Certain statements contained in this Annual Report on Form 10-K ("Report"), including, without limitation, statements containing the words "anticipates", "expects, "hopeful" and words of similar import, constitute "forward-looking statements. "Readers should not place undue reliance on these forward-looking statements. delSECUR's actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including risks faced by the Company described in this Report, including the "Risk Factors" section contained in this Item 1, and the other documents delSECUR files with the Securities and Exchange Commission ("SEC"), including its most recent reports on Form 8-K and Form 10-Q, and amendments thereto.

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. (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 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.

Page 2

Patent protection was pending for the del-ID system in the United States. Since June 26, 2001, The United States Patent application has been allowed for issuance by the U.S. Department of Commerce Patent and Trademark Office.

We improved the technology from a proof of concept to totally functional devices that we called "the first generation". Those del-ID(Registered) devices will be implemented for dedicated applications with leading corporations. The secondary done in parallel covers the implementation of a study in a controlled laboratory environment. During the last two years, an amount of $446,521 was spent for Research & Development, $184,569 for the year ending May 31, 2000 and $261,952 for the year ending May 31, 2001.

Moreover, culminating several months of discussions with various agencies and senior levels of the United States Government, the Company is involved with National Security Agency who has signed a Confidential Agreement. The signing of the agreement will permit delSECUR inc. to disclose its core del-ID(Registered) technology to NSA for testing and evaluation as a national and international means of protection against computer hacking. They have to make recommendations to the US Federal Government. The signing of this Confidentiality Agreement confirmed the uniqueness and innovative aspects of the del-ID(Registered) technology, as mentioned on the Press Release issued on April 5th, 2000. The next step will be the implementation of the totally functional del-ID technology within their laboratory as agreed with their representatives.

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 following the issuance of first application results from our technology showcases.

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 555, 11th Street NW, 6th Floor, Lincoln Square, 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. This subsi- diary has no employee and does not have any operations.

The corporation Canadian subsidiary has currently 5 employees of its 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.

In December 2000, the Company adopted the delSECUR Corporation Stock Option Plan for the granting of stock options to directors, officers, employees and consultants of the Company. The Company has reserved 1,400,000 shares of common stock for issuance under the Plan, in order to enable certain key employees, officers, directors and consultants of the Corporation to participate in the

Page 3

growth of the Corporation and thereby provide effective incentives for such individuals. The Plan shall be managed by the Board of Directors.

In accordance with the terms of the Plan, the beneficiaries may be granted options to purchase ordinary shares at a price determined by the Board of Directors. The price may not be below the market price in accordance with the regulations established by the regulatory bodies having jurisdiction over the securities of the Corporation. The total amount of common shares of the Corporation that may be subscribed under the Plan is 1,400,000 shares.

I