SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
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 Registrant 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)
Registrant'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 registrant (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-K or any amendment to this
Form 10-K. [X]
As of March 31, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $25,057,619.
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 March 31, 1998
- ------------------------------------ --------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 13,848,300 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Form 8-K filed March 10, 1998
<PAGE>
PART I
ITEM 1. Business.
The Company was incorporated under the laws of Utah on February 6, 1986
and subsequently reorganized under the laws of Nevada on December 30, 1993. The
Company's reorganization plan was formulated for the purpose of changing the
state of domicile and provided that the Company form a new corporation in Nevada
which acquired all of the contractual obligations, shareholder rights and
identity of the Utah corporation, and then the Utah corporation was dissolved.
As of December 31, 1997 the Company was in the developmental stage, and
its operations to date had been limited to the sale of shares to Capital General
Corporation and the gifts of shares to the giftees. The Company was then in the
process of investigating potential business ventures which, in the opinion of
management, would provide a source of eventual profit to the Company.
Pursuant to an Agreement made and entered into on February 25th 1998
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. Through 3127575 Canada Inc., the company has
become the exclusive licensee of the del-ID technology for personal
identification by means of electronic scanning of finger characteristics.
3127575 Canada Inc., obtained these exclusive right by the Exclusive License
Agreement dated November 12, 1997 between it and Pierre de Lanauze, inventor of
the del-ID tecnology.
The transaction was exempt from the registration requirements of the
Securities Act of 1933 by virtue of Section 4(2) thereof. Also, because the
12,848,300 shares were issued solely to non-U.S. persons, the transaction
qualified for exemption under Rules 901 et seq. of Regulation S.
Following the above transaction the former shareholders of 3127575 Canada
Inc. owned 92.5% of the outstanding shares of the Company.
The del-ID technology permits precise and positive authentication of
the identity of any living individual and is applicable to a wide range of
financial transactions where authentication of the individual is necessary to
eliminate fraud and other improper use of services. The del-ID system collects
biological data from the finger image of the individual and transfers the image
to a unique electronic signature called the "del-gram". The del-gram is not a
digitized bitmap image of the finger, but a synthesized subset of biological
data sufficient to identify the individual.
Commercial applications of the del-ID technology are numerous and
include access to the information highway/internet, identification of employees
working from a home office and requiring access to certain databases or
information, health cards, social insurance cards, drivers' licenses, passport
control encryption and access to confidential files, control of payment by debit
or credit payment systems such as credit cards, smartcards, authentication of
oral telephone ordering, access
2
<PAGE>
control to sensitive areas, hotel room access, cellular and digital telephone
controls, automobile entry and protection, census and election control, door
locks, vault locks, residential alarm system controls, timesheet management,
student file management and many others.
Patent protection is currently pending for the del-ID system in the
United States and in other major countries.
The Company expects to encounter substantial competition in the
business in which it proposes to engage. It is likely that the competing
entities will have significantly greater experience, resources, facilities,
contacts and managerial expertise than the Company and will, consequently, be in
a better position than the Company to obtain access to and to engage in the
proposed business. The Company may not be in a position to compete with larger
and more experienced entities. Business opportunities in which the Company may
ultimately participate are likely to be very risky and extremely speculative.
There are currently 8 employees of the Company inclusive of officers of
the Company.
The Agreement dated February 25, 1998 and the Exclusive License
Agreement dated November 12, 1997 were attached as Exhibits A and B to the
Company's electronic filing of Form 8-K on March 10, 1998.
ITEM 2. Properties.
As of December 31, 1997 the Company owned no properties and utilized
space on a rent-free basis in the office of its principal shareholder, Capital
General Corporation.
Pursuant to an Agreement dated February 25, 1998 between the company
and 3127575 Canada Inc. the Company acquired, through its subsidiary, world
license rights to the del-ID technology described in Item 1 above. The del-ID
technology is owned by its inventor, the Company's controlling shareholder,
Pierre de Lanauze.
