UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB / A
AMENDMENT 1
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended JANUARY 31, 2003.
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________ to ________
COMMISSION FILE NUMBER: 0-31229
GSI TECHNOLOGIES USA INC.
(Exact name of small business issuer as specified in its charter)
Delaware 65-0902449
----------------- -----------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 St Jacques Street, Suite 500, Montreal, Quebec H2Y 1S1, Canada
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(Address of principal executive offices)
(514) 282-9292
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(Issuer's Telephone Number, including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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[ ]
As of February 28, 2003, there were 26,291,023 shares of the issuer's $.001 par
value common stock issued and outstanding
Transitional Small Business Disclosure Format (Check one): Yes [ ] No[X]
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED JANUARY 31, 2003
PAGE
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
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Balance Sheet as of January 31, 2003 3
Statement of Operations for the Three Months ended January
31, 2003 and 2002 4
Statements of Cash Flows for the Three Months ended January
31, 2003 and 2002 5
Notes to Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 7-10
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11-12
Item 6. Exhibits and Reports on Form 8-K 12
Certifications 13
Signature 14
Exhibit 99.1 15
GSI TECHNOLOGIES USA, INC.
BALANCE SHEET
AT JANUARY 31ST, 2003
(UNAUDITED)
ASSETS
------
Current Assets
Cash and cash equivalents $ 179 505
Receivables - net 7 628
------------
Total current assets 187 133
Property and equipment, net 103 964
Intangible assets, net 164 872
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TOTAL ASSETS 455 970
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable 93 579
Accrued financing costs 67 100
Accrued default penalty 50 000
Accrued legal settlement 12 896
Notes Payable 635 126
Investment proceeds liability 241 778
Other current liabilities 88 376
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Total current liabilities 1 188 855
Stockholder's Equity
Common Stock, class A, $1.00 par value; authorized -
5,000,000 shares; issued and outstanding none
Common Stock, class B, $.001 par value; authorized 26 291
55,000,000 shares; issued and outstanding - 26,291,023
Paid in Capital 5 220 388
Accumulated deficit (5 978 436)
Accumulated other comprehensive income
Foreign currency translation (1 128)
------------
Total Shareholder's Equity (Deficit) (732 885)
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 455 970
============
Read the accompanying summary of significant accounting notes to Financial
statements, which are an integral part of this financial statement.
GSI TECHNOLOGIES USA INC
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31st, 2003 AND 2002
(UNAUDITED)
Three months
ended January 31,
--------------------------
2003 2002
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Revenues $ - $ 23 750
Cost of Sales - 10 634
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Gross Profit - 13 116
Operating Expenses:
Marketing 1 431 8 361
Salaries and related costs 11 201 38 996
Rent 9 000 37 723
Professional fees 9 635 6 572
Consulting 9 221 -
Software development 30 830
Depreciation 1 080 973
Amortization 23 739 23 846
Other selling, general and administrative 31 702 28 104
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Total operating expenses 127 839 144 574
Loss before other income (expense) (127 839) (131 458)
Other income (expense):
Interest income (principally related party)
Interest expense (principally related party) (9 308) (4 342)
Foreign exchange gain/(loss) 8 569
Equity in net earnings (loss) of affiliates - -
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Total other income (expense) (9 308) 4 227
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Net Loss (137 146) (127 231)
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Basic weighted average common shares outstanding 26 291 023 25 461 917
============ ============
Basic and diluted Loss per common share $ (0.01) $ (0.00)
============ ============
Read the accompanying summary of significant accounting notes to Financial
statements, which are an integral part of this financial statement.
GSI TECHNOLOGIES USA, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANAURY 31st, 2003 AND 2002
(UNAUDITED)
For the three months
ended January 31,
----------------------
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(137 146) $(127 231)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 24 819 24 819
Issuance of stock for contract settlement - 38 996
Accrued Interest Expense - 4 060
Changes in Operating assets and liabilities:
Receivables and other current assets (7 628) 26 593
Accounts Payable and Accrued Liabilities (47 933) 35 979
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Net cash provided by/(used in) operating activities (167 888) 3 215
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by/(used in) investing activities
Loan Receivable, principally related parties - (8 270)
Purchase of property and equipment (41 743) -
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Net cash provided by/(used in) investing activities (41 743) (8 270)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Notes payable 290 980 -
Investment proceeds 98 155 -
Sales of common stock - -
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Net cash provided by/(used in) financing activities 389 135 -
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Effect of exchange rate changes on cash and cash eqivalents - -
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Net increase (decrease) in cash and cash equivalents 179 505 (5 055)
Cash and cash equivalents, beginning of period - 6 019
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Cash and cash equivalents, end of period $ 179 505 $ 964
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
None
Read the accompanying summary of significant accounting notes to Financial
statements, which are an integral part of this financial statement.
