ANNUAL REPORT FOR GSI TECHNOLOGIES USA INC.
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2002
Commission File No. 333-30474
GSI TECHNOLOGIES USA INC.
-------------------------
(Name of small business issuer in its charter)
Delaware 65-0902449
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
Incorporation or organization) Number)
400, St-Jacques Street, Suite 500
Montreal, Quebec H2Y 1S1
------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (514)-282-9292
Securities registered under Section 12(b) of the Exchange Act: None Securities
registered under Section 12(g) of the Exchange Act:
CLASS B COMMON STOCK (PAR VALUE $.001 PER SHARE)
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part 1II of this Form 10-KSB or any
amendment to this Form 10-KSB. (X)
The Registrant's revenues for its most recent fiscal year were $23,750.00.
The aggregate market value for the voting and non-voting common equity held by
non-affiliates on October 31, 2002 was approximately $15,668.00. Shares of
common stock held by each officer and director and by each person who owns 5% or
more of the outstanding common stock of the Company have been excluded because
such persons may be deemed to be affiliates.
The total number of shares of Class B Common Stock outstanding on October
31,2002 was 26,068,134.
PART I
The Form 10-KSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Words
such as "anticipates", "expects", "intends", "plans", "believes", "seeks",
"estimates", variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual results could
differ materially from those expressed or forecasted in any such forward-looking
statements as a result of a number of factors, which are not within the
Registrant's control.
ITEM 1. DESCRIPTION OF BUSINESS
(a) Organization
GSI Technologies USA Inc. ("GSI") is a Delaware corporation, originally
established in July 1998 as I.B.C. Corporation. Following a change of control to
the current principal shareholders and the creation of a new business plan, we
acquired an exclusive worldwide license from GSI Technologies ("GSI Canada")
relating to a unique technology in the field of electronic commercial
advertising. The license includes proprietary software, hardware, and
broadcasting systems enabling users to transmit and receive full-motion video,
graphics, along with compressed or uncompressed audio on any kind of display
units, whether mobile or static, indoor or outdoor. The technology offers users
remote control through telephone lines, LANs, the internet, wireless systems,
cell phones, global systems for mobile telecommunications, or GSMs, fibbers
optics and short waves. GSI also acquired broadcasting server technology from
GSI Canada.
GSI participates in the information technology industry, specializing in
broadcasting solutions principally for media operators, advertisers and others
seeking to reach the greatest number of "viewers per day" at the street level.
Street level advertising is the strategic placement of signage so they are
readily visible to pedestrians and motorists. In addition to addressing
potential consumers in busy urban and suburban settings, public service messages
can also be conveyed using our technology.
Based upon our knowledge of the industry, the potential market for which GSI
sells its products is large with opportunities for growth. The advertising
industry, for example, is always looking for new ways to reach consumers. Having
acquired our license from GSI Canada, we believe we are now able to respond to
their needs as well as those of other industries. Whereas traditional media
groups such as television, radio, and newspapers used to specialize in their
respective activities, as reflected below, our research shows that there is a
clear pattern of them utilizing newly developed electronic media in order to
maintain and extend their reaching power.
Historical background
A predecessor entity called Groupe Solcom was founded in 1995 by a group of
individuals experienced in the out of home advertising and retail industries.
The primary goal of the Montreal-based R&D firm was to find ways of channeling
commercial messages to a wider range of viewers in a structured and targeted
method via electronic remotely controlled screens. Originally serving the casino
and stadium industries, Groupe Solcom soon identified diverse locations across
North America in which to successfully install, manage and remotely control
automated display systems. From 1996 through September 1998, Group Solcom
controlled and operated large electronic signs in Vancouver, Edmonton, Toronto
and Montreal.
With the rapid evolution of electronic sign capabilities via full video
broadcast signals, media companies were beginning to seek new ways of
transferring images and information from remote stations to signs in a
compressed and secure environment. Effectively using the Internet was the
logical solution. In order to respond expeditiously to market trends and to
concentrate all its resources in the completion of a fully integrated
software-hardware package, Group Solcom next applied for advantageous
governmental grants available in the area of multimedia R&D. As a result, in
September 1998, GSI Canada was incorporated in order to qualify for and receive
a CDTI Cite du Multimedia research license. Cite du Multimedia is a major
provincial government-sponsored project in Montreal designed to bring together
in the same location companies working in the information and communications
technology field. The government subsidy is an exclusive twelve-year program of
incentives that includes a subsidy of up to 40% of the salaries of research &
development personnel (within individual limits), up to 40% subsidy of the
capital cost for specialized R & D equipment, as well as other Federal tax
credits and exemptions. From 1998 to 2000, in accordance with its strategic plan
of vertical integration, GSI Canada made three acquisitions. Vertical
integration has facilitated and accelerated the process of providing a complete
turnkey solution to its target market, the media operators. These acquisitions
included Lexton Group, Hi Tech Neon and ITS Services Inter-Teck.
In June 1999, with a view to financing the enterprise and eventually going
public, the owners of GSI Canada founded GSI Technologies USA Inc, a Delaware
incorporated company. GSI is headquartered in Orlando, Florida. By August 1999,
the preliminary testing of the basic server system and software package were
completed, and in October 1999, GSI Canada granted GSI an exclusive master
license to market and commercialize its technology. In October 1999, we
successfully completed a private placement of $1,000,000 under SEC Rule 504. On
February 15, 2000, we filed a Registration Statement on Form SB-2 with the
Securities and Exchange Commission. On August 3, 2000, we filed Form 8A to
become a reporting company, and on September 13, 2000, began trading on the NASD
over-the-counter bulletin board under the symbol GSITB.
The Company's cash position and stock values have deteriorated significantly in
the past year, making it difficult to raise funds with which to continue
essential R&D and marketing activities. This is a reflection more of over all
market conditions in terms of market performance and the advertising industry.
The Company believes in its technology advantage, and value proposition, and
anticipates a turnaround in conditions in 2003.
Using cash on hand, we have continued operations in a reduced fashion, while
pursuing appropriate strategies to realize market success of our products. The
Company intends to pursue new sales opportunities aggressively, while
re-organizing to attract new investors. As of year-end, we have entered into
discussions which will reinforce our technology leadership, and lead to greater
market penetration.
The technology
The basic technological advance achieved by GSI Canada and available to us by
way of the master licensing agreement is the successful integration of various
hardware components and specialty software for the transmission of broadcast
signals in real time. Using our GSI Multimedia Pack software, which is described
below, we have the unique capability to broadcast from a central server to full
video screens in remote locations anywhere in the world. The system is capable
of updating pinpoint information virtually in real time by way of video
compressing systems and other fully automated software systems.
By utilizing our products and services, media and advertisers have an improved
way of reaching consumers right in their daily out-of-home environment,
especially in suburban shopping malls and the downtown cores where thousands of
people circulate daily as pedestrians, as motorists or as they use public
transportation going to and from work or to shop.
HARDWARE
To achieve its sales goals, GSI is commercializing products such as Citycolumn,
Digicolumn, E-Column, and Skycolumn. These products can all be marketed directly
by GSI to end-users or via sub-licensing agreements with media operators which
are described below.
GSI's objective is to offer the possibility of what we call GSITV.COM, The Total
Vision Network, linking large numbers of installations of our products in
various locations. Animated advertising displays and information of public
interest can be efficiently and economically managed from strategically placed
servers in central locations. The content broadcast on the network will be
continuously updated. For optimal exposure, the content will consist of a
three-minute loop divided into eighteen segments of ten seconds each. Besides
advertising, these segments will include messages of public interest issued by
our newsroom, drawing on the technical support of our control room. For example,
six of the segments can be dedicated to local advertising while the other twelve
are made available for regional or national advertising and the messages of
public interest. The involvement of radio and television networks is being
sought for this part of the network's offering.
(b) Products
SOFTWARE
GSI's software is the cornerstone of its broadcasting solution, providing a
modern, economic alternative to static advertising media and an improved means
of attracting the attention of pedestrians and motorists in high-traffic
locations. This broadcast-enabling software, coupled with integrated hardware
solutions, clearly distinguishes the Company from traditional static content
providers. The GSI Multimedia Pack which enables virtually real time
broadcasting consists of three sub-packs, each with its own applications,
enabling users to schedule and send content to any number of display units and
then to play it. The key advantage is that it enables intensive, pinpoint
advertising campaigns and efficient changes to the content. Through this
software the Company is able to effectively monitor and transmit
up-to-the-minute news and commercials directly to each screen location.
Demographic criteria such as average age, population size, gender, language, and
nationality can be programmed for each screen. Consequently, GSI is able to
provide its advertisers or strategic partners with a complete advertising
campaign package. All together, the GSI Multimedia Pack consists of five
applications. Innovative applications include: database graphical user interface
(GUI), schedule manager, billing manager, file transfer manager and the
multimedia player.