The Company, through 31275275 Canada Inc., owns various computer and
office equipment, furnishings etc., acquired at a cost not exceeding $500,000
USD. 3127575 Canada Inc. leases office space in downtown Montreal; it has no
manufacturing facilities and does not plan to manufacture its products directly.
ITEM 3. Legal Proceedings.
During the period prior to December 31, 1997 there have been numerous
legal proceedings against the Company and its former Directors and Officers.
These have been fully reported in previous reports filed with the Securities and
Exchange Commission. None of such legal proceedings are currently pending.
3
<PAGE>
See also item 10 regarding legal proceedings against former officers
and directors.
No legal proceedings have been incurred as a result of the Agreement
dated February 25th, 1998, as described in Item 1 above.
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to the Company's security holders for a vote
during the fiscal year ending December 31, 1997.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters.
As of December 31, 1997 there was no trading market for the Company's
$.001 par value common stock nor was there a trading market for the Company's
stock prior to that date.
As of March 31, 1998, there were 802 record holders of the Company's
common stock. The Company has not previously declared or paid any dividends on
its common stock and does not anticipate declaring any dividends in the
foreseeable future.
The Company's common stock commenced trading on the NASD Bulletin Board
on March 31, 1998 under the symbol GDER. The aggregate market value of the stock
held by been non-affiliates on that date was $25,057,619.
ITEM 6. Selected Financial Data.
GRANDEUR, INC.
SUMMARY OF OPERATIONS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets........... 0 0 0 0 0
Revenues............... 0 0 0 0 0
Operating Expenses.... 0 0 0 0 0
Net Earnings (Loss).. 0 0 0 0 0
Per Share Data
Earnings (Loss)...... 0 0 0 0 0
Average Common Shares
Outstanding..... 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
</TABLE>
As of March 31, 1998 there were 13,848,300 shares outstanding.
4
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
As of December 31, 1997, the Company had no operational history and had
not engaged in business of any kind. All risks inherent in new and inexperienced
enterprises were, and still are, inherent in the Company's business.
As of December 31, 1997, the Company had no liquidity and no available
capital resources.
As a consequence of the Agreement entered into on February 25, 1998,
the management and operations of the Company changed to give effect to the new
business of the Company as described in Item 1.
Management is of the opinion that the Company's del-ID technology,
while as yet untested in the marketplace, represents a viable business
opportunity in a number of different fields of government and business activity.
Given the well publicized worldwide requirement for ID authentication systems
and the paucity of suitable alternatives available, it is the intention of
management to proceed by way of co-ventures, joint ventures, sublicense
agreements and similar arrangements with major entities, including governments
at all levels, that can benefit from implementing the technology in their
existing operations. The Company has no present intention to manufacture del-ID
products; instead, products will be manufactured by licensed outside
suppliers/users.
This market development strategy will have the further benefit of
minimizing capital requirements and, in light of this fact, management believes
the financial condition of the Company to be sound and cash resources available
to be adequate for present purposes.
ITEM 8. Financial Statements and Supplementary Data.
See Item 14.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
ITEM 10. Directors and Executive Officers of the Registrant.
The following table shows the positions held by the Company's officers
and directors during the year ended December 31, 1997. Directors are appointed
annually and serve until the next annual meeting of the Company's stockholders,
and until their successors have been elected and have qualified. Officers are
appointed to their positions, and continue in such positions, at the discretion
of the directors.
5
<PAGE>
Name Age Position
Krista Nielson 34 President, Director
Sasha Belliston 24 Secretary/Treasurer, Director
(appointed April 22, 1997)
David R. Yeaman 50 Secretary/Treasurer, Director
(resigned April 22, 1997)
KRISTA NIELSON, has been Director of the Company since inception until
her resignation as an officer and Director of the Company on February 26, 1998.
In addition to her management position with the Company, she has been since 1986
an officer and director of Capital General Corporation, a Utah-based financial
consulting firm, and has been involved in the organization and promotion of
various shell companies. Ms. Nielson received a Business degree from Salt Lake
Community College in 1987. She serves as an officer and/or director in the
following private corporations: Yeaman Enterprises, Inc. and Universal
Associates, Inc., family holding companies, Yeaman Auto Sales, Inc., an
automobile dealership company, Four Star Ranch, Inc., a farmland development
company, Creative Financial Corporation and Visual Impact Corporation, financial
consulting companies, and National Stock Transfer, Inc., a stock transfer agency
company. Ms. Nielson devotes her time primarily to her role as Vice President of
Capital General and to the financial consulting activities in which Capital
General engages.
