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, 1999
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
DELSECUR CORPORATION.
(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. [] Yes [X ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-KSB 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 October 1, 1999, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $26,602,425.
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 31,1999
$.001 PAR VALUE CLASS A COMMON STOCK 13,848,300 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Form 8-K filed March 10, 1998
1
<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 (Registered) technology for personal
identification by means of electronic scanning of finger characteristics.
3127575 Canada Inc., obtained these exclusive rights by the Exclusive License
Agreement dated November 12, 1997 between it and Pierre de Lanauze, inventor of
the del-ID (Registered) technology.
As of July 15th 1999, GRANDEUR INC. changed its name to DELSECUR CORPORATION
As of January 20th 1999, 3127575 Canada Inc. changed its name to delSECUR Inc.
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 delSECUR
Inc. owned 92.5% of the outstanding shares of the Company.
The del-ID (Registered) 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
(Registered) 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 (Registered) 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 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. The International Preliminary Examination Report was issued in
accordance with the Patent Cooperation Treaty application (PCT) that included 82
countries. The Examiner has recognized and acknowledged the inventive step, the
novelty and the industrial applicability by accepting all of the 11 claims
represented by the technology.
2
<PAGE>
In April 1998,delSECUR Inc. signed an agreement with the "Centre de
Recherche en Informatique de Montreal (CRIM)" for a scientific evaluation of the
technology. The evaluation holds two topics. The primary one covers theoretical
and accurate applications. The secondary covers the implementation of a study in
a controlled laboratory environment. Here are the following details of the
laboratory :
- - The basic analysis of the technology ( technical specifications). - Practical
applications in simulated commercial environment such as banking, telephony,
e-commerce etc. The primary topic analysis has been done by the CRIM in
collaboration with a major American University. The positive results have been
published and shall be available soon on delSecur's web site at delsecur.com.
The secondary topic is presently in the making and will be done in
collaboration with major firms who are well recognized in their fields of
activity. These major firms will sponsor part of the implementation costs of the
laboratory studies. For the time frame and more details about this section, we
refer the reader to the delSecur web site.
Commercial applications of the del-ID (Registered) 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 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.
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.
The Company will not manufacture del-ID (Registered) cards or card
readers directly. This will tend to minimize the capital requirements of the
Company, its principal activities being limited to marketing the del-ID system
to manufacturers and/or users internationally. Anticipated sources of revenue
are license fees payable by government agencies and corporate entities for the
right to manufacture, use or sell cards and card readers incorporating the
del-ID system, as well as royalty payments by such entities for each card and
reader employed in a del-ID system. We anticipate the first commercial revenue
in twelve months from the present.
delSECUR Corporation announced July 1st 1999 the creation of a new
wholly owned subsidiary, delSECUR USA Inc., incorporated in Delaware and with
its principal offices located at 801 Pennsylvania Avenue, Suite 800, Washington
D.C. 20004.
This subsidiary has been created specifically to manage all delSECUR
operations in the United States. The decision to locate the offices in
Washington D.C. was made following the recent expressions of interest in the
del-ID (Registered) technology by several U.S. Government agencies.
There are currently 12 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.
Pursuant to an Agreement dated February 25, 1998 between the company
and delSECUR Inc. the Company acquired, through its subsidiary, world license
rights to the del-ID (Registered) technology described in Item 1 above. The
del-ID (Registered) technology is owned by its inventor, the Company's
controlling shareholder, Pierre de Lanauze.
3
<PAGE>
The Company, through delSECUR Inc., owns various computer and office
equipment, furnishings etc., acquired at a cost not exceeding $500,000 USD.
delSECUR 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.
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 May 31, 1999.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters.
As of October 1, 1999, there were 698 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 symbol has been change for DLSC
following the name modification as of July 15th 1999. The aggregate market value
of the stock held by been non-affiliates on that date was $25,057,619.
The following table lists the high and low sales prices for the common
stock of the Company during the two most recent fiscal years:
NASDAQ-OTC
High Sales Low Sales
Price Price
1998 First Quarter $ 0.00 $ 0.00
Second Quarter 0.00 0.00
Third Quarter 0.00 0.00
Fourth Quarter 2.2812 0.00
1999 First Quarter 2.9375 1.5937
Second Quarter 2.125 .625
Third Quarter 1.1875 .4062
Fourth Quarter 3.9375 .52
4
<PAGE>
ITEM 6. Selected Financial Data.