HARDWARE
To effectively demonstrate the power of its broadcasting capability and the
software that drives it, GSI has developed an array of actual and potential
hardware applications. Designed, assembled and integrated in various forms and
shapes suited for the precise out-of-home environment, GSI's know-how is
constituted in the products we are currently commercializing such as Citycolumn,
E-Column, Skycolumn, and Digicolumn, the latter two being the simplest of the
units using LED and plasma screens. Other variants are under development.
Customized user requirements can also be met. A key element of GSI's total media
solution and market development strategy, the display units typically
incorporate television screens, plasma screens, computer components and heating,
ventilation, and control systems that are purchased from various suppliers. The
design of the units truly differentiates the Company's solution from traditional
static billboards, attracting and retaining viewers for longer periods of time.
A brief description is found below of the different hardware alternatives
offered by GSI.
CITYCOLUMN
Citycolumn is an interior display unit or kiosk consisting of three television
screens 36" wide. Full-size video, 3D animations and stereo sound can be
broadcast on these units and they can be remotely controlled and reprogrammed
via GSI's software from anywhere in the world. Adding a remote control unit can
also extend Citycolumn's capabilities by providing advertisers with
interactivity. The combination of video and computer digital displays makes
changing commercials almost instantaneous, allowing for short advertising
campaigns, special promotions, and the latest news headlines. In addition to the
animated display there are two backlit display panels 28" wide and 40" high.
Other features of the interactive kiosk include a tactile menu on a 15" tactile
screen, promotional windows for advertisers as well as directories and location
maps.
DIGICOLUMN
Part of the "high-tech" generation of communications products it has flat
plasma-screens, having the same features and programming capabilities as the
Company's Citycolumn unit. Plasma screens with a 50" diagonal width and only
3.5" deep, provide added image quality and purity of color. This screen can be
installed in virtually any indoor location, effectively rendering all wall-space
a potential advertising medium.
SKYCOLUMN
Skycolumn is a giant outdoor screen, capable of transmitting video images from a
server located anywhere in the world. Potential installation sites include
airports, sport stadiums, and large expressways.
E-COLUMN
E-column is an internet-enabled information kiosk that will provide consumers
with animated information on products and services, and facilitate transactions
such as express check out and event ticket purchases. Potential installations
sites include high traffic areas such as airports, hotels, conference halls and
large warehouse stores.
NOVACOLUMN
In the category of what major advertisers call "urban furniture" or "street
furniture," Novacolumn, is designed for outdoor displays and meeting the
requirements of traditional advertisers. Via a single projector and providing a
field of view of from 5 to 300 feet, the main display side features a large
screen 36" wide by 42" high, the dimensions of a regular advertising poster. The
other two sides include space for static backlit posters. This kiosk can be
remotely controlled and reprogrammed via GSI's software. As with Citycolumn, the
combination of video and computer digital display makes changing commercials
almost instantaneous, allowing for short advertising campaigns, special
promotions, and the latest headlines. Adding a remote control unit can also
extend Novacolumn's capabilities, providing advertisers with interactive
applications. For instance, the Novacolumn can be made to control another
potential product offering, the interactive parking meter. Novacolumn's
specifications include sturdy, composite materials and each unit is molded in
sections. Providing climate control for installations in environments that will
periodically experience extreme weather conditions, including hot and/or cold,
Novacolumn is equipped with a CEMU or computerized environmental management
unit.
SERVICOLUMN
Servicolumn is a customized, outdoor, self-contained unit that is designed to be
incorporated in the display portion of transit shelters. GSI's aim for this unit
is to replace the static backlit display in the offerings of other
manufacturers. 24" in depth, on one side will be a 36" X 48" display of animated
content and on the other side pedestrians and public transportation users will
have access to a 14" touch-screen, a smart card reader, and a wireless phone
providing informational content, transactional functions and access to emergency
or information phone numbers.
(c) Industry
OUT-OF-HOME ADVERTISING INDUSTRY
The out-of-home advertising industry encompasses media such as billboard
advertising, transit advertising, stadium signage, urban buildings, and other
distinctive forms of advertising that reach individuals outside of their
domestic residences. The industry constitutes all types of advertising and is
currently undergoing notable transformations. The key participants in the
industry are the large media operators who seek to optimize the number of people
exposed to advertising and enhance their rates of retention. The primary
opportunity in out-of-home advertising stems from the fact that large audiences
are available and can be reached by less expensive forms of media than radio,
and the press. Industry analysts expect traditional approaches to advertising to
give way to more creative solutions using new technologies. Many of the
limitations associated with traditional out-of-home advertising approaches will
disappear, yielding to multimedia-based approaches. Digital display product
systems will provide advertisers with a new forum by which they are able to more
profoundly impact their target audience. Thus the growth in deployment of
interactive electronic display products is expected to continue at an
accelerating rate.
INDUSTRY OVERVIEW
According to the latest edition of Advertising Expenditure Forecasts published
by Zenith Media, global advertising expenditure is projected to have increased
by 8% to $332 billion in 2000. Spending in North America and Europe, the two
regions targeted by the Company, is estimated to have grown at 8% to $233
billion, or approximately 70% of global spending.
From the same data source, spending in North America by advertising medium in
2000 comprised:
Advertising $ Spent % of
Medium (Billions) Total
--------------------------------------------------------
Television 53.9 38.6
Newspapers 48.1 34.4
Radio 18.1 13.0
Magazines 16.8 12.0
Outdoor 2.6 1.9
Cinema 0.1 0.1
--------------------------------------------------------
Total 139.6 100.0
According to Zenith Media, advertising spending in North America and Europe is
projected to increase to $273 billion by 2003, a compound annual growth rate of
5.5 %.
While television's relative position has been maintained, advances in technology
now enable the consumer to select from more than 500 television channels at
home. Many of these are specialized channels and pay television that do not
broadcast advertising. Broadcasters are not able to reach the same number of
in-home "viewers per day" as they used to. To maintain and increase reach, it
has become strategically imperative for the advertisers and advertising agencies
to seek other out-of-home possibilities. Mainly through mergers and
acquisitions, media companies are now increasingly able to offer advertisers a
variety of multimedia-based approaches. Clear Channel Corporation is in the
forefront.
GSI believes that significant potential exists in the indoor sector of the
market in particular. Unlike the outdoor sector, which depends to a large extent
on the approval of municipal authorities for the use of public sites, the indoor
environment is inherently more hospitable, both from an environmental standpoint
and due to the private ownership characteristic. Media operators are actively
seeking to penetrate the indoor advertising market which is largely untapped and
still in an embryonic stage of development. Shopping centers and office
buildings offer excellent opportunities. Information about the shopping center
industry was obtained from Scope 1999 from the website www.icsc.org of the ICSC.
According to the National Research Bureau, there were a total of 43,600 shopping
centers in the United States in 1998, an increase of 1.7% from 1997. Retail
sales in shopping centers increased by 5.0% to $1,044.6 billion, representing
51% of total retail sales in the country, excluding auto dealer sales. In a
typical month, 189 million adults shop at shopping centers and 94% of the
population over 18 years of age. Similarly, in Canada, there were 4,298 shopping
centers in Canada by the end of 1998, generating $94.2 billion in retail sales.
Media operators generally negotiate with the owners of public and private
property sites suitable for advertising campaigns. Clear Channel Communications,
an American multinational, is the largest in the world, operating over 750,000
display faces in 40 countries. It has erected over 700,000 out-of-home signs
over a span of 28 years. Clear Channel's direct competitor is JC Decaux, a
French multinational with extensive U.S. operations, which has deployed 160,000
backlit advertising panels and 205,000 units of urban furniture worldwide.
Outdoor Systems is also a major operator in the out-of-home industry, having
deployed its urban furniture products in 90 U.S. metropolitan regions and 13
Canadian cities.
Through our research and from our direct contacts with these dominant media
operators, we have confirmed that they are actively seeking multimedia-based
approaches to complement and enhance their traditional urban furniture products
and to accelerate growth. In addition, national, regional, and local advertisers
are expected to be more and more interested in the unique benefits offered by
digital networks.
One clear trend in the out-of-home advertising industry is the consolidation of
media operators as they seek to strengthen their national coverage and expand
their network of installations. Leading industry players such as Clear Channel,
TDI, Outdoor Systems and JC Decaux are primarily driving the trend of
consolidation throughout the industry.
(d) Patents and trademarks
Intellectual property
GSI has acquired an exclusive worldwide license from GSI Canada, which has
proprietary rights on the software required to operate the system. These rights
are governed and protected by applicable commercial law. GSI intends to take all
reasonable and practicable steps to obtain patent and trademark protection, when
available, to protect its rights to the licensed technology. Our legal advisors
specializing in trademarks are in the process of filing trademark applications
for the following brand names used by the Company in the United States and
Canada: Citycolumn; Novacolumn; GSI Multimedia Pack; GSI Technologies;
GSITV.COM.