SASHA BELLISTON, was Director of the Company from April 22, 1997 until
her resignation as an officer and Director on February 26, 1998. In addition to
her management position with the Company, she has been Vice President of Capital
General since April, 1997. For the past five years, Ms. Belliston has devoted
her time primarily as a cosmetologist and homemaker. Ms. Belliston serves as an
officer and/or director in the following private corporations: Yeaman
Enterprises, Inc. and Universal Associates, Inc., family holding companies, Four
Star Ranch, Inc., a farmland development company, Argon Financial Corporation
and Public Financial Corporation, investment companies. Mr. Belliston dedicates
her time primarily to her role as President of Four Star Ranch and the farming
activities in which Four Star Ranch engages.
DAVID R. YEAMAN, was a Director and officer of the Company from its
inception until his resignation on April 22, 1997. In addition to his management
position with the Company, he had been President of Capital General Corporation
since its inception in 1971 until his resignation as an officer and director of
that company on April 22, 1997. Mr. Yeaman had been involved in numerous
development stage companies since he assisted in organizing Capital General.
Previous management of the Company have, in their various capacities at
Capital General over the past ten years, assisted in the organization of
approximately 75 corporations similar to the Company which are in varying stages
of development and approximately 50 of such corporations have completed a
merger/acquisition transaction.
On February 8, 1996, David R. Yeaman was charged in the United States
District Court for the Eastern District of Pennsylvania with conspiracy, wire
fraud and fraud in the offer, purchase and sale of securities, in violation of
18 U.S.C. Sections 2, 371 and 1343; 15 U.S.C. Sections 77q(a), 77x, 78j(b), and
78ff; and Rule 10b-5 promulgated by the Securities and Exchange Commission,
Title 17, Code of Federal Regulations, Section 240.10b-5 (1986).
6
<PAGE>
On February 22, 1996, Mr. Yeaman entered his not guilty plea to all
charges. The allegations against Mr. Yeaman are based on the government's claims
that he and five of the other defendants named in the proceeding violated the
aforesaid laws by inflating the apparent worth of certain reinsurance companies
by leasing them alleged worthless securities. Specifically, it is alleged that
Mr. Yeaman, with other defendants, engaged in practices which falsely increased
the quoted prices of the securities and misrepresented restricted securities as
free trading securities. Based on these allegations, the charges against Mr.
Yeaman include one count of conspiracy, seven counts of wire fraud, six counts
of securities fraud, and aiding and abetting with respect to each count. On
April 16, 1998, Mr. Yeaman was convicted of one count of conspiracy, five counts
of wire fraud, and three counts of securities fraud and sentenced to serve 14
months in a US correctional facility. He began his prison sentence at FPC
Nellis, Las Vegas, Nevada on March 3, 1998. Upon release from prison, Mr. Yeaman
will be on supervised release for a term of three years, under the terms of
which he is required as follows: (1) to not commit another federal, state or
local crime, (2) to refrain from engaging in the securities and insurance
industries, and (3) various other standard conditions of supervised release.