GSI TECHNOLOGIES USA, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 -BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of GSI
Technologies USA, Inc. have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. The financial
statements reflect all adjustments consisting of normal recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results for the periods shown. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
These financial statements should be read in conjunction with the audited
financial statements and footnotes thereto included in GSI Technologies USA,
Inc.'s 10K-SB as filed with the Securities and Exchange Commission.
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and that effect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE 2 - NET EARNINGS (LOSS) PER SHARE
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 3 - DETAILS OF FINANCIAL STATEMENT COMPONENTS
January 31, 2003
Property and Equipment:
Furniture and fixture $ 38,934
Computer and other equipment 21,701
Leasehold improvements 53,543
Less: Accum depreciation & amortization 10,214
Property and equipment, net $ 103,964
NOTE 3 - DETAILS OF FINANCIAL STATEMENT COMPONENTS (CONTINUED):
Intangible Assets:
License rights - $ 474,779
(Gross amount of $800,000 acquired from affiliate and
recorded at predecessor basis with the cost over such basis of
$325,221 recorded as a dividend to affiliate).
Accumulated amortization (309,907)
$ 164,872
Amortization expense for the period 23,739
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 as an origination fee which was valued at .05 per share
totaling $100,000. On June 20, 2002, a shareholder of the Company indirectly
forwarded to the lender 1,114,000 shares as collateral for this transaction on
behalf of the Company thereby assigning 55.7% ($55,700) of the origination fee
liability from the lender to the shareholder. On June 20, 2002, another
shareholder of the Company directly forwarded to the lender 886,000 shares as
collateral for this transaction on behalf of the Company thereby assigning 44.3%
(44,300) of the origination fee liability from the lender to the shareholder. On
June 21, 2002 the Company agreed to issue 1,114,000 shares to the shareholder
who advanced his shares to the lender as well as issuing an additional 222,800
for his assistance in this matter. The 222,800 were valued at .05 per share
totaling $11,140 and reflected as interest in the October 31, 2002 financial
statements. At October 31, 2002, no shares had been issued to the shareholder
and the origination fee liability of $55,700 as well as the additional $11,400
in accrued interest remained reflected as liabilities in the October 31, 2002
financial statements . On June 21, 2002 the Company and the other shareholder
who forwarded 886,000 shares to the lender agreed that he would not receive any
shares from the Company for his assistance in the matter. The Company reflected
this as relieving the balance of the accrued origination fee liability with an
offset to Paid in Capital in the amount of $44,300 in the October 31, 2002
financial statements. 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 valued at .05 per
share totaling $50,000. At October 31, 2002, the Company had not issued any
shares related to default penalty. The default penalty amounts have been accrued
and reflected in the October 31, 2002 financial statements. At January 31, 2003,
the note had not been paid back and accrued interest of $5,362 has been
reflected in the financial statements. This note including all interest
associated with it was $340,199 at January 31, 2003.
On December 18, 2002, the Company signed a promissory note for $440,000 CAD,
approximately $290,980 USD with an unrelated party. The note bears interest of
11%. At January 31, 2003 interest of $3,946 has been accrued and reflected in
the financial statements. The balance of the note, including interest, at
January 31, 2003 is approximately $294,926 USD.
NOTE 5 - COMMITMENTS AND CONTIGENCIES
Investment agreements
On September 10, 2002 the Company entered into an investment agreement whereby
an investment group will advance 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 advanced to the Company. During the three month period ending
January 31, 2003, additional advances totaling $98,155 had been received. At
January 31, 2003, a total of $241,778 had been advanced to the Company.