(e) Market Development
A key element of GSI's strategy is to establish relationships and alliances to
assist in marketing, selling, and deploying its electronic urban furniture. We
believe that strong global alliances are expected to achieve solid market
penetration and to package and bundle turnkey solutions for customers. We are
pursuing strategic alliances with the following companies:
Clear Channel International ("CCI"): Based in the UK, it is part of Clear
Channel Communications, one of the largest media companies in the world whose
key subsidiaries and divisions include: Adshel, More Group, and Eller Media. The
association with a major media operator such as Clear Channel further
strengthens GSI's attempt to gain more international exposure. We expect to
provide Adshel, whose research center is located in London, England, with access
to GSI's unique broadcasting technology and integrated advertising solution
enabling remotely controlled updates, more targeted content and digital quality
that encompasses interactive services to be provided on advertising display
products. A master software access agreement is currently under negotiation.
After successfully achieving pilot projects with Clear Channel in City of
Bristol & Swindon, using GSI's Software Pack solution, we have received from
Clear Channel's R&D department a list of requirements on specific applications
of our software as well as full reports on technical bugs to our beta version.
We have agreed that pursuant to the requirements specified, that we can
successfully deliver an updated version ready to support Clear Channel's
worldwide market development ambitions. Our engineering team has indicated that
preliminary product upgrades can be completed by March 15th, 2003 and the second
part of further modular applications would be ready for August 2003.
Barco: Headquartered in Kuurne, Belgium, Barco operates six major lines of
business: Projection, Display Systems, Automation, Machine Vision, Graphics and
Communications. BARCO Projection Systems is an ISO 9001 registered world leader,
developing and manufacturing large screen projection systems for a broad range
of applications, entertainment, presentations, training, process control, and
simulation. GSI, Adshel, and Barco have collaborated in pilot projects in
Europe. Barco Daylight Display Systems USA and GSI Canada are currently
negotiating a strategic alliance to pursue opportunities in the Canadian outdoor
advertising market in which GSI Canada would become an exclusive distributor of
their products in Canada. At this stage, however, no guarantee can be made that
a contract will be formalized or that we will receive any revenues from this
source.
Successful pilot projects demonstrating the power of animated advertising on
attractive display products have already lead to contracts with leading Canadian
real estate operators such as Ivanho , SITQ, and Toulon. We believe these three
pilot projects should enable us to attract at least one of the world's leading
media operators and lead to the rapid expansion of the network.
Other pilot projects have been completed in Europe to demonstrate GSI's
technology. A significant breakthrough occurred in November when the Company
helped Adshel, a division of Clear Channel International, secure a contract from
the city of Nantes, the sixth largest city in France. Using GSI's technology
during the pilot project, Adshel was able to displace JC Decaux, winning a 170
million French franc deal to install 2,100 pieces of its own Adshel brand of
urban furniture, including 783 transit-shelters, 257 plasma display columns, and
60 sign faces each measuring 8 square meters in dimension. Adshel's new brand of
urban furniture will replace the existing, outdated furniture. Deployment will
be implemented from October 2001 to March 2002. The difference in Adshel's favor
was its ability, by utilizing GSI's technology, to present attractive new
information technology features and interactivity via a single server
transmitting video images to electronic screens, 12 plasma screens and 7 giant
LED screens. GSI's broadcasting technology provided the edge.
(f) Customer Service and Technical Support
At year end, we have initiated discussions with LTS Networks Inc. ("LTS"), a
Montreal-based provider of Linux-based technology solutions to serve our
customers and provide technical support to projects underway, and under
discussion.
LTS Networks is a Network Systems development company specializing in Low Total
Cost of Ownership (TCO) institutional network computing solutions. The company
designs and builds commodity networks , vertical market computing appliances and
client side software. LTS Networks leverages commodity computing hardware and
Open Source software to deliver robust, scalable low cost solutions.
(g) Research and Development
Our in works agreement with LTS Networks as of Year-End envisages a partnership
that will allow us to work closely together on the new development of our
software enhancement. LTS Networks' engineering team will provide GSI with full
analysis on our existing platform and going forward needs.
(h) Competition
The media industry is highly competitive. It encompasses broadcast and cable
television, the Internet, radio, magazines, newspapers, traditional billboards
and direct mail marketers. Operators compete in the out-of-home environment in
locations such as highways, shopping centers and malls, airports, stadiums,
movie theaters and supermarkets; as well as in transit shelters, and in taxis,
trains, buses and subways. The out-of-home advertising industry is attracting
numerous alternative media products, many of which will be direct competitors.
Although the existing major media operators such as Clear Channel, JC Decaux,
TDI and Outdoor Systems could become significant clients, they could also decide
to develop their interactive display products and become competitors.
Other firms are currently placing electronic-type display products in various
locations such as retail outlets, elevators, airports and subways. Next
Generation Network (NGN) is emerging within the US market having installed over
6,500 electronic billboards in locations throughout the United States. NGN's
network infrastructure has attracted the attention of many industry analysts and
is considered the influential source driving change in the out-of-home
advertising sector. Other competitors include Fred Systems Ltd. of Waterloo,
Canada, New York-based Golden Screen Interactive Technologies and Montreal-based
Digital Advertising Network ("DAN"), Vert Intelligent Displays of Summerville,
Massachusetts, Clarity Visual Systems of Willsonville, Oregon and Pioneer
Electronic Corporation of Tokyo, Japan.
(i) Human Resources
Subsequent to October 31st, 2002, we had no direct employees on payroll. Our
president and other principals were strictly working on a consulting bases to
allow restructuring of the corporation.
The Company believes that with a new business approach, it can attract new
investor interest. Proceeds from which would be to rebuild an executive team
capable of executing the business plan, and providing investor confidence. The
Company intends to be in a position to report such events in our 10-Q filing in
March 2003.
ITEM 2. DESCRIPTION OF PROPERTY
We own no real estate. In January 6th, 2000, GSI USA entered into a co-sharing
leasing agreement with our affiliate GSI Canada with 2849-3930 Quebec Inc.
represented by SITQ Inc. for a term of 4 years. Due to our affiliate financial
difficulties and to the market crash with technologies corporations, we entered
during the year 2002, in negotiations with the land-lord (SITQ) to leave the
premises.
Our monthly rent represented fees of approximately 20,000.00$ USD and was
previously hosting 70 people. We concluded a final agreement with the SITQ on
October 2002. Our total debt was $179,000.00 Cdn. We settled for $139,015.00Cdn
and became free of our lease agreement.
In October 2002, we moved our Canadian offices to 400, St-Jacques Street, suite
500, Montreal, Quebec, Canada, H2Y 1S1 and signed a leasing agreement with
Worldwide Business Consultant, for a term of 3 years at a monthly rent of
$2,212.00 USD, taxes included. Our offices spaces are 3000 square feet, located
on St-Jacques Street, in the center of Old Montreal, City known for its
financial banking activities. We believe the savings represent tremendous
savings for the corporation helping us growing our profitability immediately.
Effective June 16, 2000, GSI entered into a lease agreement with Sun Trust
Center LLC for a term of 5 years at 200, South Orange Avenue, Suite 2150,
Orlando, Florida.
As of November 1st, 2002, we have moved our US corporate offices to Plattsburg
NY to realize traveling savings and to better coordinate our North American
activities since both our new offices are one hour and a half away from each
other.
Our new corporate office address in the United States is: 99, Trade Rd,
Plattsburg, New York, USA 12901.
ITEM 3. LEGAL PROCEEDINGS
1. MR. JACQUES BIRON : We remain party to one proceeding initiated by
another party, Mr. Jacques Biron, against GSI Canada, GSI, our former
President in the Superior Court of the Province of Quebec, District of
Montreal. An amount of $98,766 in Canadian dollars has been claimed
for our alleged failure to pay a commission and consequent damages
relating to negotiations with GSI Canada for an acquisition. We have
retained legal counsel in Montreal, Mr. Marc Cote of Labelle,
Boudrault, Cote & Associates, who advises that, in his opinion, Mr.
Biron's case against the company is without merit; that he has no
right in law to sue GSI Technologies USA Inc.
2. MR. ALEX ZERVAKOS: On September 2001, we received a law sue from Mr.
Alex Zervakos a former employee of GSI USA. we concluded an out of
court settlement, on November 22nd, 2002, for the amount of $12,000.00
Cdn as final settlement.
3. CITY OF MONTREAL: The Company has been involved in litigation for
unpaid business taxes with the City of Montreal. The litigation has
been settled in the amount of approximately $21,080USD of which
$4,800.00 USD has been paid by October 31, 2002.
4. SITQ, PREVIOUS LANDLORD: On October 8, 2002, the Company entered into
a settlement and release agreement with its landlord in its original
downtown Montreal office whereby the Company could cancel its lease
with a one-time payment of approximately $77,848.00 USD. This payment
was made during October 2002.
5. CVMQ: On December 15, 2000, we signed an agreement with the Quebec
Securities Commission to conform to filing requirements for any sales
of shares to residents of the Province. Our former President also
agreed that the sale of any shares directly by himself or shares owned
by companies in which he has an interest would be in conformity with
the filing requirements in the jurisdiction of Quebec.