DELSECUR CORPORATION.
SUMMARY OF OPERATIONS
MAY 31, 1999
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Assets.......... $ 777,419 $ 845,921 $ 580,249 $ 0 $ 0
Revenues.............. 0 0 0 0 0
Operating Expenses.... 1,274,955 1,021,133 822,219 0 0
Net Earnings (Loss) (1,274,955) (1,021,133) (822,219) 0 0
Per share data
Earnings (Loss)..... (0.09) (0.24) (0.82) 0 0
Average Common Share
Outstanding......... 13,848,300 4,212,075 1,000,000 1,000,000 1,000,000
</TABLE>
As of May 31, 1999 there were 13,848,300 shares outstanding.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
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.
The Company had a net loss of $1,274,955 for the year ended May 31,
1999 compared with a loss of $1,021,133 for the year ended May 31, 1998. The
increased loss of about $254,000 was mainly due to an increase of $142,000 in
research and development costs and an increase of $118,000 in general and
administrative costs.
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
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.
5
<PAGE>
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 May 31, 1999. 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.
On December 14,1998, following the resignation of Mr. J. Randall
McCormick (May 4th 1998) and Mrs. Julie Gaucher (December 14th 1998) 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 60 President, Chairman of the Board, Director
Marc Descheneaux 47 Executive Vice President, Director
Suzanne de Lanauze 36 Secretary/Treasurer, 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.
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.
ITEM 11. Executive Compensation.
During the year ended May 31, 1999 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 May 31, 1999, 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.
6
<PAGE>
<TABLE>
<CAPTION>
Amount of
Title Name and Address beneficial Percent
of Class beneficial owner 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)
Total of all 5% or Greater Shareholders 7,338,600 52.9%
</TABLE>
ITEM 13. Certain Relationships and Related Transactions.
During the year ended May 31, 1999 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 - May 31, 1999, 1998 and 1997.
Reports on Form 8-K.
There were no reports on Form 8-K filed during the fourth quarter of
fiscal year ending May 31, 1999. 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.
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.
DELSECUR CORPORATION.
Date: September 29,1999 By: 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: September 29, 1999 By: Pierre de Lanauze
Pierre de Lanauze, President, Chairman
of the Board and Director
Date: September 29, 1999 By: Suzanne de Lanauze
Suzanne de Lanauze,
Secretary/Treasurer and Director
Date: September 29, 1999 By: Marc Descheneaux
Marc Descheneaux
Executive Vice President, Director
7
<PAGE>
July 22, 1999
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
delSECUR Corporation and Subsidiary
(development stage enterprises)
We have audited the consolidated balance sheets of delSECUR Corporation and
Subsidiary (development stage enterprises) as at May 31, 1999 and 1998 and the
consolidated statements of loss, deficit and cash flows for each of the years in
the three-year period ended May 31, 1999. 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, 1999 and
1998 and the results of its operations and its cash flows for each of the years
in the three-year period ended May 31, 1999 in accordance with generally
accepted accounting principles in the United States of America.