In November 2002, the Company entered into an investment agreement whereby an
additional investment group will advance up to $125,000 from November 2002
through February 2003. In consideration for the proceeds, the Company will issue
on February 1, 2003, 2.5 million shares of Class B Common Stock, 2,000,000
options at an exercise price of $0.050 expiring January 31, 2010. During the
three month period ending January 31, 2003, no advances had been received.
Office leases
On September 1, 2002, the Company entered into a three year office lease for its
Monteal office with monthly payments approximately $2,000.
On October 1, 2002, the Company entered into a one year office lease for its
U.S. office with monthly payments approximately $1,000.
Legal Matters
We remain party to one proceeding initiated by another party 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. Legal counsel advises that, in his opinion, the case against the
company is without merit.
On September 2001, we received a law suit from a former employee for unpaid
salaries. We concluded an out of court settlement, on November 22nd, 2002, for
the amount of approximately $7,750 US ($12,000 CAD) as final settlement. The
$7,750 had been accrued and reflected in the October 31, 2002 financial
statements.
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 and the remaining $18,000 due to the City of Montreal has been reflected in
accounts payable at October 31, 2002. During the three month period ending
January 31, 2003 no payments were made towards this debt. At January 31, 2003,
the outstanding balance remained at $18,000.
NOTE 5 - COMMITMENTS AND CONTIGENCIES (CONTINUED):
In March 2002, a former Director, who was also an Officer in the Company, along
with another employee of the Company, 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 but
believed this complaint to be without merit and is in the process of negotiating
a settlement and release agreement with these two individuals in the amount of
approximately $13,000. The Company has received an oral confirmation to the
$13,000 settlement and release agreement. The $13,000 had been accrued and
reflected in the October 31, 2002 financial statements. The Company and these
individuals have agreed to sign the settlement agreement related to this matter
on February 27, 2003.
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.
NOTE 6 - SOFTWARE DEVELOPMENT
The Company is currently developing software for resale to prospective clients.
The Company capitalizes cost of materials, consultants, interest, and payroll
and payroll-related costs for employees incurred in developing computer software
for resale once technological feasibility is attained. Currently, the Company
has contracted with consultants to develop the software. Technological
feasibility is established when the Company has completed all planning,
designing, coding, and testing activities that are necessary to establish that
the product can be produced to meet its design specifications including
functions, features, and technical performance requirements. Until technological
feasibility is established, all costs associated with the software development
are considered research and development expenditures and are charged to
development expense in the period incurred.
NOTE 7 - 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 $137,146 (unaudited) for the three months
ended January 31, 2003 and a loss of $5,978,436 (unaudited) since inception. As
reported on the statement of cash flows, the Company incurred negative cash
flows from operating activities of $167,888 for the three months ended January
31, 2003. 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
continues to aggressively pursue strategic alliances which will bring a cash
infusion, restructuring and forward looking business plan.
NOTE 8 - RELATED PARTY TRANSACTIONS
Legal fees to Director's firm
During the three month period ending January 31, 2003, the Company has
retained legal services from a firm in which a director of the Company, Marc
Cote, is a partner. The Company incurred approximately $3,300 in legal fees from
this firm in the three month period ending January 31, 2003 .
NOTE 9 - INCOME TAXES
The provision for taxes on earnings for the three months ended January 31,
consist of:
2003 2002
Current
Federal $ - $ -
State - -
Foreign - -
Deferred
Federal $ - $ -
State - -
Foreign - -
At January 31, 2003, the Company has a Federal tax net operating loss ("NOL")
carryforward of approximately $5,000,000, which expires at various dates through
2015.
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 carryforwards, because of uncertainty regarding its
realizability.
NOTE 10 - 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.
The Company has 55,000,000 authorized shares of Class B common stock with a par
value of $.001. Each share entitles the holder to one vote.
During the three month period ending January 31, 2003, no shares were issued by
the Company.