6. FORMER DIRECTOR AND OFFICER: In March 2002, a former Director and
Officer along with another employee of the Company have filed a civil
action against the Company in the State of Florida alleging unpaid
wages and expense reimbursements totaling approximately $225,000. The
Company has not retained legal counsel on this matter, but believes
this complaint is without merit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market for Common Stock
Our Common Stock has traded in the over-the-counter market on the "OTC
Bulletin Board" since September 13, 2000 under the symbol GSITB. The
quotations below from www.OTCBB.com/Nasdaq Trading & Market Services
represents the high and low, closing bid and asked prices, by
quarters, since that date. These do not include retail markups,
markdowns or commissions. Nor do they represent actual transactions.
Stocks Information
Closing November 1st 2000, $1.03125
CLOSING OCTOBER 31ST 2002, $.01
(b) Recent Sales of Unregistered Securities
None
(c) Issuance of warrants
No warrants has been issued during fiscal year 2001-2002.
(d) Cancellation of Class A Shares
None
(e) Grant of stock options
On August 1, 2000 the Board of Directors approved a Long Term Incentive Plan.
Under the plan, stock options were approved for the directors, officers, and
certain key employees of GSI and its affiliates; as well as for certain
consultants to GSI. The initial design of the plan reflects the issuance of
"Nonqualified Stock Options." A maximum of 10% of the authorized capital of the
Corporation, being equivalent to a total of 5,500,000 Class B common shares, was
reserved and available for distribution pursuant to the terms of the plan.
Nonqualified Stock Options to purchase a total of up to 3,000,000 Class B common
shares of GSI at a price of $2.00 per share were to be granted to certain
employees and other eligible individuals, as determined by the Chief Executive
Officer. One-third will vest on December 18, 2000; a following one-third will
vest on December 18, 2001; the remaining one-third will vest on December 18,
2002. The stock options expire seven years from the date of the grant. Further
grants may be made periodically at an exercise price not less than the closing
price on the day prior to the date of the grant. On November 20, 2000, the Board
of Directors approved a re-granting of the options at an exercisable price of
$1.25. During the Corporation's restructuring phase, the principals of the
Corporation have decided to postpone any grants or options until further notice.
No grants or options have been issued during fiscal year ending October 31st,
2002.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains forward-looking statements that are based on the Company's
beliefs as well as assumptions made by and information currently available to
the Company. When used in this report, the words "believe," "expect,"
"anticipate," "estimate," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks,
uncertainties and assumptions, including without limitation, the overall
strength of the national securities markets, the Company's present financial
condition and the risks and uncertainties concerning the availability of
additional capital as and when required, technological changes, increased
competition, and general economic conditions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, or
projected. The Company cautions potential investors not to place undue reliance
on any such forward-looking statements, all of which speak only as of the date
made.
OVERVIEW
GSI Technologies USA specializes in offering broadcasting solutions principally
for out home advertising, such as electronic billboards, interactive advertising
kiosks and any type of animated electronic screens with full video capabilities.
GSI USA's software enable user to transmit pinpoint animated information contact
as well as receive full motion video, graphics and audio files. GSI's software
and concept allows advertisers to reach more consumer on a daily bases and
permits to measure impact of their ads by interacting with consumer.
RESULTS FROM OPERATIONS
During the fiscal year from November 1, 2001 to October 31, 2002, GSI USA
incurred a loss of $1,552,752 or $0.06 per share versus a loss of $2,589,345 or
$0.12 per share in the same period in the prior year. The current year loss can
be attributed to limited revenue generated as well as a 1.1 million loss on
write off of an affiliate note receivable.
REVENUES
$23,750 in revenue was recognized during the current fiscal year versus $229,793
for the same period in the prior year. These revenues are related to the sale of
products, as well as a sub-license sold to Groupe Solcom International France
S.A.S. ("Groupe Solcom") giving it commercialization rights for the territory of
London, England, Nantes, France and a sub-license sold to GSI Technologies ("GSI
Canada") giving it commercialization rights for the territory of Canada.
Cost of revenues and direct operating costs
According to the master license agreement with GSI Canada, GSI USA owns 60% of
the price of any sub-license it sells to a new licensee. This amount is payable
to GSI Canada by the end of the calendar quarter in which the sub-license is
granted its sub-license. GSI USA has incurred $10,634 in direct operating cost
for the current fiscals year versus $121,797 for the same period in the prior
year.
Operating expenses
During the current fiscal year ended October 31st, 2002, GSI USA has incurred
$407,655 in operating expenses versus $1,752,839 for the same period in 2001.
The decrease is attributable primarily to a drastic cut back in operations for
the current year.
Other income
During the current fiscal year ending October 31st, 2002, $1,158,213 in other
expenses were realized compared to $944,503 of other expenses in the prior year.
These amounts are primarily attributable to the write offs of the Loss on
Affiliate note receivables and advances.
Liquidity and capital resources
At October 31, 2002 GSI USA had zero cash as compared to $6,019 at October 31,
2001. Cash used in operating activities during the year ending October 31, 2002
was $382,749, which was mainly attributable to the net cash loss from operations
plus changes in net operating assets and liabilities.
Cash used by investing activities during the current year are comprised of
purchases of property and equipment totaling $33,502. Cash provided by investing
activities during the prior year reflected additional short-term loans to GSI
Canada in the amount of $801,656.
Cash provided from financing activities during the current year of $410,232
include the net effect of short-term borrowing through note payables as well as
proceeds from an investment group. Cash provided from financing activities
during the prior year of $519,469 reflects a private placement as well as
funding provided by issuance of Notes Payable.
MANAGEMENT DISCUSSION AND ANALYSIS
Since beginning of our operations we worked closely with an affiliate company,
"GSI Canada" (GSIC). The overall market strategy was that GSI Technologies USA
Inc. (GSIUS) developed business through its unique understanding of the
advertising industry, notably in providing custom, software, sales services and
products to customers for electronic, out of home, advertising media
applications and needs. We depended on GSIC as the technology developer, and in
our dealings with that company, acquired exclusive licensing rights agreement on
proprietary software technology.
As such, GSIUS has advanced funds to GSIC for the addition of significant
upgrades and additional intellectual property of GSIUS to that base software.
In this regard, we have in the past, from time to time, supported our
affiliate's development of technologies by advancing funds to enhance our
modular software applications and allow us to remain ahead of competition. In
addition, we had co-located certain of our activities with the affiliated
company to ensure proximity to the development team and shared some of these
costs (leases, communications, IT, etc.).
In the later part of 2001, GSIC was forced to file for receivership in Canada
due to extraordinary circumstances and a downturn in overall market conditions.
As such, in the period beginning November 2001 to Mid September 2002, GSIC had
to shut down most of its operations and was not able to repay advances to our
corporation or to provide us with necessary services.
During the course of 2002, GSIUS negotiated new agreements directly with
suppliers to reduce our costs, while remaining a viable, stand-alone business
having lost the services of GSIC. Significant downsizing at GSIUS accompanied
this event, in an effort to cut costs, re-consider our business plan, and
re-establish the Company's business foundation at time of turmoil in the
electronic advertising industry in our core markets of the USA and Europe. An
example of cost saving measures was to lease new offices facilities and move our
operations from a $20,000.00 monthly rent to $2,500.00. Further, we didn't renew
any employment contracts and negotiated our way out of consulting contracts to
bring our operations to minimize expenses.
At the end of fiscal year October 31st, 2002, we decided to take a right off on
our affiliate loan for an approximate value of $1,145,792.00.
We have negotiated a loan agreement allowing us to resolve most of pending
financial issues and reduce our payables considerably by end of October 2002 and
anticipate completing our restructuring program by end of next quarter. We are
currently investigating the potential of transforming certain loans and
liabilities into equity partnerships and to seek into the possibility of raising
new capital in the Corporation.
Based on a solid foundation, the Company anticipates a rebuilding phase in early
Fiscal 2003. We have initiated discussions with both customers and new suppliers
to move forward with initial phase of upgrading and developing our own
proprietary technology, in order to reduce our dependence on third party
services and to build a long-term solution for the best interest of our
customers and corporation's shareholders.
Our past experience allowed us to design and tailor an application plan based on
pilot projects and market tests in real situation, with greater possibilities,
more efficiencies, more durability and stability supported and combined with
upgrades of hardware and other software development available in the industry.
Although, our affiliate's situation affected our sales potential, we maintained
our 5-year relationship with a major customer based in the USA and one of the
world's largest out-of-home media corporation. In the later part of year 2002,
we have significantly moved forward to reach a new business agreement with that
company to tailor new software in order to support their needs of worldwide
development of electronic out-of-home media. At year end of Fiscal 2002, we
received a purchase order for the first phase for a value of $30,000.00 and
agreed with the Client's management team to negotiate through the course of year
2003 a longer term plan with more appropriate cost structure.
Their specifications are based on a 3 phase development plan, in which we
eagerly anticipate closure soon after year end 2002. While preliminary, that
agreement would call for the first beta version to be delivered by the end of
March 2003. The second phase will be initiated after testing of version I by the
Client's engineering team and GSI's R&D team.