The U.S. Securities and Exchange Commission, Securities Act of 1933
Release No. 7008 and Securities Exchange Act of 1934 Release No. 32669 announced
that on July 23, 1993, it ordered David R. Yeaman and Capital General
Corporation to permanently cease and desist from committing or causing further
violations of Section 5(a) and (c) and 17(a) of the Securities Act of 1933 and
Sections 10(b) and 13(g) of the Securities Exchange Act of 1934 and Rules 10b-5,
12b-20 and 13d-1(c) thereunder. Krista Nielson was ordered to permanently cease
and desist from committing or causing further violations of Section 17(a) of the
Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5 and 12b-20
thereunder. In addition, the Commission ordered the revocation of the
registration of the common stock of Altara International, Inc., Arrow
Management, Inc., Atlas Equity, Inc., Dynamic Associates, Inc., Energy Systems,
Inc., Four Star Ranch, Inc., Panorama Industries, Inc., Partisan Corporation,
Quiescent Corporation, Saber, Inc., Upsilon, Inc., Vicuna, Inc., Why Not?, Inc.,
Xebec Galleon, Inc., Zebu, Inc., and Zeus Enterprises, Inc. pursuant to Section
12(j) of the Exchange Act. The Commission found that each of the issuers had
filed a registration statement on Form 10 that contained materially false and
misleading statements in violation of Section 10(b) of the Exchange Act and Rule
10b-5 thereunder.
Each of the respondents submitted an Offer of Settlement consenting to
the entry of the Order without admitting or denying the allegations in the
Order. Prior to the submission of the Offers of Settlement, Capital General, on
behalf of the above mentioned companies, except for Panorama Industries, Inc.,
filed a registration statement on Form S-1 during December of 1992 to register
the common stock of those companies under the Securities Act of 1933.
Concurrently with the signing of the Offers of Settlement, the Registration
Statement was declared effective on June 30, 1993. A Post- Effective Amendment
was filed and declared effective September 2, 1993. Although the registration of
the common stock under Section 12(g) of the 1934 Act was revoked on July 23,
1993, the companies are now registered and reporting under the Securities Act of
1933 by virtue of the filing of Form S-1 as indicated by Commission File No.
33-55254.
7
<PAGE>
On February 26, 1998, following the resignation of Ms. Nielson and Ms.
Belliston new Directors and Officers were appointed, who will serve until the
next annual meeting of the Company's stockholders. These new Directors and
Officers are as follows:
Name Age Position
Pierre de Lanauze 58 President, Chairman of the Board, Director
J. Randall McCormick 48 Acting Vice President- Finance, Director
Marc Descheneaux 46 Executive Vice President, Director
Suzanne de Lanauze 35 Secretary/Treasurer, Director
Julie Gaucher 36 Director
PIERRE DE LANAUZE is a graduate of the Cinq Mars School in Montreal,
Canada. He has been active in the audio-video business for the past 20 years. In
this field he has been involved in projects for Expo' 67 in Montreal, Walt
Disney Studios, the Canadian Broadcast Corporation and the Canadian Department
of National Defense. In 1986 he founded DelSynchro, Inc. to market motion
picture dubbing technologies he developed. Mr. de Lanauze has also developed
three other technologies which pertain to the dubbing and subtitling of motion
pictures, and video security. Mr. de Lanauze has been developing the del-ID
technology since January 1995. His responsibilities at the Company are to
further develop and implement the del-ID technology.
J. RANDALL McCORMICK, CLU., CHFC, FP, started his career in the
financial field in 1976 with Prudential Life Insurance Company as a chartered
life underwriter. Since 1990 he was been the owner and President of Tandem
Financial Services Inc., a Quebec mutual fund dealer which now manages over
approximately $300,000,000 for approximately 7,000 customers. Since 1993, Mr.
McCormick has been involved in venture capital funding through his wholly-owned
affiliated company, Tandem Capital Inc. As Acting Vice President- Finance, Mr.
McCormick will be overseeing the Company's financial management, financing, and
sales contracts.
MARC DESCHENEAUX, B.A.A., received his undergraduate Baccalaureat
degree in business Administration in 1977. After obtaining a graduate degree in
International Commerce from the Universite de Paris-Nord in 1979, Mr.
Descheneaux was employed as an investment analyst with what is now the Canadian
Development Bank. From 1979 to 1983 he was a Director of Industrial Credit with
Mouvement des Jardins, a Canadian financial institution. Subsequently, Mr.
Descheneaux has held management positions with two large Canadian wholesaling
companies, Metro Richelieu and Groupe Ro-Na. In 1997, after two years as a
business consultant, Mr. Descheneaux joined the management team of Mr. Pierre de
Lanauze at 3127575 Canada Inc. As Executive Vice President Mr. Descheneaux will
oversee general management and adiministration, daily operations and marketing
of the Company's technologies.