PriceWaterhouseCoopers LLP
Chartered Accountants
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
May 31
1998 1999
--------------- ---------------
Assets
Current assets
<S> <C> <C>
Cash $ 3,197 $ 14,473
Sales taxes receivable 132,653 35,508
Prepaid expenses 6,820 30,858
Advances to a common control company, 137,649 170,736
without interest (Note 3)
Advances to a director, without interest 387,107 357,420
--------------- ---------------
667,426 608,995
Property and equipment (Note 4) 178,494 168,423
License (Note 5) 1 1
--------------- ---------------
$ 845,921 $ 777,419
=============== ===============
Liabilities
Current liabilities
Trade accounts payable $ 94,618 $ 311,929
Accrued liabilities 98,200 34,927
Advances from a common control company,
without interest 146,207 189,877
Due to a director 1,413,300 1,474,000
Demand loans, bearing interest at monthly rate varying
from 0.5% to 1% 265,123 247,987
--------------- ---------------
2,017,448 2,258,720
Deferred credit - 6,900
Commitments and contingencies (Notes 10 and 11)
Stockholders' Deficit
Common stock, $0.001 par value
Authorized 100,000,000 shares
Issued and outstanding (Note 6)
13,848,300 shares 19,715 19,715
Additional paid-up capital (Note 7) 695,602 1,653,883
Deficit accumulated during the development stage (1,886,844) (3,161,799)
--------------- ---------------
(1,171,527) (1,488,201)
--------------- ---------------
$ 845,921 $ 777,419
=============== ===============
</TABLE>
Approved by the Board Director Director
1
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
CONSOLIDATED STATEMENTS OF LOSS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
From date of
inception to
Year ended May 31 May 31
1997 1998 1999 1999
--------------- --------------- --------------- ---------------
Revenue
<S> <C> <C> <C> <C>
Interest $ - $ - $ - $ 5,000
Management income - - - 3,000
--------------- --------------- --------------- ---------------
- - - 8,000
Expenses
Depreciation 21,129 68,817 60,671 150,618
Interest expense - 20,132 22,150 47,326
Research and development 135,348 99,978 242,130 477,456
General and administrative
expenses 665,742 832,206 950,004 2,451,133
--------------- --------------- --------------- ---------------
822,219 1,021,133 1,274,955 3,126,533
--------------- --------------- --------------- ---------------
Net loss $ (822,219) $ (1,021,133) $ (1,274,955) $ (3,118,533)
=============== =============== =============== ===============
Net loss per weighted
average share $ (0.82) $ (0.24) $ (0.09)
=============== =============== ===============
Weighted average number of
common shares used to compute
net loss per weighted average
share 1,000,000 4,212,075 13,848,300
=============== =============== ===============
</TABLE>
2
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
CONSOLIDATED STATEMENTS OF DEFICIT
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
From date of
inception to
Year ended May 31 May 31
1997 1998 1999 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Deficit accumulated during
the development stage,
beginning of year $ (226) $ (822,445) $ (1,886,844) $ -
Net loss (822,219) (1,021,133) (1,274,955) (3,118,533)
Amount from additional
paid-up capital (Note 7) - (43,266) - (43,266)
--------------- --------------- --------------- ---------------
Deficit accumulated during
the development stage,
end of year $ (822,445) $ (1,886,844) $ (3,161,799) $ (3,161,799)
=============== =============== =============== ===============
</TABLE>
3
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
From date of
inception to
Year ended May 31 May 31
1997 1998 1999 1999
--------------- --------------- --------------- ---------------
Operating activities
<S> <C> <C> <C> <C>
Net loss $ (822,219) $ (1,021,133) $ (1,274,955) $ (3,118,533)
Adjustments to reconcile loss to
net cash provided by operating
activities
Depreciation of property and 21,129 68,817 60,671 150,617
equipment
Provision on common control 290,402 - - 290,402
company advances
Loss on foreign exchange - - 60,700 60,700
fluctuation
Amortization of deferred
credit - - (766) (766)
Free rent - - 7,666 7,666
Changes in
Sales taxes receivable (71,731) (60,922) 97,145 (35,508)
Prepaid expenses (62,020) 55,200 (24,038) (30,858)
Advances to a common
control company (466,332) 91,073 (33,087) (461,138)
Director loan (17,381) (369,726) 29,687 (357,420)
Trade accounts payable 43,585 51,033 217,311 311,929
Accrued liabilities 14,747 80,453 (63,273) 34,927
Advances from a common
control company 101,912 44,295 43,670 189,877
--------------- --------------- --------------- ---------------
(967,908) (1,060,910) (879,269) (2,958,105)
Financing activities
Loan 239,350 124,000 188,500 601,850
Repayment of loan (50,000) (98,227) (205,636) (353,863)
Loan from a director 1,000,000 1,085,250 - 2,085,250
Contribution from a director - - 958,281 958,281
Share issues - - - 100
--------------- --------------- --------------- ---------------
1,189,350 1,111,023 941,145 3,291,618
Investing activities
Additions to property and
equipment (140,863) (127,577) (50,600) (319,040)
--------------- --------------- --------------- ---------------