We are currently preparing all necessary documentation to file and qualify for
Canadian Government R&D programs for tax credit benefits and employees
sponsoring program. These incentive programs will help us develop and maintain
leading edge technology at a cost effective ratio for the benefit of our
Corporation.
In July 2002, we completed a Letter of Intent with a Californian based
Entertainment Company specialized in Internet market content. The agreement
calls for the Client to install a network of full motion video plasma screens in
approximately 200 preferred locations in the United States. As of year-end, we
have been informed that our customer has succeeded in signing in over 100
locations and anticipates starting installation during the month of March 2003.
We have negotiated a 10-year licensing agreement starting when the networks
begin its operations, management of the network contract and content production
service agreement. Based on our customer development plan, we anticipate
starting to ramp up our revenues by summer 2003.
We have initiated discussions for strategic alliances and potential partnerships
with new equity partners and allied strategic partners and anticipate new
results at the outset of Fiscal 2003.
We strongly believe all these measures will help us re-establish our business
presence and build value for the benefit of our Corporation and shareholders.
ITEM 7. FINANCIAL STATEMENTS
Attached is Appendix A containing the following information:
- Independent Auditor's Report - Balance Sheets as of October 31st, 2002 and
2001 - Statements of Operations for the years ended October 31st, 2002 and
2001.
- Statements of Stockholders' Equity (Deficiency) for the years ended October
31st, 2002 and 2001.
- Statements of Cash Flows for the years ended October 31st, 2002 and 2001.
- Notes to Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT:
(a) Directors and Officers.
Our executive officers and directors are listed below. The term of each director
is for one year.
Name Office Age
------------------- --------------------------- --------
Rene Arbic Chief Executive Officer 50
President and Director
(Since September 18, 2001)
Marc Cote Director 42
(Since October 23, 2000)
Marie El-Ahmar Eid Secretary of the board 40
(Since May 27, 2002)
RENE ARBIC
Mr. Arbic has served on multiple boards of technologies companies after retiring
from Bell Canada in 1996, where he occupied multiple functions as well in
technical positions than management. In 1997, he was cofounder of a
telecommunication consultant firm name Rave Communications. In 1997, he was
cofounder of a publicly traded company: Bridgepoint International. Bridgepoint
built and operated colocation central offices facilities in multiple cities in
North America. Mr. Arbic will bring a long experience in marketing and
management to GSI as a board member.
MARC COTE
A graduate in civil law from the University of Ottawa and a member of the Quebec
Bar since 1985, Mr. Cote is a senior partner in the Montreal law firm of Labelle
Bourdreault Cote. He currently specializes in the area of commercial law.
MARIE EL-AHMAR EID
A graduated from Lebanese University in Beyrouth in Management of Networks
Technologies since 1983. She has occupied multiple functions at the National
Bank of Canada from 1993 to 1999. In 1999, she was hired by GSI Technologies USA
as an Executive Assistant to the President and CEO. In year 2001 she became
Human Resources Manager and Business Development Manager. She became board
member of GSI on May 27, 2002.
(b) Section 16(a) Beneficial Ownership Reporting Compliance.
Not applicable
ITEM 10. EXECUTIVE COMPENSATION
During the fiscal year, November 1st, 2001 to October 31st, 2002, the officers
and directors of the corporation, considering the situation of the company's
cash flow availability adopted a resolution accepting working without
remuneration.
The objectives of the principals of the corporation were to restructure, refocus
and re-capitalize the corporation and resolve all pending legal issues before
allowing any benefits to individuals. Only necessary expenses were authorized to
officers of the corporation during the fiscal year ending October 31st, 2002.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended October 31, 2002 to each of the Named Executive Officers:
AGGREGATED FISCAL YEAR-END OPTION VALUES
There were no option exercises by the Named Executive Officers during the fiscal
year ended October 31,2002. The following table sets forth information with
respect to the number and value of securities underlying unexercised options
held by the Named Executive Officers as of October 31, 2002:
(1)The option's program has been temporarily suspended and postponed until
further notice for restructuring program reasons. The option program has
been created on a merit base for employees who would perform and achieve
budgets and targets, helping the corporation to grow. Since they haven't
been any employee in the corporation during fiscal year ending October
31st, 2002, no options were granted.
AGGREGATED FISCAL YEAR-END OPTION VALUES
There were no option exercises by the Named Executive Officers during the fiscal
year ended October 31,2001. The following table sets forth information with
respect to the number and value of securities underlying unexercised options
held by the Named Executive Officers as of October 31, 2001:
The Company has no arrangement for the remuneration of its directors. No
remuneration was paid to the directors during the year ended October 31, 2002.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial stock
ownership of GSI's executive officers and directors, each person known by GSI to
own five percent or more of the outstanding shares of its Common Stock, as well
as all officers and directors as a group as of October 31, 2002.
* under 1%
------------
(1) Held by 3633730 Canada Inc. which is 100% owned by our former President, Mr.
J. Michel de Montigny. Includes 260,954 shares underlying currently exercisable
warrants and which expired on January 31, 2002 and were not exercised.
(2) Held by 3633632 Canada Inc. which is 100% owned by our former President, Mr.
J. Michel de Montigny. Includes 347,938 shares underlying exercisable warrants
and which expired January 31, 2002 and were not exercised.
(3) Held by Totalcom Inc. which is 100% owned by our former President, Mr. J.
Michel de Montigny. Includes 34,794 shares underlying exercisable warrants and
which expire January 31, 2002.
(4) Represents 500,000 shares underlying exercisable warrants held directly by
our former President, Mr. de Montigny, which expired January 31, 2002 and were
not exercised.
(5) Represents one-third of the 500,000 shares subject to an option granted to
Mr. de Montigny on October 2, 2000 which vest over a three-year period which
begins December 18, 2000 and which expires seven years from the date granted.
Since Mr. de Montigny has resigned on September 2001, only 2/3 of the options
were granted.
(6) Represents 50,000 shares underlying exercisable warrants held by Mr. Hone
and which expired January 31, 2002. They were not exercised
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial stock
ownership of GSI's executive officers and directors, each person known by GSI to
own five percent or more of the outstanding shares of its Common Stock, as well
as all officers and directors as a group as of October 31, 2002.
Officers and Directors:
Rene Arbic, President & CEO, certificate no: 1499 400,000 shares
Marc Cote, Director, certificate no: 1504 200,000 shares
Over 5% ownerships:
3633730 Canada Inc., owned by J. Michel de Montigny 7,754,424 shares
Craig Perry 2,000,000 shares
(1) Held by 3633730 Canada Inc. which is 100% owned by our former President, Mr.
J. Michel de Montigny. Includes 260,954 shares underlying currently exercisable
warrants and which expired on January 31, 2002 and were not exercised.
(2) Held by 3633632 Canada Inc. which is 100% owned by our former President, Mr.
J. Michel de Montigny. Includes 347,938 shares underlying exercisable warrants
and which expired January 31, 2002 and were not exercised.
(3) Held by Totalcom Inc. which is 100% owned by our former President, Mr. J.
Michel de Montigny. Includes 34,794 shares underlying exercisable warrants and
which expire January 31, 2002.
(4) Represents 500,000 shares underlying exercisable warrants held directly by
our former President, Mr. de Montigny, which expired January 31, 2002 and were
not exercised.
(5) Represents one-third of the 500,000 shares subject to an option granted to
Mr. de Montigny on October 2, 2000 which vest over a three-year period which
begins December 18, 2000 and which expires seven years from the date granted.
Since Mr. de Montigny has resigned on September 2001, only 2/3 of the options
were granted.
(6) Represents 50,000 shares underlying exercisable warrants held by Mr. Hone
and which expired January 31, 2002. They were not exercised.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
We did not file any reports on Form 8-K during the last quarter of the period
covered by this report.
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.
GSI TECHNOLOGIES USA INC.
Dated: January 30th, 2003 By: /s/Rene Arbic
---------------------------
Rene Arbic
CEO & Chairman of the Board
Dated: January 30th,2003 By: /s/Marie El-Ahmar Eid
---------------------------
Marie El-Ahmar Eid
Director
Dated: January 30th, 2003 By: /s/Marc Cote
---------------------------
Marc Cote
Director
APPENDIX A
GSI TECHNOLOGIES USA INC.
FINANCIAL STATEMENTS
INDEX
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . F-1
Balance Sheet as of October 31, 2002 and 2001. . . . . . . . F-2
Statements of Operations for the years ended
October 31, 2002 and 2001. . . . . . . . . . . . . . . . . . . . F-3
Statements of Stockholders' Equity (Deficiency)
For the years ended October 31, 2002 and 2001. . . . . . . . F-4
Statements of Cash Flows for the year ended
October 31, 2002 and 200 . . . . . . . . . . . . . . . . . . . . F-5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . F-6
F-1
Mark Cohen C.P.A.