SUZANNE DE LANAUZE, graduated from Campus Pont-Viau, Laval in 1979. From
1992 to 1995 she was a secretary and paralegal at Colby Monet Demers Delage and
Crevier, a prominent Montreal law firm. In 1995 Ms. de Lanauze became an
administrative assistant to Pierre de Lanauze President of del Synchro Inc. In
1997 she became Director of Administration of 3127575 Canada Inc. Ms. de
Lanauze's responsibilities at the Company consist of overall office management
as well as legal secretarial functions. Ms. de Lanauze is the daughter of Pierre
de Lanauze.
8
<PAGE>
JULIE GAUCHER, B.A.A., M. Sc. Finance, has experience in commercial
lending, banking, corporate finance and corporate management in Canada. Since
1995 she has been working as executive assistant to the owner of franchise
rights in the Province of Quebec for Groupe Sutton, one of Canada's larger real
estate brokers.
ITEM 11. Executive Compensation.
During the year ended December 31, 1997 the Company had no arrangements
for the remuneration of its officers and directors, except that they were
entitled to receive reimbursement for actual, demonstrable out-of-pocket
expenses, including travel expenses if any, made on the Company's behalf in the
investigation of business opportunities.
The Company will pay compensation to the officers and
directors elected in 1998 at a rate yet to be determined by the board of
directors.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1997, information
regarding the beneficial ownership of shares by each person known by the Company
to own five percent or more of the outstanding shares, by each of the directors
and by the officers and directors as a group.
<TABLE>
<CAPTION>
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class
<S> <C> <C> <C>
Common Stock Capital General Corporation1,2 505,300 50.53%
3098 So. Highland Drive, Suite 460
Salt Lake City, Utah 84106
Common Stock Yeaman Enterprises, Inc.1,2 300,000 30.00%
3098 So. Highland Drive, Suite 460
Salt Lake City, Utah 84106
Common Stock Krista Nielson1,2 40,000 4.0%
3098 So. Highland Drive, Suite 460
Salt Lake City, Utah 84106
Common Stock All Officers and
Directors as a Group2 845,300 84.53%
</TABLE>
1Capital General Corporation, Yeaman Enterprises, Inc., Krista Nielson and
David R. Yeaman may be deemed to be the Company's "parents" and "promoters,"
pursuant to the Rules and Regulations promulgated under the 1933 Act.
9
<PAGE>
2Capital General Corporation is a private corporation. The majority of its
shares (80%) are owned by another private corporation, Yeaman Enterprises, Inc.
The stockholders of Yeaman Enterprises are members of the family of David R.
Yeaman, who was an officer and director of the Company and Capital General. Mr.
Yeaman's beneficial ownership of the securities of the Company includes shares
directly owned by Capital General and Yeaman Enterprises. Although Yeaman
Enterprises is nominally owned by Mr. Yeaman's children, Mr. Yeaman beneficially
owns shares nominally owned by Yeaman Enterprises in that he has the power to
vote or direct the voting of the shares and the power to dispose of or to direct
the disposition of the shares. Other owners of the stock of Capital General
include Krista Nielson, the Company's president. Mr. Yeaman and Ms. Nielson
control and have beneficial ownership of the shares owned by Capital General and
Yeaman Enterprises and exercise shared voting power and shared investment power
over those shares.
The following table sets forth, as of February 26, 1998, following the
acquisition of 3127575 Canada Inc., information regarding the beneficial
ownership of shares by each person known by the Company to own five percent or
more of the outstanding shares, by each of the directors and by the officers and
directors as a group.
