR
[ ] 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. 33-55254-15
GRANDEUR, INC.
(Exact name of Small business issuer as specified in its charter)
NEVADA 87-0438451
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1801 McGill College, Suite 1330
Montreal, Quebec, Canada H3A 2N4
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (514) 282-9000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
As of September 15, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $8,803,993 based on a bid price of $1.625.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of May 31, 1998
- ------------------------------------ --------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 13,848,300 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Form 8-K filed March 10, 1998
1
<PAGE>
ITEMS 1 through 12
Management is still finalizing the remainder of Form 10-KSB. An
amendment will be filed as soon as possible and will include all items
not included in this filing. It is expected that ITEMS 1 through 12
will not differ substantially from Form 10-K for the year ended
December 31, 1997, but there are enough differences that management has
chosen not to include the items with this filing.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GRANDEUR, INC.
Date: September 15, 1998 By:
Pierre de Lanauze, President, Chairman
Of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: September 15, 1998 By:
Pierre de Lanauze, President, Chairman
Of the Board of Directors
Date: September 15, 1998 By:
J. Randall McCormick
Vice President, Director
Date: September 15, 1998 By:
Suzanne de Lanauze,
Secretary/Treasurer and Director
Date: September 15, 1998 By:
Marc Descheneaux
Executive Vice President, Director
Date: September 15, 1998 By:
Julie Gaucher, Director
3
<PAGE>
August 21, 1998
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Grandeur, Inc. and Subsidiary
(a development stage enterprise)
We have audited the consolidated balance sheets of Grandeur, Inc. and Subsidiary
(a development stage enterprise) as at May 31, 1998 and 1997 and the
consolidated statements of loss, deficit and cash flows for each of the years in
the three-year period ended May 31, 1998. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at May 31, 1998 and
1997 and the results of its operations and its cash flows for each of the years
in the three-year period ended May 31, 1998 in accordance with generally
accepted accounting principles in the United States of America.
PriceWaterhouseCoopers
Chartered Accountants
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
May 31
1997 1998
------------ ------------
Assets
Current assets
<S> <C> <C>
Cash $ 80,661 $ 3,197
Sales taxes receivable 71,731 132,653
Prepaid expenses 62,020 6,820
Advances to a common control company, 228,722 137,649
without interest (Note 3)
Shareholder loan, without interest 17,381 387,107
------------ ------------
460,515 667,426
Property and equipment (Note 4) 119,734 178,494
License (Note 5) - 1
------------ ------------
$ 580,249 $ 845,921
============ ============
Liabilities
Current liabilities
Trade accounts payable $ 43,585 $ 94,618
Accrued liabilities 17,747 98,200
Advances from a common control company, 101,912 146,207
without interest
Due to a shareholder - 1,413,300
Loan, bearing interest at a monthly rate of 0.5% to 1% 239,350 265,123
------------ ------------
402,594 2,017,448
Loan from a shareholder, without interest or 1,000,000 -
repayment terms (Note 7*)
Stockholders' Deficit
Common stock, $0.001 par value
Authorized
100,000,000 shares
Issued and outstanding (Note 6)
13,848,300 shares (1997 - 1,000,000) 1,424 19,715
Additional paid-up capital (Note 7) (1,324) 695,602
Deficit accumulated during the development stage (822,445) (1,886,844)
------------ ------------
(822,345) (1,171,527)
------------ ------------
$ 580,249 $ 845,921
============ ============
</TABLE>
Approved by the Board Director Director
1
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF LOSS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
From date of
inception to
Year ended May 31 May 31
1996 1997 1998 1998
--------------- --------------- --------------- -----------------
Revenue
<S> <C> <C> <C> <C>
Interest $ 5,000 $ - $ - $ 5,000
Management income 3,000 - - 3,000
--------------- --------------- --------------- -----------------
8,000 - - 8,000
Expenses
Depreciation - 21,129 68,817 89,946
Interest expense 5,044 - 20,132 25,176
Research and development - 135,348 99,978 235,326
General and administrative 3,182 665,742 832,206 1,501,130
expenses
--------------- --------------- --------------- -----------------
8,226 822,219 1,021,133 1,851,578