1772 East Trafalgar Circle
Hollywood, Fl 33020
(954) 922 - 6042
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
GSI Technologies USA Inc.
We have audited the accompanying balance sheet of GSI Technologies USA Inc. as
of October 31, 2002 and 2001 and the related statements of operations,
shareholders' equity (deficiency) and cash flows for the years then ended. 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 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 GSI Technologies USA Inc. at
October 31, 2002 and 2001, and the results of its operations and its cash flows
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has experienced an operating loss that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 5. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Mark Cohen
----------------
Mark Cohen C.P.A.
A Sole Proprietor Firm
Hollywood, Florida
January 31, 2003
F-2
GSI TECHNOLOGIES USA INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
October 31, 2002 October 31, 2001
------------------ ------------------
ASSETS
------
Current Assets
Cash and cash equivalents $ - $ 6,019
Receivables, net (principally related party) - 1,619,292
------------------ ------------------
Total current assets - 1,625,311
Property and equipment, net 63,302 36,248
Intangible assets, net 188,611 283,567
Other assets - 19,908
------------------ ------------------
TOTAL ASSETS 251,913 1,965,034
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable 102,749 733,080
Deferred Revenue - 17,500
Notes Payable - short term 334,837 68,273
Investment proceeds liability 143,623 -
Other current liabilities 126,487 176,321
------------------ ------------------
Total current liabilities 707,696 995,174
Stockholder's Equity
Common Stock, class A, $1.00 par value; authorized - -
5,000,000 shares; issued and
outstanding none in 2002 and 2001
Common Stock, class B, $.001 par value; authorized 26,291 24,502
55,000,000 shares; issued and
outstanding - 26,291,023 and
24,502,134 shares respectfully
Paid in Capital 5,243,740 5,118,419
Deficit accumulated during the development
stage (5,726,201) (4,173,450)
Accumulated other comprehensive income 388 388
------------------ ------------------
Total Shareholder's Equity (455,783) 969,859
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 251,913 $ 1,965,034
================== ==================
Read the accompanying summary of significant accounting notes to financial
statements, which are an integral part of this financial statement.
F-3
GSI TECHNOLOGIES USA INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF INCOME
Year Ended Year Ended
October 31, 2002 October 31, 2001
------------------ ------------------
Revenues $ 23,750 $ 229,793
Cost of Sales 10,634 121,797
------------------ ------------------
Gross Profit 13,116 107,997
Operating Expenses:
Marketing 55,602 92,298
Management and administrative fees 11,897 707,533
Salaries and related costs 45,275 229,770
Rent 71,334 250,904
Financing expense 32,774 15,000
Professional fees 42,920 91,992
Consulting 13,165 31,914
Depreciation 3,893 3,893
Amortization 96,231 95,382
Travel - 46,361
Other selling, general and administrative 34,563 187,791
------------------ ------------------
Total operating expenses 407,655 1,752,839
Loss before other income (expense) (394,539) (1,644,842)
Other income (expense):
Interest income (principally related party) 317,275
Interest expense (principally related party) (22,459) (111,596)
Loss on Affiliate note receivable and advances (1,145,792) (1,033,652)
Equity in net earnings (loss) of affiliates - (25,000)
Foreign exchange gain (loss) 11,319 (54,562)
Loss on disposal of assets (1,280) (36,968)
------------------ ------------------
Total other income (expense) (1,158,213) (944,503)
------------------ ------------------
Net Loss (1,552,752) (2,589,345)
================== ==================
Basic weighted average common shares
outstanding 26,175,802 22,403,444
================== ==================
Basic Loss per common share $ (0.06) $ (0.12)
================== ==================
Read the accompanying summary of significant accounting notes to financial
statements, which are an integral part of this financial statement.
F-4
GSI TECHNOLOGIES USA INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
Common Class A Receivable
--------------------------------------------- Paid in from sale
Shares Amount Shares Amount Capital of stock
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Balance, October 31, 2000 - - 20,543,636 20,544 1,748,131 (13,200)
Dec 20, 2000 - sale of Class B through private placement 125,000 125 124,875
Dec 20, 2000 - cancellation of share subscription (12,000) (12) (13,188) 13,200
Dec 20, 2000 - cancellation warrant exercise (24,764) (25) (27,216)
February 13, 2001 - settlement of commission payable 25,000 25 4,975
Apr 02, 2001 - sale of Class B through private placement 400,000 400 99,600
Apr 02, 2001 - settlement of comission payable 20,000 20 4,980
May 03, 2001 - settlement of notes payable 2,307,900 2,308 2,971,379
August 13, 2001 - settlement of consulting fees 6,250 6 5,994
September 6, 2001 - settlement of advances from
affiliate 1,111,112 1,111 198,889
Net loss - 12 months ended October 31, 2001
Foreign currency translation adjustment
-----------------------------------------------------------------------
Balance, October 31, 2001 - - 24,502,134 24,502 5,118,419 -
February 7, 2002 - settlement of liabilities 1,788,889 1,789 125,321
Net loss - 12 months ended October 31, 2002
-----------------------------------------------------------------------
Balance, October 31, 2002 - - 26,291,023 26,291 5,243,740 -
=======================================================================
Accumulated
other Total
Accumulated Comprehensive Shareholder's
Deficit Income/(loss) Equity
-------------------------------------------
-------------------------------------------
Balance, October 31, 2000 (1,584,105) 386 171,756
Dec 20, 2000 - sale of Class B through private placement 125,000
Dec 20, 2000 - cancellation of share subscription -
Dec 20, 2000 - cancellation warrant exercise (27,240)
February 13, 2001 - settlement of commission payable 5,000
Apr 02, 2001 - sale of Class B through private placement 100,000
Apr 02, 2001 - settlement of comission payable 5,000
May 03, 2001 - settlement of notes payable 2,973,687
August 13, 2001 - settlement of consulting fees 6,000
September 6, 2001 - settlement of advances from
affiliate 200,000
Net loss - 12 months ended October 31, 2001 (2,589,345) (2,589,345)
Foreign currency translation adjustment 2 -
Balance, October 31, 2001 (4,173,450) 388 969,859
-------------------------------------------
February 7, 2002 - settlement of liabilities 127,110
Net loss - 12 months ended October 31, 2002 (1,552,752) (1,552,752)
Balance, October 31, 2002 (5,726,201) 388 (455,783)
============== ============== ===========
F-5
GSI TECHNOLOGIES USA INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
October 31, 2002 October 31, 2001
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (1,552,752) $ (2,589,345)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 100,124 99,276
Loss on write down of affiliate note receivable and advances 1,145,792 1,033,652
Issuance of stock for contract settlement - 11,000
Issuance of stock in lieu of salaries 38,995 -
Accrued Interest Expense (principally related party) 4,837 107,530
Accrued Interest Income (principally related party) - (317,274)
Changes in Operating assets and liabilities:
Receivables and other current assets - (39,744)
Other assets 19,908 41,196
Accounts Payable and Accrued Liabilities (206,658) 334,198
------------------ ------------------
Net cash provided by/(used in) operating activities (449,754) (1,319,511)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by/(used in) investing activities
Loan Receivable, principally related parties - 801,656
Purchase of property and equipment 33,502 -
------------------ ------------------
Net cash provided by/(used in) investing activities 33,502 801,656
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Notes payable, principally related parties - 118,391
Notes payable - affiliate - 203,318
Notes payable - third parties 266,609 -
Investment proceeds 143,623 -
Sales of common stock - 197,760
------------------ ------------------
Net cash provided by/(used in) financing activities 410,232 519,469
------------------ ------------------
Net increase (decrease) in cash and cash equivalents (6,019) 1,615
Cash and cash equivalents, beginning of period 6,019 4,404
------------------ ------------------
Cash and cash equivalents, end of period $ (0) $ 6,019
================== ==================
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of shares for settlement of note payables 3,173,687
Issuance of shares for settlement of liabilities 87,625
Read the accompanying summary of significant accounting notes to financial
statements, which are an integral part of this financial statement
F-6
GSI TECHNOLOGIES USA INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND 2001
(Audited)
October 31st 2002
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
GSI Technologies USA, Inc., formerly I.B.C. Corporation, was incorporated
in the State of Delaware on July 06, 1998. The Company participates in the
Information Technology (IT) industry, specializing in broadcasting solutions
principally for advertisers and others seeking to reach the greatest number of
"viewers per day" as well as to achieve other commercial and public service
objectives. The basic advanced technology available to the company by way of a
Master Licensing agreement is the successful integration of various hardware
components and specialty software for the transmission of broadcast signals in
real time via the Internet to remote locations. Using its universal transcoder
system, the company has a unique capability in broadcasting from a central
server to full video screens in remote locations anywhere in the world. The
system is capable of updating pinpoint information minute by minute by way of
video compressing systems and other fully automated software systems.
GSI Technologies USA, Inc. prepares its financial statements in accordance
with generally accepted accounting principles. This basis of accounting involves
the application of accrual accounting; consequently, revenues and gains are
recognized when earned, and expenses and losses are recognized when incurred.