Increase (decrease) in cash during
the year 80,579 (77,464) 11,276 14,473
Cash, beginning of year 82 80,661 3,197 -
--------------- --------------- --------------- ---------------
Cash, end of year $ 80,661 $ 3,197 $ 14,473 $ 14,473
=============== =============== =============== ===============
</TABLE>
4
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
CONSOLIDATED STATEMENTS OF CASH FLOWS ...continued
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
From date of
inception to
Year ended May 31, May 31
1997 1998 1999 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Non-cash financing and investing
activities
Repayment of a loan to a
shareholder (Note 7) $ - $ (2,085,250) $ - $ (2,085,250)
--------------- --------------- --------------- ---------------
Acquisition of license (Note 5) $ - $ (1,413,299) $ - $ (1,413,299)
--------------- --------------- --------------- ---------------
Supplemental cash flow information
Cash paid for interest $ - $ 8,200 $ 22,150 $ 30,350
--------------- --------------- --------------- ---------------
</TABLE>
5
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three-year period ended May 31, 1999
(expressed in Canadian dollars)
1 Incorporation and nature of operations
delSECUR Corporation, 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
under the name of Grandeur Inc. Effective May 28, 1999, the company
legally changed its name to delSECUR Corporation. Through its
subsidiary, DELSECUR Inc., 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,
delSECUR Corporation (the "company") issued and delivered on February
26, 1998 12,848,300 shares of its common stock bearing a restrictive
legend to DELSECUR Inc., formerly known as 3127575 Canada Inc., a
Canadian corporation, in exchange of which issuance it acquired all of
the outstanding shares of DELSECUR Inc.
For accounting purposes, the transaction is treated as an issuance of
shares by DELSECUR 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 DELSECUR Inc.
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.
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 share is computed by dividing net earnings
(loss) by the weighted average common shares outstanding during each
year.
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% for computer
equipment and 20% for office equipment.
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.
6
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1999
(expressed in Canadian dollars)
2 Significant accounting policies ...continued
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
The license is recorded at its carrying value.
Income taxes
The company uses the assets and liabilities approach for financial
accounting and reporting of income taxes. Under this method, deferred
tax assets and liabilities are recognized for the expected future tax
consequences of events that have been recognized in the financial
statements or tax returns. Deferred tax assets and liabilities are
measured using 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 earnings in the period in which the
change occurs.
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 director loan included in current assets,
trade accounts payable, accrued liabilities, advances from a common
control company, due to a director and demand loans included in current
liabilities.
The fair value of these financial instruments is not significantly
different than their carrying amounts.
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.
Translation of foreign currencies
Monetary assets and liabilities are translated at the year-end exchange
rate. Any gain or loss due to exchange fluctuation is charged to the
statement of loss.
7
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1999
(expressed in Canadian dollars)
3 Advances to a common control company
<TABLE>
<CAPTION>
1998 1999
--------------- ---------------
<S> <C> <C>
Balance, beginning of year $ 519,124 $ 428,051
Payments net of charges (charges net of payments) (91,073) 33,087
--------------- ---------------
428,051 461,138
Provision on common control company advances (290,402) (290,402)
--------------- ---------------
Balance, end of year $ 137,649 $ 170,736
=============== ===============
</TABLE>
4 Property and equipment
<TABLE>
<CAPTION>
1999
Accumulated Net book
Cost depreciation value
--------------- ---------------- ---------------
<S> <C> <C> <C>
Computer equipment $ 293,091 $ 147,231 $ 145,860
Office equipment 25,949 3,386 22,563
--------------- ---------------- ---------------
$ 319,040 $ 150,617 $ 168,423
=============== ================ ===============
1998
Accumulated Net book
Cost depreciation value
--------------- ---------------- ---------------
Computer equipment $ 268,440 $ 89,946 $ 178,494
=============== ================ ===============
</TABLE>
5 License
On November 12, 1997, the principal stockholder 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$1,474,000) as at May 31,
1999.
This transaction was measured at its carrying value of $1. The excess of
the consideration payable over the carrying value at the date of the
transaction was recorded against additional paid-up capital and deficit.