<TABLE>
<CAPTION>
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class
DIRECTORS AND OFFICERS
<S> <C> <C> <C>
Common Stock Mr. Pierre De Lanauze 7,338,600 52.9%
1231, avenue Theroret
Ile Bizard, Quebec,. Canada
H9E 1H7
(DIRECTOR AND OFFICER)
Common Stock Mr. J. Randall McCormick 1,091,858 7.8%
407 Olympic
Box 1269
Hudson, Quebec, Canada
J0P 1H0
(DIRECTOR AND OFFICER)
TOTAL SHAREHOLDING OF 8,430,458 60.8%
- --------------------- --------- -----
DIRECTORS AND OFFICERS)
- -----------------------
OTHER 5% HOLDERS
Common Stock Uniglobe Investments Inc. 725,859 5.2%
6360, Jean-Talon, Suite 203-A
St-Leonard, Quebec, Canada
H8R 2M9
Common Stock Denis Chaurette "IN TRUST" 698,300 5%
2000, avenue McGill College, Suite 1600
Montreal, Quebec, Canada
H3A 3H3
Common Stock Vision Management 890,000 6.4%
P.O. Box N-7777
29 Retirement Road
Nassau, Bahamas
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Common Stock First Caribbean Securities 800,000 5.7%
The Law Building, Suite 100, P.O. Box 14
The Valley, Anguilla, British West Indies
TOTAL OF ALL 5% OR GREATER SHAREHOLDINGS 11,544,617 83.3%
- ---------------------------------------- ---------- -----
</TABLE>
ITEM 13. Certain Relationships and Related Transactions.
During the year ended December 31, 1997 no officer, director, nominee
for election as a director, or associate of such officer, director or nominee
is, or was, in debt to the Company or engaged in any other transactions, with
the Company.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial Statements and Financial Statement Schedules.
Financial Statements - December 31, 1997, 1996 and 1995.
Reports on Form 8-K.
There were no reports on Form 8-K filed during the fourth quarter of
fiscal year ending December 31, 1997. The Company filed a Form 8-K on March 10,
1998 which reported: Item I: change in control of the Company; Item 6:
Registration and appointment of Directors; Item 9; Sales of equity securities
pursuant to Registration S.
11
<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: April 23, 1998 By: \s\ Pierre de Lanauze
-----------------------
Pierre de Lanauze, President, Chairman of the
Board and Director
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: April 23, 1998 By: \s\ Pierre de Lanauze
----------------------
Pierre de Lanauze, President, Chairman
of the Board and Director
Date: April 23, 1998 By: \s\ J. Randall McCormick
-------------------------
J. Randall McCormick
Vice President, Director
Date: April 23, 1998 By: \s\ Suzanne de Lanauze
-----------------------
Suzanne de Lanauze,
Secretary/Treasurer and Director
Date: April 23, 1998 By: \s\ Marc Descheneaux
---------------------
Marc Descheneaux
Executive Vice President, Director
Date: April 23, 1998 By: \s\ Julie Gaucher
------------------
Julie Gaucher, Director
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<PAGE>
SMITH & COMPANY
A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297
UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: [email protected]
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Grandeur, Inc. (A Development Stage Company)
We have audited the accompanying balance sheets of Grandeur, Inc. (a development
stage company) as of December 31, 1997 and 1996, and the related statements of
operations, changes in stockholders' equity, and cash flows for the years ended
December 31, 1997, 1996, and 1995, and for the period of February 6, 1986 (date
of inception) to December 31, 1997. 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. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Grandeur, Inc. (a development
stage company) as of December 31, 1997 and 1996, and the results of its
operations, changes in stockholders' equity, and its cash flows for the years
ended December 31, 1997, 1996, and 1995, and for the period of February 6, 1986
(date of inception) to December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
January 31, 1998, except Note 5 which is dated March 13, 1998
F-1
<PAGE>
GRANDEUR, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
12/31/97 12/31/96
----------------- -----------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 0 $ 0
----------------- -----------------
TOTAL CURRENT ASSETS 0 0
OTHER ASSETS
Organization costs (Note 1) 0 0
----------------- -----------------
0 0
----------------- -----------------
$ 0 $ 0
================= =================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 0 $ 0
----------------- -----------------
TOTAL CURRENT LIABILITIES 0 0
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 1,000,000 shares 1,000 1,000
Additional paid-in capital 1,000 1,000