--------------- --------------- --------------- -----------------
Net loss $ (226) $ (822,219) $ (1,021,133) $ (1,843,578)
=============== =============== =============== =================
Net loss per weighted average share $ - $ (0.82) $ (0.24)
=============== =============== ===============
Weighted average number of
common shares used to compute
net loss per weighted average
share 1,000,000 1,000,000 4,212,075
=============== =============== ===============
</TABLE>
2
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF DEFICIT
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
From date of
inception to
Year ended May 31, May 31,
1996 1997 1998 1998
--------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Deficit accumulated during the $ - $ (226) $ (822,445) $ -
development stage, at beginning
of year
Net loss (226) (822,219) (1,021,133) (1,843,578)
Amount from additional paid-up - - (43,266) (43,266)
capital (Note 7)
--------------- --------------- --------------- -----------------
Deficit accumulated during the $ (226) $ (822,445) $ (1,886,844) $ (1,886,844)
development stage, at end of year
=============== =============== =============== =================
</TABLE>
3
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
From date of
inception to
Year ended May 31, May 31
1996 1997 1998 1998
--------------- --------------- --------------- -----------------
Operating activities
<S> <C> <C> <C> <C>
Net loss $ (226) $ (822,219) $ (1,021,133) $ (1,843,578)
Adjustments to reconcile loss to net
cash provided by operating
activities
Depreciation of property and - 21,129 68,817 89,946
equipment
Provision on common control - 290,402 - 290,402
company advances
Changes in
Sales taxes receivable - (71,731) (60,922) (132,653)
Prepaid expenses - (62,020) 55,200 (6,820)
Shareholder loan - (17,381) (369,726) (387,107)
Trade accounts payable - 43,585 51,033 94,618
Accrued liabilities 3,000 14,747 80,453 98,200
Advances from a common - 101,912 44,295 146,207
control company
--------------- --------------- --------------- -----------------
2,774 (501,576) (1,151,983) (1,650,785)
Financing activities
Loan - 239,350 124,000 413,350
Repayment of loan - (50,000) (98,227) (148,227)
Loan from a shareholder - 1,000,000 1,085,250 2,085,250
Share issues - - - 100
--------------- --------------- --------------- -----------------
- 1,189,350 1,111,023 2,350,473
Investing activities
Advances from a common control (3,503) (466,332) 91,073 (428,051)
company
Additions to property and equipment - (140,863) (127,577) (268,440)
--------------- --------------- --------------- -----------------
(3,503) (607,195) (36,504) (696,491)
--------------- --------------- --------------- -----------------
Increase (decrease) in cash during (729) 80,579 (77,464) 3,197
the year
Cash, beginning of year 811 82 80,661 -
--------------- --------------- --------------- -----------------
Cash, end of year $ 82 $ 80,661 $ 3,197 $ 3,197
=============== =============== =============== =================
Cash paid for interest $ 5,044 $ - $ 8,200 $ 13,244
=============== =============== =============== =================
Non-cash financing and investing
activities
Repayment of a loan to a $ - $ - $ (2,085,250) $ (2,085,250)
shareholder (Note 7)
=============== =============== =============== =================
Acquisition of license (Note 5) $ - $ - $ (1,413,299) $ (1,413,299)
=============== =============== =============== =================
</TABLE>
4
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three-year period ended May 31, 1998
(expressed in Canadian dollars)
1 Incorporation and nature of operations
Grandeur, Inc. a development stage enterprise, was incorporated under
the laws of the State of Utah on February 6, 1986 and subsequently
incorporated under the laws of the State of Nevada on December 31, 1993.
Through its subsidiary, 3127575 Canada Inc., operating under the name of
Delsecur, it is involved in the research, development and
commercialization of the "DEL ID" project.
Pursuant to an agreement made and entered into on February 25, 1998,
Grandeur, Inc. (the "company") issued and delivered on February 26, 1998
12,848,300 shares of its common stock bearing a restrictive legend to
3127575 Canada Inc., a Canadian corporation, in exchange for which
issuance it acquired all of the outstanding shares of 3127575 Canada
Inc.
For accounting purposes, the transaction is treated as an issuance of
shares by 3127575 Canada Inc. for the net monetary assets of the company
(nil at February 26, 1998), accompanied by a recapitalization.
The historical financial statements prior to February 28, 1998 are those
of 3127575 Canada Inc.