NOTE 11 - 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 On
October 02, 2000, 925,000 options with an exercise price of $1.25 had been
issued to consultants and other non employee affiliates who rendered services to
the Company throughout the year. The services were rendered in the fiscal year
ending October 31, 2000. The expense for such services were reflected in the
financial statements ended October 31, 2000. As an incentive to maintain a
relationship with these consultants and non employee affiliates, the Company
issued these options for anticipated future services. These future services were
not received. 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 nonvested stock is measured at the market price of a share on the grant
date. The proforma effect to net income and earnings per share is reflected as
follows:
January January
FAS 123 "Accounting for stock based compensation 31, 2003 31, 2002
Paragraph 47 (a)
1.Beginning of year - outstanding
i. number of options/warrants 308,333 308,333
ii. weighted average exercise price 1.35 1.35
2. End of year - outstanding
i. number of options/warrants 308,333 308,333
ii. weighted average exercise price 1.35 1.35
3. End of year - exercisable
i. number of options/warrants 308,333 308,333
ii. weighted average exercise price 1.35 1.35
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
i. number of options/warrants 0 0
ii. weighted average exercise price 0 0
7. During the year - Expired
i. number of options/warrants
ii. weighted average exercise price
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
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%
Weighted average expected life (in months) 36.00 48.00
Weighted average expected volatility 0.00% 0
Weighted average expected dividends 0.00 0
Paragraph 47(e) Total compensation cost recognized in income for stock-based
employee compensation awards. 0 0
Paragraph 47(f) The terms of significant modifications of outstanding awards. none none
Paragraph 48 - Options outstanding at the date of the lateststatement of financial
position presented:
1. (a) Range of exercise prices $1.10-$2.00 $1.10-$2.00
(b) Weighted-average exercise price 1.35 1.35
2. Weighted-average remaining contractual life (in months) 36.00 48.00
Quarter ended Quarter ended
January 31, 2003 January 31, 2002
Net Income after proforma effect (137 146) (127,231)
Earnings per share after proforma effect $ (0.01) $ 0.00
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
Explanatary Note.
This Amendment No. 1 on Form 10-QSB/A (this "Amendment") amends the
Company's Quarterly Report on Form 10-QSB for the quarterly period ended January
31, 2003, originally filed on March 24, 2003 (the "Original Filing"). This
Amendment is being filed to amend the financial statement footnotes to address
SEC comments and certain parts of Part II of the Original Filing to clarify
certain disclosures and to include certain disclosures which were inadvertently
omitted from the Original Filing. In addition, in connection with the filing of
this Amendment and pursuant to the rules of the Securities and Exchange
Commission, the Company is including with this Amendment certain currently dated
certifications.
Except as described above, no other changes have been made to the Original
Filing. This Amendment continues to speak as of the date of the Original Filing,
and the Company has not updated the disclosures contained herein to reflect any
events which occurred at a date subsequent to the filing of the Original Filing.
FORWARD LOOKING STATEMENTS.
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, international war and terrorism 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 (GSI 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 users to transmit pin point animated information contact as well as
receive full motion video, graphics and audio files. GSI's software and concept
allows advertisers to reach more consumers on a daily basis and permits its
clients to measure the impact of their ads by interacting with the consumer.
RESULTS FROM OPERATIONS
3 months ending January 31, 2003 and 2002
During GSI's first quarter from November 1st,2002 to January 31st, 2003, GSI USA
incurred a loss of $137,146 versus a loss of $127,231 in the same period in
2001.
REVENUES
Zero in revenue was recognized during the current year quarter, versus
$23,750 for the same period in the prior year. This is related to sub-licensing
agreements realized over the respective terms.
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 zero in direct
operating cost for the current quarter, versus 10,634 for the same quarter in
the prior year.
OPERATING EXPENSES
During the three months ended January 31, 2003, GSI USA has incurred
$127,839 in operating expenses versus 144,574 for the same period in 2001. The
decrease was mainly attributable to lower rent due to relocation of our
corporate office
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2003 GSI USA had $179,505 in cash. Cash used in operating
activities during the three months ending January 31, 2003 was 167,888, 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 period reflects additional
short-term loans to GSI Canada in the amount of $41,743, which was for purchased
of business equipment
Net Cash provided from financing activities during the period was 389,135.
The result of all activities during the three-month period ending January
31, 2002 was a net increase of $179,505 in our cash position.
