SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended November 30, 1999
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _________ to ___________
Commission file number 33-55254-15
delSECUR Corporation
(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 87-0438451
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
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
Indicate by a 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 issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding as of November 30, 1999
- ------------------------- -----------------------------------
$.001 PAR VALUE CLASS A 14,243,411 SHARES
COMMON STOCK
1
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
The accompanying unaudited financial statements (pages F-1 through F-3)
have been prepared in accordance with the instructions to Form 10-QSB and,
therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows and
stockholders' deficit in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operation and financial position have
been included and all such adjustments are of a normal recurring nature.
Operating results for the six months ended November 30, 1999 are not necessarily
indicative of the results that can be expected for the year ending May 31, 2000.
ITEM 2. Management's Plan of Operation.
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. (now delSECUR
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 rights by the
Exclusive License Agreement dated November 12, 1997 between it and Pierre de
Lanauze, inventor of the del-ID technology.
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 92.78% 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.
2
<PAGE>
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.
In April 1998, 3127575 Canada 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 the delSecur web site at delsecur.com.
The secondary topic is presently in the making and will be done in
collaboration with majors firms who are well recognized in their fields of
activity. These majors 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 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
informations, health cards, social insurance cards, drivers' licenses, passport
control encryptions 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. Therefore it is to our advantage to associate ourselves to
such major firms by gaining credibility and recognition. This enables us to use
their know how, their resources and networking.
3
<PAGE>
The Company will not manufacture del-ID 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.
As of November 30, 1999, the Company's balance sheet showed an
accumulated deficit of $4,756,398, an increase of $1,594,599 during the six
months. Operations to date have been financed principally by loans from senior
management and others. Additional unsecured loan facilities continue to be
available and are believed by management to be sufficient to finance operations
over the next several months, pending the anticipated initial receipt of
contract revenues during the second half of the 2000 fiscal year. No financing
involving the issuance of additional shares is presently contemplated.
The Company had a net loss of $1,594,599 for the six months ended
November 30, 1999 compared with a loss of $664,416 for the same period for the
prior year. The main increase from 1998 was approximately $947,000 spent for
promotion. About $983,000 of expenses were paid by issuing 204,000 shares of
common stock.
The Company will continue to seek marketing opportunities for product
licensing with governmental agencies and corporate entities on a world-wide
basis.
As the Company will be engaged in securing licensing contracts for use
of its existing del-ID technology, no significant expansion of the physical
plant, equipment or number of employees is foreseen for the period of the next
twelve months.
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems many
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.
4
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
delSECUR Corporation
Date: January 14, 2000 By:
Pierre de Lanauze, President,
Chairman of the Board and Director
5
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
November 30, May 31,
1999 1999
---------------------- --------------------
ASSETS (Unaudited) (Audited)
CURRENT ASSETS
<S> <C> <C>
Cash $ 275,769 $ 14,473
Sales taxes receivable 69,859 35,508
Prepaid expenses 20,524 30,858
Receivable-related party 208,085 170,736
Receivable - officer 0 357,420
---------------------- --------------------
TOTAL CURRENT ASSETS 574,237 608,995
OTHER ASSETS
Property and equipment 151,580 168,423
License from related party 1 1
---------------------- --------------------
151,581 168,424
---------------------- --------------------
$ 725,818 $ 777,419
====================== ====================
LIABILITIES & DEFICIT
CURRENT LIABILITIES
Accounts payable $ 113,502 $ 311,929
Accrued liabilities 33,915 34,927
Payable-related party 181,806 189,877
Payable - officer 1,472,800 1,474,000
Payable - director 90,136 0
Loans payable 235,000 247,987
---------------------- --------------------