Deficit accumulated during
the development stage (2,000) (2,000)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 0 0
----------------- -----------------
$ 0 $ 0
================= =================
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
GRANDEUR, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2/6/86
Year Year Year (Date of
ended ended ended inception) to
12/31/97 12/31/96 12/31/95 12/31/97
------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Net sales $ 0 $ 0 $ 0 $ 0
Cost of sales 0 0 0 0
------------ ------------ ------------ ----------------
GROSS PROFIT 0 0 0 0
General & administrative
expenses 0 0 0 2,000
------------ ------------ ------------ ----------------
NET LOSS $ 0 $ 0 $ 0 $ (2,000)
============ ============ ============ ================
Net income (loss) per weighted
average share $ .00 $ .00 $ .00
============ ============ ============
Weighted average number of
common shares used to
compute net income (loss)
per weighted average share 1,000,000 1,000,000 1,000,000
============ ============ ============
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
GRANDEUR, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
Par Value $0.001 Paid-in Development
Shares Amount Capital Stage
-------------- -------------- ----------------- --------------
Balances at 2/6/86
<S> <C> <C> <C> <C>
(Date of inception) 0 $ 0 $ 0 $ 0
Issuance of common
stock (restricted)
at $.002 per share
at 4/2/86 1,000,000 1,000 1,000
Net loss for period (1,950)
-------------- -------------- ----------------- --------------
Balances at 12/31/86 1,000,000 1,000 1,000 (1,950)
Net loss for year (10)
-------------- -------------- ----------------- --------------
Balances at 12/31/87 1,000,000 1,000 1,000 (1,960)
Net loss for year (10)
-------------- -------------- ----------------- --------------
Balances at 12/31/88 1,000,000 1,000 1,000 (1,970)
Net loss for year (10)
-------------- -------------- ----------------- --------------
Balances at 12/31/89 1,000,000 1,000 1,000 (1,980)
Net loss for year (10)
-------------- -------------- ----------------- --------------
Balances at 12/31/90 1,000,000 1,000 1,000 (1,990)
Net loss for year (10)
-------------- -------------- ----------------- --------------
Balances at 12/31/91 1,000,000 1,000 1,000 (2,000)
Net income for year 0
-------------- -------------- ----------------- --------------
Balances at 12/31/92 1,000,000 1,000 1,000 (2,000)
Net income for year 0
-------------- -------------- ----------------- --------------
Balances at 12/31/93 1,000,000 1,000 1,000 (2,000)
Net income for year 0
-------------- -------------- ----------------- --------------
Balances at 12/31/94 1,000,000 1,000 1,000 (2,000)
Net income for year 0
-------------- -------------- ----------------- --------------
Balances at 12/31/95 1,000,000 1,000 1,000 (2,000)
Net income for year 0
-------------- -------------- ----------------- --------------
Balances at 12/31/96 1,000,000 1,000 1,000 (2,000)
Net income for year 0
-------------- -------------- ----------------- --------------
Balances at 12/31/97 1,000,000 $ 1,000 $ 1,000 $ (2,000)
============== ============== ================= ==============
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
GRANDEUR, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
2/6/86
Year Year Year (Date of
ended ended ended Inception) to
12/31/97 12/31/96 12/31/95 12/31/97
-------------- -------------- -------------- --------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ 0 $ 0 $ 0 $ (2,000)
Adjustments to reconcile
net income (loss) to
cash used by operating
activities:
Amortization 0 0 0 50
-------------- -------------- -------------- --------------
NET CASH USED BY
OPERATING ACTIVITIES 0 0 0 (1,950)
INVESTING ACTIVITIES
Organization costs 0 0 0 (50)
-------------- -------------- -------------- --------------
NET CASH USED BY
INVESTING ACTIVITIES 0 0 0 (50)
FINANCING ACTIVITIES
Proceeds from sale of
common stock 0 0 0 2,000
-------------- -------------- -------------- --------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 0 0 0 2,000
-------------- -------------- -------------- --------------
INCREASE IN CASH
AND CASH EQUIVALENTS 0 0 0 0
Cash and cash equivalents
at beginning of year 0 0 0 0
-------------- -------------- -------------- --------------
CASH & CASH EQUIVALENTS
AT END OF YEAR $ 0 $ 0 $ 0 $ 0
============== ============== ============== ==============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
GRANDEUR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
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.