MANAGEMENT DISCUSSION AND ANALYSIS
GSI USA TECHNOLOGY
GSI Technologies USA Inc. has entered into relationship with LTS Networks, a
Corporation specialized in Network management and R&D software development. The
Corporation has given LTS a mandate to develop an entirely new family of digital
distribution products from the ground up. GSI USA over the past couple of years
has acquired
experience in serving digital network operators through various pilot projects,
therefore we believe our specifications will serve our customers more
adequately. Furthermore, we currently anticipate offering the first phase of our
products by the beginning of May 2003.
We have received significant interest from potential customers as well as
building our relationship with a client, Clear Channel International. We believe
we have made great strides in restructuring the Company and we have completed a
large part of our rebuilding phase with the goal of offering our customers and
shareholders a corporation with value based upon its own proprietary technology.
The markets' appetite for digital signage's solution has increased considerably
and many media operators are seeking to find a management solution that will
give them the best value for their investment.
Retail outlets and public facilities have begun to recognize the significance of
their potential of reaching large numbers of viewers on a daily basis. They are
beginning to realize that they can increase their own revenue base by offering
information content about their services as well as generating revenues through
recurring advertising revenues.
We believe our turn key solution has all the necessary tools to meet the new
emerging needs of the industry.
We have initiated and are pursuing discussions with potential partners for new
equity and strategic alliances. We anticipate results during the first half of
2003.
In July 2002, we completed a letter of Intent with a California based
corporation specializing 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 client has succeeded in sign up over 100 locations and
anticipates starting installation during March 2003. We have negotiated a 10
year licensing agreement starting when the Network begins its operations.
Network management and content production contract are currently been
negotiated.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 2001, we received a law suit from a former employee for unpaid
salaries. We concluded an out of court settlement, on November 22nd, 2002, for
the amount of approximately $7,750 US ($12,000 CAD) as final settlement. The
$7,750 had been accrued and reflected in the October 31, 2002 financial
statements.
In March 2002, a former Director, who was also an Officer in the Company, along
with another employee of the Company, 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 but
believed this complaint to be without merit and is in the process of negotiating
a settlement and release agreement with these two individuals in the amount of
approximately $13,000. The Company has received an oral confirmation to the
$13,000 settlement and release agreement. The $13,000 had been accrued and
reflected in the October 31, 2002 financial statements. The Company and these
individuals have agreed to sign the settlement agreement related to this matter
on February 27, 2003.
ITEM 2. CHANGES TO AUTHORIZED SHAREHOLDERS' CAPITAL
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Late filing 10-K : On February 4th, 2002, we became delinquent because we were
late filing our annual 10-KSB report. On March 5th, 2002, we were temporarily
delisted from the OTCBB. On March 8th, 2002, we filed our 10-KSB report for the
period ending October 31, 2001. Since then, we have filed all of our reports on
time. We are currently responding to comments from the NASD pursuant to the
fling of our Form C2-11 in Fall 2002. We anticipate obtaining approval from
regulatory authorities shortly.
On May 2002, GSI entered into a loan agreement with private party 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 equity, subject to
approval of regulatory authorities.
In end of December 2002, GSI entered into an agreement with LTS Networks to
eventually participate in the share capital structure of the corporation.
Subject to complete due diligence and standard accounting policies, we
anticipate closing by end of next quarter.
As of February 7, 2003 Mr. Rene Arbic resigned from his position as Chief
Executive Officer of GSI Technologies USA Inc. Our board directors is currently
evaluating candidates for his replacement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are contained in this 10-QSB:
Exhibit 99.1
CERTIFICATION
I, Gilles Addison, hereby certifie that:
I have reviewed this amended quarterly report on Form 10-QSB of GSI Technologies
USA Inc.;
Based on my knowledge, this 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 report; and
Based on my knowledge, the financial statements, and other financial information
included in this 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 report.
I am responsible for establishing and maintaining disclosure controls and
procedures for the issuer and have:
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; Evaluated the
effectiveness of the issuer's disclosure controls and procedures as of January
31st, 2003; and Presented in the report our conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;
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):
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 Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the issuer's internal controls; and
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: October 23rd, 2003
By: /s/ Gilles Addison
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Gilles Addison
President and CEO
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: October 23rd, 2003 GSI TECHNOLOGIES USA INC.
By: /s/ Gilles Addison
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Gilles Addison
President and CEO