The company changed its fiscal year end to May 31 to coincide with the
fiscal year end of its Canadian operating subsidiary.
2 Significant accounting policies
The consolidated financial statements are expressed in Canadian dollars
and have been prepared in accordance with accounting principles
generally accepted in the United States of America.
Consolidation
The consolidated financial statements include the accounts of the
company and its subsidiary.
Change in reporting currency
As the majority of transactions occur in Canadian dollars further to the
acquisition mentioned in Note 1 above, commencing with the current
period, the consolidated financial statements have been expressed in
Canadian dollars. Previously, the United States dollar was used as the
unit of measure. This change has been applied retroactively.
Accounting methods
The company recognizes income and expenses based on the accrual method
of accounting.
Dividend policy
The company has not yet adopted any policy regarding payment of
dividends.
Cash and cash equivalents
For financial statement purposes, the company considers all highly
liquid investments with an original maturity of three months or less
when purchased to be cash equivalents.
Earnings (loss) per share
Earnings or loss per common and common equivalent share is computed by
dividing net earnings (loss) by the weighted average common shares
outstanding during each year.
5
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1998
(expressed in Canadian dollars)
2 Significant accounting policies ...continued
Property and equipment and depreciation
Property and equipment are recorded at cost. Depreciation is calculated
using the declining balance method at a rate of 30%.
The carrying value of the property and equipment is evaluated whenever
significant events or changes occur that might indicate an impairment
through comparison of the carrying value to the net recoverable amount.
Research and development costs
Research costs, which include all costs incurred to establish
technological feasibility, and development costs are charged to
operations in the year in which they are incurred.
License
License is recorded at its carrying value.
Income taxes
The company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes. Tax
credits are recorded in the year realized. Since the company has not yet
realized income as of the date of this report, no provision for income
taxes has been made.
In February 1992, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, which supersedes substantially all existing authoritative
literature for accounting for income taxes and requires deferred tax
balances to be adjusted to reflect the tax rates in effect when those
amounts are expected to become payable or refundable. The Statement was
applied in the company's financial statements for the fiscal year
commencing January 1, 1993.
Use of estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on
informed estimates and judgements of management with consideration given
to materiality. Actual results could differ from those estimates.
Fair value of financial instruments
Due to their short-term maturity, the carrying values of certain
financial instruments were assumed to approximate their fair values. The
financial instruments include: sales taxes receivable, advances to a
common control company and shareholder loan included in current assets,
trade accounts payable, accrued liabilities, advances from a common
control company, due to a shareholder and loan included in current
liabilities, and loan from a shareholder included in long-term
liabilities.
The fair value of these financial instruments is not significantly
different than their carrying amounts.
6
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1998
(expressed in Canadian dollars)
2 Significant accounting policies ...continued
Credit risk
The company's exposure to credit risk is as indicated by the carrying
amounts of the financial assets.
The company may be exposed to losses in the future if the debtors fail
to pay. Significant portions of the amounts receivable are from related
parties.
3 Advances to a common control company
<TABLE>
<CAPTION>
1997 1998
--------------- ---------------
<S> <C> <C>
Balance, beginning of year $ 52,792 $ 519,124
Advances during the year 466,332 -
Charges net of payments - (91,073)
--------------- ---------------
519,124 428,051
Provision on common control company advances (290,402) (290,402)
--------------- ---------------
Balance, end of year $ 228,722 $ 137,649
=============== ===============
</TABLE>
4 Property and equipment
<TABLE>
<CAPTION>
1997
Accumulated Net book
Cost depreciation value
-------------- --------------- ---------------
<S> <C> <C> <C>
Computer equipment $ 140,863 $ 21,129 $ 119,734
============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
1998
Accumulated Net book
Cost depreciation value
-------------- --------------- ---------------
<S> <C> <C> <C>
Computer equipment $ 268,440 $ 89,946 $ 178,494
============== =============== ===============
</TABLE>
7
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1998
(expressed in Canadian dollars)
5 License
On November 12, 1997, the principal shareholder of the company and owner
of an invention consisting of an apparatus and method, including related
software, for scanning and storing an optical representation of a
finger's capillary lines entered into an agreement with the company
whereby he granted to the company the exclusive right to commercialize
the invention which shall include, among other things, manufacturing and
marketing the invention under the terms and conditions contained therein
for the consideration of US$1,000,000 (CDN$1,413,300).