Financial statement items are recorded at historical cost and may not
necessarily represent current values.
The accompanying financial statements reflect GSI Technologies USA, Inc. is no
longer considered to be in the development stage. From inception (July 6, 1998)
through October 31, 2001, the Company was considered to be in the development
stage.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management 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 and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Certain amounts included in the financial
statements are estimated based on currently available information and
management's judgment as to the outcome of future conditions and
circumstances. Changes in the status of certain facts or circumstances
could result in material changes to the estimates used in the preparation
of financial statements and actual results could differ from the estimates
and assumptions. Every effort is made to ensure the integrity of such
estimates.
Fair value of Financial Instruments
The carrying amounts reported in the balance sheet for cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities
approximate their fair values because of the immediate or short-term
maturity of these financial instruments.
Impairment of long-lived assets:
Long-lived assets held and used by the Company are reviewed for possible
impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of the assets to the future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. The fair value of an asset
is the amount at which the asset could be bought or sold in a current
transaction between willing parties, that is, other than in a forced or
liquidation sale. Quoted market prices in active markets are the best
evidence of fair value and shall be used as the basis for the measurement,
if available. If quoted market prices are not available, the estimate of
fair value shall be based on the best information available in the
circumstances. The estimate of fair value shall consider prices for similar
assets and the results of valuation techniques to the extent available in
the circumstances. Valuation techniques include the present value of
estimated expected future cash flows using a discount rate commensurate
with the risk involved, option-pricing models, matrix pricing and
fundamental analysis.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Cash and cash equivalents:
The Company considers all highly liquid investments with original
maturities of ninety days or less to be cash and cash equivalents. Such
investments are valued at quoted market prices.
Receivables:
The Company believes that the carrying amount of receivables at October 31,
2001 approximates the fair value at such date.
Property, equipment and depreciation:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives as follows when the property and equipment is placed in
service:
Estimate Useful Life (In Years)
Office Furniture and Equipment 10
Computer and Other Equipment 3
Leasehold Improvements 5
Repairs and maintenance are charged to operations as incurred, and
expenditures for significant improvements are capitalized. The cost of
property and equipment retired or sold, together with the related
accumulated depreciation, are removed from the appropriate asset and
depreciation accounts, and the resulting gain or loss is included in
operations.
License rights:
License rights are recorded at cost, less accumulated amortization.
Licenses are amortized to operations using the straight-line method over
the remaining term. The remaining term is 23 months for the current and
only license which the company has rights to.
Revenue Recognition
Revenue from sales of display units are recorded at the time the units are
delivered. Revenues from sub-licensing the master licensing agreement are
recognized over the term of the sub-licensing agreement.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which
provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. SAB 101 outlines the
basic criteria that must be met to recognize revenue and provide guidance
for disclosures related to revenue recognition policies. Management
believes that GSI Technologies USA, Inc.'s revenue recognition practices
are in conformity with the guidelines of SAB 101.
Earnings (Loss) per share calculation:
Earnings (Loss) per common share are calculated under the provisions of
SFAS No. 128, "Earnings per Share," which establishes standards for
computing and presenting earnings per share. SFAS No. 128 requires the
Company to report both basic earnings (loss) per share, which is based on
the weighted-average number of common shares outstanding during the period,
and diluted earnings (loss) per share, which is based on the
weighted-average number of common shares outstanding plus all potential
dilutive common shares outstanding. Options and warrants are not considered
in calculating diluted earnings (loss) per share since considering such
items would have an anti-dilutive effect.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Recent Accounting Pronouncements:
The Statement of Financial Accounting Standards Board (SFAS) No. 141,
"Business Combinations," was issued by the Financial Accounting Standards
Board (FASB) in July 2001. This Statement establishes standards for
accounting and reporting for business combinations. This statement requires
the purchase method of accounting to be used for all business combinations,
and prohibits the pooling-of-interests method of accounting. This Statement
is effective for all business combinations initiated after June 30, 2001
and supersedes APB Opinion No. 16, "Business Combinations" as well as
Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 38, "Accounting for Pre-acquisition Contingencies of
Purchased Enterprises." The adoption of this statement by the Company did
not have a material impact on its financial condition or results of
operations.
The Statement of Financial Accounting Standards Board (SFAS) No. 142,
"Goodwill and Other Intangible Assets," was issued by the Financial
Accounting Standards Board (FASB) in July 2001. This Statement addresses
how intangible assets that are acquired individually or with a group of
other assets should be accounted for in financial statements upon their
acquisition. This statement requires goodwill amortization to cease and for
goodwill to be periodically reviewed for impairment, for fiscal years
beginning after October 31, 2001. SFAS No. 142 supersedes APB Opinion No.
17, "Intangible Assets." The adoption of this statement by the Company did
not have a material impact on its financial condition or results of
operations.
The Statement of Financial Accounting Standards Board (SFAS) No. 143,
"Accounting for Asset Retirement Obligation," was issued by the Financial
Accounting Standards Board (FASB) in August 2001. This Statement will
require companies to record a liability for asset retirement obligations in
the period in which they are incurred, which typically could be upon
completion or shortly thereafter. The FASB decided to limit the scope to
legal obligation and the liability will be recorded at fair value. This
Statement is effective for fiscal years beginning after June 15, 2002. The
Company does not expect the adoption of this statement to have a material
impact on its financial condition or results of operations.
The Statement of Financial Accounting Standards Board (SFAS) No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," was
issued by the Financial Accounting Standards Board (FASB) in October 2001.
This Statement provides a single accounting model for long-lived assets to
be disposed of and replaces SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of." This Statement
is effective for fiscal years beginning after December 15, 2001. The
Company is evaluating the effect of the adoption of this statement.
NOTE 3 - DETAILS OF FINANCIAL STATEMENT COMPONENTS
October 31, 2002 October 31, 2001
----------------- -----------------
Property and Equipment:
Furniture and fixture 38,934 38,934
Computer and other equipment 10,581 -
Leasehold improvements 22,921 2,133
Less: Accum depreciation & amortization 9,134 4,819
----------------- -----------------
Property and equipment, net $ 63,302 $ 36,248
================= =================
Intangible Assets:
License rights
(Acquired from affiliate and recorded at
predecessor basis with the cost over such
basis recorded as a dividend to affiliate).
Accumulated amortization (286,168) (191,212)
---------- ----------
$ 188,611 $ 283,567
=========== ==========
NOTE 4 - NOTE PAYABLE
On May 15, 2002 the Company signed a promissory note for $330,000. The term
of the note is for 60 days and the rate of interest is prime plus 2%. The
Company also agreed to issue 2 million shares of Class B Common Stock to
the lender as part of the transaction. At October 31, 2002, the note had
not been paid back and the accrued interest totaled $4,837. As part of the
agreement, the Company will issue an additional 1,000,000 shares as a
default penalty. At October 31, 2002, the Company had not issued any shares
related to this matter, but a shareholder of the Company has forwarded to
the lender 1,114,000 shares as collateral for this transaction on behalf of
the Company.
NOTE 5 - COMMITMENTS AND CONTIGENCIES
Investment agreement
On September 10, 2002 the Company entered into an investment agreement
whereby an investment group will lend up to $300,000 from September 10,
2002 through February 1, 2003. In consideration for the proceeds, the
Company will issue on February 1, 2003, 6 million shares of Class B Common
Stock, 2,000,000 options at an exercise price of $0.10 expiring January 31,
2010 and 2,000,000 warrants at an exercise price of $1.20 expiring on
February 1, 2005. At October 31, 2002, $143,623 had been invested in the
Company.
Office leases
On September 1, 2002, the Company entered into a three year office lease
for its Montreal office with monthly payments approximately $2,000.
On October 1, 2002, the Company entered into a one year office lease for
its U.S.A office with monthly payments approximately $1,000.
The following is a schedule by years of future minimum rental payments
required under operating leases that have initial or remaining non
cancelable lease terms in excess of one year as of October 31, 2002:
Year ending October 31:
2003 - 35,000
2004 - 24,000
2005 - 20,000
2006 - -
2007 - - .
---------
$ 79,000
=========
Legal Matters
On October 8, 2002, the Company entered into a settlement and release
agreement with its landlord in its original downtown Montreal office whereby the
Company could cancel its lease with a one time payment of approximately $44,000.
This payment was made during October 2002.
The Company has been involved in litigation for unpaid business taxes with
the City of Montreal. The litigation has been settled in the amount of
approximately $23,000 of which approximately $5,000 has been paid by October 31,
2002.
In March 2002, a former Director and Officer along with another employee of
the Company have filed a civil action against the Company in the State of
Florida alleging unpaid wages and expense reimbursements totaling approximately
$225,000. The Company has not retained legal counsel on this matter, but
believes this complaint is without merit.