TOTAL CURRENT LIABILITIES 2,127,159 2,258,720
Deferred credit 6,133 6,900
STOCKHOLDERS' DEFICIT
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 14,243,411
shares (13,848,300 at May 31, 1999) 20,110 19,715
Additional paid-in capital 3,328,814 1,653,883
Deficit accumulated during the
development stage (4,756,398) (3,161,799)
---------------------- --------------------
TOTAL STOCKHOLDERS' DEFICIT (1,407,474) (1,488,201)
---------------------- --------------------
$ 725,818 $ 777,419
====================== ====================
</TABLE>
F - 1
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in Canadian dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended From Date of
November 30, November 30, inception to
1999 1998 1999 1998 11/30/99
---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net sales $ 0 $ 0 $ 0 $ 0 $ 0
Cost of sales 0 0 0 0 0
---------------- --------------- --------------- --------------- ---------------
GROSS PROFIT 0 0 0 0 0
Other income 0 0 0 0 8,000
Depreciation and amortization 8,421 13,861 16,843 27,565 167,460
Interest expense 2,863 5,000 8,713 8,000 56,039
Research and development 59,071 182,735 88,588 228,297 566,044
General and administrative expenses 632,035 180,769 1,480,455 400,554 3,931,589
---------------- --------------- --------------- --------------- ---------------
702,390 382,365 1,594,599 664,416 4,721,132
---------------- --------------- --------------- --------------- ---------------
NET LOSS $ (702,390) $ (382,365) $ (1,594,599) $ (664,416) $ (4,713,132)
================ =============== =============== =============== ===============
Net income (loss) per weighted
average share $ (.05) $ (.03) $ (.11) $ (.05)
================ =============== =============== ===============
Weighted average number of common
shares used to compute net income
(loss) per weighted average share 14,243,411 13,848,300 14,243,411 13,848,300
================ =============== =============== ===============
</TABLE>
F - 2
<PAGE>
delSECUR CORPORATION AND SUBSIDIARY
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(expressed in Canadian dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended From Date of
November 30, inception to
1999 1998 11/30/99
--------------- --------------- ------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (1,594,599) $ (664,416) $ (4,713,132)
Adjustments to reconcile net (loss) to cash used
by operating activities:
Depreciation 16,843 27,565 167,460
Amortization of deferred credit (767) 0 (1,533)
Free rent 0 0 7,666
Stock issued for services 983,431 0 983,431
Related party advances 0 0 290,402
Foreign exchange fluctuation (1,200) 0 59,500
Changes in assets and liabilities:
Sales tax receivable (34,351) 6,856 (69,859)
Prepaid expenses 10,334 (18,836) (20,524)
Officer loan 357,420 6,257 0
Receivable - related party (37,349) 5,787 (498,487)
Accounts payable (198,427) 265,919 113,502
Accrued liabilities (1,012) (14,933) 33,915
Payable - related party (8,071) 62,218 181,806
Payable - director 90,136 0 90,136
--------------- --------------- ------------------
NET CASH USED
BY OPERATING ACTIVITIES (417,612) (323,583) (3,375,717)
INVESTING ACTIVITIES
Purchase of property & equipment 0 (50,351) (319,040)
--------------- --------------- ------------------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES 0 (50,351) (319,040)
FINANCING ACTIVITIES
Loan 0 143,500 601,850
Repayment of loan (12,987) (140,000) (366,850)
Loan from director 0 0 2,085,250
Stock sold 662,895 0 662,995
Increase in bank overdraft 0 18,202 0
Contribution to paid-in capital by director 29,000 349,035 987,281
--------------- --------------- ------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 678,908 370,737 3,970,526
--------------- --------------- ------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 261,296 (3,197) 275,769
Cash and cash equivalents at beginning of year 14,473 3,197 0
--------------- --------------- ------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 275,769 $ 0 $ 275,769
=============== =============== ==================
Cash paid for interest $ 11,700 $ 6,500 $ 42,050
=============== =============== ==================
</TABLE>
During 1999, the Company issued 204,000 shares of common stock for services of
$983,431.
F - 3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from delSECUR CORPORATION November 30, 1999 consolidated
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> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> NOV-30-1999
<EXCHANGE-RATE> .67898
<CASH> 275,769
<SECURITIES> 0
<RECEIVABLES> 277,944
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 574,237
<PP&E> 319,040
<DEPRECIATION> (167,460)
<TOTAL-ASSETS> 725,818
<CURRENT-LIABILITIES> 2,127,159
<BONDS> 0
0
0
<COMMON> 20,110
<OTHER-SE> (1,427,584)
<TOTAL-LIABILITY-AND-EQUITY> 725,818
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,594,599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,713
<INCOME-PRETAX> (1,594,599)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,594,599)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,594,599)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