Organization Costs:
The Company amortized its organization costs over a five year period.
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.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses during the reporting period.
Estimates also affect the disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results
could differ from these estimates.
Stock Options:
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its future employee stock options
rather than adopting the alternative fair value accounting provided for
under Financial Accounting Standards Board ("FASB") FASB Statement No.
123, Accounting for Stock Based Compensation (SFAS 123).
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.
At December 31, 1997 a deferred tax asset has not been recorded due to
the Company's lack of operations to provide income to use the net
operating loss carryover of $2,000 which expires as follows:
Year Ended Expires Amount
------------------- ------------------- ------------
December 31, 1986 December 31, 2001 $ 1,950
December 31, 1987 December 31, 2002 10
December 31, 1988 December 31, 2003 10
December 31, 1989 December 31, 2004 10
December 31, 1990 December 31, 2005 10
December 31, 1991 December 31, 2006 10
------------
$ 2,000
============
F-6
<PAGE>
GRANDEUR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Utah on
February 6, 1986 and has been in the development stage since
incorporation. On December 30, 1993, the Company was dissolved as a
Utah corporation and reincorporated as a Nevada corporation.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000 shares of its
common stock to Capital General Corporation for $2,000 cash for an
average consideration of $.002 per share. The Company's authorized
stock includes 100,000,000 shares of common stock at $.001 par value.
NOTE 4: RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real property. Office services
were provided, without charge, by Capital General Corporation. Such
costs are immaterial to the financial statements, and, accordingly,
have not been reflected therein. The officers and directors of the
Company are involved in other business activities and may, in the
future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business
interests. The Company has not formulated a policy for the resolution
of such conflicts.
NOTE 5: SUBSEQUENT EVENTS
On February 26, 1998, the Company issued 12,848,300 shares of
Regulation S common stock to acquire a Canadian entity, 3127575 Canada
Inc. 3127575 Canada Inc. is now a wholly-owned subsidiary of the
Company. The Company through its subsidiary will continue to develop a
technology known as DEL- ID.
The DEL-ID technology permits precise and positive authentication of
the identify of any living individual and is applicable to a very wide
range of financial transactions where authentication of the individual
is necessary to eliminate fraud and other improper use of services. The
DEL-ID system collects biographical data from the finger image of the
individual and transfers the image into a unique electronic signature
called the "del-gram". The del-gram is not a digitized bitmap image of
the finger, but a synthesized subset of biological data sufficient to
identify the individual.
Commercial applications of the DEL-ID technology are numerous and
include access to the information highway/Internet, identification of
employees working from a home office and requiring access to certain
databases or information, health cards, social insurance cards, drivers
licenses, passport control encryption and access to confidential files,
control of payment by debit or credit payment systems such as credit
cards, smartcards, cash cards, authentication of oral telephone
ordering, access control to sensitized areas, hotel room access,
cellular and digital telephone controls, car entry and protection,
census and election control, door locks, vault locks, residential alarm
system controls, timesheet management, student file management and many
others.
Patent protection is currently pending for the DEL-ID system in the
United States and in other major countries.
On November 12, 1997, the Company's current President, (who was not
affiliated with the Company at that time), through a license agreement
assigned his rights to the DEL-ID technology to 3127575 Canada, Inc. in
exchange for $1,000,000 and a 2% royalty on all revenues received by
3127575 Canada Inc. from the invention. The royalty will be
renegotiated to a lesser amount if a US Patent is not received on the
invention. 3127575 Canada Inc. shall use its best efforts to market and
promote the invention. Any further development of the invention will be
owned by the Company's President but will be licensed to 3127575 Canada
Inc. on the same terms as the above described license agreement. At the
time of the agreement, the President was the sole owner of 3127575
Canada Inc.
The former officers and directors of the Company resigned on February
26, 1998. As a result of the above, the Company has experienced a
change in control.
F-7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Granduer, Inc. December 31, 1997 financial statements and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000894498
<NAME> Grandeur, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (1,000)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