This transaction was measured at its carrying value of $1. The excess of
the consideration payable over the carrying value was recorded against
additional paid-up capital and deficit.
6 Common stock
<TABLE>
<CAPTION>
1996 1997 1998 From date of inception
to May 31, 1998
Number $ Number $ Number $ Number $
----------- ------- ----------- ------- ----------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year 1,000,000 $ 1,424 1,000,000 $ 1,424 1,000,000 $ 1,424 - $ -
Issuances of common stock
February 6, 1986 - - - - - - 1,000,000 1,424
February 26, 1998
(Note 1) - - - - 12,848,300 18,291 12,848,300 18,291
----------- ------- ----------- ------- ----------- ------- ----------- ---------
1,000,000 $ 1,424 1,000,000 $ 1,424 13,848,300 $19,715 13,848,300 $ 19,715
=========== ======= =========== ======= =========== ======= =========== =========
</TABLE>
7 Additional paid-up capital
<TABLE>
<CAPTION>
From date of
inception to
1996 1997 1998 May 31, 1998
-------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Balance, beginning of year $ (1,324) $ (1,324) $ (1,324) $ -
Issuance of capital at
inception - - - (1,324)
Add: Shareholder loan * - - 2,085,250 2,085,250
Deduct: License (Note 5) - - (1,413,299) (1,413,299)
-------------- -------------- -------------- ----------------
(1,324) (1,324) 670,627 670,627
Amount transferred to
deficit - - 43,266 43,266
Recapitalization on
February 26, 1998 (Note 1) - - (18,291) (18,291)
-------------- -------------- -------------- ----------------
Balance, end of year $ (1,324) $ (1,324) $ 695,602 $ 695,602
============== ============== ============== ================
</TABLE>
* From June 1997 to May 31, 1998, further advances were made by the
principal shareholder totalling $1,085,250. The principal shareholder
contributed the full amount of the loan outstanding of $2,085,250 to
capital.
Accordingly, the amount has been accounted for as additional paid-up
capital.
8
<PAGE>
GRANDEUR, INC. AND SUBSIDIARY
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1998
(expressed in Canadian dollars)
8 Income tax
The company has accumulated losses for income tax purposes totalling
approximately $1,585,000 for which the benefits have not been recognized
in the financial statements. These losses can be deducted from future
years' taxable income and expire as follows:
2004 $ 566,000
2005 $1,019,000
The company recognized a deferred tax asset of $602,000 on net operating
loss carryforwards. In addition, the company created a valuation
allowance equal to this deferred tax asset to bring down its value to
nil.
9 Related party transactions
During the period, the company made some transactions with two companies
owned by the same shareholder.
1996 1997 1998
------------ ----------- -----------
Expenses $ - $ 458,300 $ 151,786
============ =========== ===========
These transactions occurred in the normal course of the company's
activities and are measured at fair value, which represents the exchange
value.
10 Contingency
An application was filed by a shareholder of Delsynchro Inc., a common
control company, who has requested authorization from the Court to
institute proceedings on behalf of Delsynchro Inc. requesting the Court
to declare Delsynchro Inc. owner of the invention known as "DEL ID" and
the related rights.
Management believes that the resolution of the litigations in which
Delsynchro Inc. is involved would not have a material adverse effect on
the financial condition or results of operations of the company.
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Grandeur, Inc. and subsidiary May 31, 1998 financial
statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000894498
<NAME> Grandeur, Inc.
<CURRENCY> Canadian Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<EXCHANGE-RATE> .70241
<CASH> 3,197
<SECURITIES> 0
<RECEIVABLES> 657,409
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 667,426
<PP&E> 268,440
<DEPRECIATION> (89,946)
<TOTAL-ASSETS> 845,921
<CURRENT-LIABILITIES> 2,017,448
<BONDS> 0
0
0
<COMMON> 19,715
<OTHER-SE> (1,191,242)
<TOTAL-LIABILITY-AND-EQUITY> 845,921
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,021,133
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,132
<INCOME-PRETAX> (1,021,133)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,021,133)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,021,133)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