Consulting agreement
On May 27, 2002, the Company entered into a consulting agreement with a non
affiliated individual. The agreement is for one year and the annual amount of
the agreement is approximately $100,000.00
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company reported a net loss of $1,552,752
and $2,589,345 for the twelve months ended October 31, 2002 and 2001
respectively. As reported on the statement of cash flows, the Company incurred
negative cash flows from operating activities of $444,872 and $1,319,511 for
twelve months ended October 31, 2002 and 2001. Continuation of the Company as a
going concern is dependent upon obtaining sufficient working capital for
its planned activity. Additional capital and/or borrowings will be necessary in
order for the Company to continue in existence until attaining and sustaining
profitable operations. The Company is aggressively pursuing strategic alliances
which will bring a cash infusion, restructuring and forward looking business
plan.
NOTE 6 - RELATED PARTY TRANSACTIONS
Loss on write off - Note receivable and advances to affiliate
From November 01, 1999 through October 31, 2001, the Company advanced funds
to GSI Technologies (3529363 Canada Inc.), an affiliate of the Company in
exchange for promissory notes in order to continue to develop the concept
of GSITV.com, The Total Vision Network in Canada. The note has a term of
one year, but has been extended indefinitely bearing interest at prime plus
2%. At October 31, 2001, the outstanding balance due from GSI Technologies
(3529363 Canada Inc.) was $1,560,944 including interest and a write down of
the receivable of approximately $1,034,000 due to GSI Technologies (3529363
Canada Inc.) approval from the Quebec Superior courts ratification of
reorganization on October 9, 2001. At October 31, 2002, due to GSI
Technologies (3529363 Canada Inc.) continued financial difficulties, the
Company wrote off the remaining balance of the receivable along with
additional advances made during the year offset by a payable to a
subsidiary wholly owned by GSI Technologies (3529363 Canada Inc.). The loss
realized in the current year related to these items totaled approximately
$1,146,000.
Legal fees to Director's firm
During the course of the year the Company has retained legal services from
a firm in which a director of the Company, Marc Cote, is a partner. The Company
incurred $20,000 in legal fees from this firm in the current year.
Promissory note to Shareholder
On March 6, 2002 the Company signed a promissory note with a shareholder in
which the shareholder advanced $20,000 to the Company during the year. At
October 31, 2002 the entire promissory amount of $20,000 had been paid back to
the shareholder.
NOTE 7 - INCOME TAXES
The Company did not provide any current or deferred United States federal, state
or foreign income tax provision or benefit for the period presented because it
has experienced operating losses since inception. The Company has provided a
full valuation allowance on the deferred tax asset, consisting primarily of net
operating loss carry forwards, because of uncertainty regarding its
realizability.
NOTE 8 - SHAREHOLDERS' EQUITY
Common Stock
The Company has 5,000,000 shares of class A common stock which to date have
never been issued. Management has no intent of issuing any of these shares
and will be canceling these shares by filing an amendment to the articles
of incorporation with the State of Delaware.
NOTE 9 - WARRANTS AND OPTIONS
On August 01, 2000 the Company adopted a Long Term Incentive Plan whereby
directors, officers, certain key employees of the Company and its
affiliates as well as certain consultants to the Company would be granted
stock options. A maximum of 10% of the authorized Class B common shares
totaling 5,500,000 can be reserved and available for distribution pursuant
to the terms of the plan. On October 02, 2000, 925,000 options with an
exercise price of $1.25 had been issued to consultants and other non
employee affiliates for services rendered to the Company throughout the
year. The options vest one-third on December 18, 2000, one third on
December 18, 2001 and one third on December 18, 2002. The stock options
expire seven years from the date they were granted.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". The Company has determined that it will continue
to account for employee stock-based compensation under Accounting
Principles Board No. 25 and elect the disclosure-only alternative under
SFAS No. 123. The fair value of a share of non vested stock is measured at
the market price of a share on the grant date. The pro-forma effect to net
income and earnings per share is reflected as follows:
Year ended Year ended
FAS 123 "Accounting for stock based compensation Oct. 31, 2002 Oct. 31, 2001
------------- -------------
Paragraph 47 (a)
1.Beginning of year - outstanding
i.number of options/warrants 308,333 308,333
ii.weighted average exercise price 1.25 1.25
2.End of year - outstanding
i. number of options/warrants 308,333 308,333
ii. weighted average exercise price .25 1.25
3.End of year - exercisable
i. number of options/warrants 308,333 08,333
ii. weighted average exercise price 25 1.25
4.During the year - Granted
i. number of options/warrants 0 0
ii. weighted average exercise price 0 0
5.During the year - Exercised
i.number of options/warrants 0 0
ii.weighted average exercise price 0 0
6.During the year - Forfeited
number of options/warrants 0 0
weighted average exercise price 0 0
7.During the year - Expired
i.number of options/warrants 0 0
ii.weighted average exercise price 0 0
Paragraph 47 (b) Weighted-average grant-date fair value of options granted
during the year:
1.Exceeds market price 0 0
Paragraph 47 (c) Equity instruments other than options/warrants none none
NOTE 9 - WARRANTS AND OPTIONS (CONTINUED):
Paragraph 47(d) Description of the method and significant assumptions used
during the year to estimate the fair value of options:
(1)Weighted average risk-free interest rate 5.54% 5.54%
(2)Weighted average expected life (in months 39.00 51.00
(3)Weighted average expected volatility 0.00% 0
(4)Weighted average expected dividends 0.00 0
Paragraph 47(e) Total compensation cost recognized in income for 0 0
stock-based employee compensation awards.
Paragraph 47(f) The terms of significant modifications of none none
outstanding awards.
Paragraph 48 - Options outstanding at the date of the latest
statement of financial position presented:
1.(a) Range of exercise prices $1.10-$1.25 $1.10-$1.2
(b) Weighted-average exercise price 1.25 1.25
2. Weighted-average remaining contractual 39.00 51.00
life (in months)
Year ended Year ended
Oct. 31, 2002 Oct.31,2001
--------------- -------------
Net Income after pro-forma effect (1,552,752) (2,589,345)
Earnings per share after pro-forma effect $ (0.06) $ (0.12)
PART II - OTHER INFORMATION
ITEM 1. OTHER INFORMATION
--------------------------
On February the 4th, 2002, we became delinquent for late filing of our annual
report 10-K. On March 5th, 2002, we were temporarily delisted from the OTCBB.
On March the 8th, 2002, we filed our annual 10-K report for period ending
October 31st 2001. Since then, we have filed all of our reports on time. We are
currently responding to all questions from market makers and SEC pursuant to the
filing of our 15 C2-11 in fall 2002. We anticipate obtaining approval from
regulator authorities shortly.
On May 2002, GSI entered into a loan agreement with private party Mr. Craig
Perry for a sum of $330,000.00 USD, at bearing interest of prime rate +2%.
In Fall 2002, GSI completed a loan agreement with a private investment
corporation for a bridge loan of $300,000.00 USD, which could become an equity
investment by spring 2003, conditional to due diligence and approval of
regulatory authorities. These funds were utilized to resolve pending issues with
payables under governance of a law firm.
On December 2002, GSI entered into a loan agreement with private individual for
an amount of $320,000.00 USD which could be converted into stocks subject to
approval of regulator authorities.
We are currently negotiating other strategic partnerships and potential equity
investments in our Corporation based on new administration vision and business
plan possibilities.
BOARD STATUTE
Mr. Marc Cote has been a Director since October 23, 2000
On September 8th, 2001, Mr. Rene Arbic was nominated as President of GSI and
Chairman of the Board.
On May 27, 2002, Mrs. Marie El-Ahmar Eid was nominated as a new board member.
F-17
GSI TECHNOLOGIES USA INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND 2001
(Audited)
SIGNATURES
Pursuant to the requirements 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.
Dated: February 4, 2003 GSI TECHNOLOGIES USA INC.
By: /s/ Rene Arbic
--------------------------
Rene Arbic
Chief Executive Officer
CERTIFICATIONS
Each of the undersigned hereby certify that:
1. I have reviewed this quarterly report on Form 10-KSB of
GSI Technologies USA, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact, or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial position, results of operations, and cash flows of the
issuer as of, and for, the periods presented in this quarterly report.
4. I am responsible for establishing and maintaining disclosure controls and
procedures for the issuer and have:
(i) Designed such disclosure controls and procedures to ensure that
material information relating to the issuer is made known to me,
particularly during the period in which the periodic reports are
being prepared;
(ii) Evaluated the effectiveness of the issuer's disclosure controls and
procedures as of October 31, 2002; and
(iii) Presented in the report our conclusions about the effectiveness of
the disclosure controls and procedures based on my evaluation as of
the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the issuer's
auditors and the audit committee of the board of directors (or persons
fulfilling the equivalent function):
(i) All significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to
record, process, summarize and report financial data and have
identified for the issuer's auditors any material weaknesses in
internal controls; and (ii) Any fraud, whether or not material, that
involves management or other employees who have a significant role
in the issuer's internal controls; and
6. I have indicated in the report whether or not there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: February 4, 2003
Rene Rabic ____________________
Rene Rabic, CEO _______________, CFO