8
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1999
(expressed in Canadian dollars)
6 Common stock
<TABLE>
<CAPTION>
1997 1998 1999 From date of inception
to May 31, 1999
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 13,848,300 $ 19,715 - $ -
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 13,848,300 $ 19,715 13,848,300 $ 19,715 13,848,300 $ 19,715
=========== ======== ========== ======== ========== ======== ========== ========
</TABLE>
7 Additional paid-up capital
<TABLE>
<CAPTION>
From date of
inception to
1997 1998 1999 May 31, 1999
---------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Balance, beginning of year $ (1,324) $ (1,324) $ 695,602 $ -
Issuance of capital at
inception - - - (1,324)
Add: Loans forgiven - 2,085,250 - 2,085,250
Add: Contribution from a
director - - 958,281 958,281
Deduct: License (Note 5) - (1,413,299) - (1,413,299)
---------- -------------- -------------- ----------------
(1,324) 670,627 1,653,883 1,628,908
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) $ 695,602 $ 1,653,883 $ 1,653,883
========== ============== ============== ================
</TABLE>
9
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1999
(expressed in Canadian dollars)
8 Income tax
The company has accumulated losses for income tax purposes totalling
approximately $2,329,800 and research and development expenses totalling
approximately $240,700. The company recognized a deferred tax asset of
$885,300 related to these items. In addition, the company created a
valuation allowance equal to this deferred tax asset to bring down its
value to nil. The undeducted research and development expenses can be
carried forward indefinitely. The non-capital loss can be deducted from
future years' taxable income and expires as follows:
Tax loss
------------------
2003 $ 200
2004 $ 408,000
2005 $ 849,700
2006 $ 1,071,900
------------------
9 Related party transactions
During the three-year period, the company made some transactions with
two companies owned by the principal stockholder.
<TABLE>
<CAPTION>
1997 1998 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Expenses $ 458,300 $ 168,858 $ 77,850
Acquisition of capital assets $ - $ - $ 40,855
-------------- -------------- --------------
</TABLE>
The expenses occurred in the normal course of the company's activities
and are measured at fair value, which represents the exchange value.
The capital assets were acquired from corporations under common control
at a cost equal to the net book value of the vendor.
10 Contingency
An application was filed by three minority shareholders of Delsynchro
Inc., a common control company, which requested the Court to declare
Delsynchro owner of the invention known as "DEL ID" and the related
rights and consequently that:
(a) the licence agreement related to the DEL ID invention signed
in November 1997 between Delsecur Inc. and delSECUR Corporation
be considered to be signed between Delsynchro Inc. and delSECUR
Corporation;
10
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY (Note 1)
(development stage enterprises)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...continued
For the three-year period ended May 31, 1999
(expressed in Canadian dollars)
10 Contingency ...continued
(b) the exchange of shares on February 25, 1998 whereby delSECUR
Corporation issued 9,854,609 of its shares to shareholders of
Delsecur Inc. in exchange for the acquisition by delSECUR Corporation
of all the issued shares of Delsecur Inc. should be amended so that
the 9,854,609 shares of delSECUR Corporation will be issued to the
shareholders of Delsynchro Inc., a common control company, in
exchange for the acquisition by delSECUR Corporation of all the
issued shares of Delsynchro Inc.
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.
11 Contractual obligations
The company has signed a rental contract whereby it must pay a base rent
as well as additional fees. The contract expires in November 2003.
The base rent for the next five years is as follows:
2000 $21,444
2001 $21,444
2002 $21,444
2003 $21,444
2004 $10,722
12 Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition,
similar problems may arise in some systems which use certain dates in
1999 to represent something other than a date. The effects of the Year
2000 Issue may be experienced before, on, or after January 1, 2000, and,
if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is
not possible to be certain that all aspects of the Year 2000 Issue
affecting the company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
13 Comparative figures
Certain of the 1997 and 1998 comparative figures have been reclassified
to conform with the financial statement presentation adopted for the
current year.
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from delSecur Corporation May 31, 1999 financial statements and
is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000894498
<NAME> delSecur Corporation
<CURRENCY> Canadian Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> MAY-31-1999
<EXCHANGE-RATE> .67705
<CASH> 14,473
<SECURITIES> 0
<RECEIVABLES> 563,664
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 608,995
<PP&E> 319,040
<DEPRECIATION> (150,617)
<TOTAL-ASSETS> 777,419
<CURRENT-LIABILITIES> 2,258,720
<BONDS> 0
0
0
<COMMON> 19,715
<OTHER-SE> (1,507,916)
<TOTAL-LIABILITY-AND-EQUITY> 777,419
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,274,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,150
<INCOME-PRETAX> (1,274,955)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,274,955)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,274,955)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
