As filed with the Securities and Exchange Commission on February 15, 2000
Registration No. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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GSI TECHNOLOGIES USA INC.
(Name of issuer in its charter)
Delaware 7319 65-0902449
(State or other jurisdiction (Primary Standard Indust- (I.R.S. Employer
of incorporation or organization) rial Classification Code) Identification No.)
2001 McGill College Avenue Irving Rothstein, Esq.
Suite 1310 Heller, Horowitz & Feit, P.C.
Montreal H3A 1G1 Quebec 292 Madison Avenue
(514) 940-5262 CANADA New York, New York 10017
(Address and telephone number (212) 685-7600
of registrant's principal executive (Name, address and telephone
offices and principal place of business) number of agent for service)
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Copies to:
Irving Rothstein, Esq.
Heller, Horowitz & Feit, P.C.
292 Madison Avenue
New York, New York 10017
Telephone: (212) 685-7600
Approximate date of commencement of proposed sale to public: At the
discretion of the selling stockholders.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Each Class of Securities Amount To Be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
to be Registered Registered Price Per Security(2) Offering Price(2) Registration Fee
<S> <C> <C> <C> <C>
Common Stock Class B, par value $0.001 7,733,206 $1.00(3) $7,733,206 $2,343.39
Common Stock Class B, par value $0.001 3,674,000(1) $1.10(4) $4,041,400 $1,224.67
Total 11,407,206(1) $11,774,606 $3,568.06
- -------------------------------------- ------------- ------------------------- -------------------------- ----------------
<FN>
(1) Includes 3,674,000 shares of Common Stock issuable upon exercise of
currently exercisable warrants. Pursuant to Rule 416, this
Registration Statement also covers any additional shares of Common
Stock which may be issuable by virtue of the anti- dilution
provisions in the warrants.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Based upon the price of a recent private offering.
(4) Exercise price.
</FN>
</TABLE>
<PAGE>
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION DATED, FEBRUARY 15, 2000
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GSI TECHNOLOGIES USA INC.
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11,407,206 Shares of Common Stock
This Prospectus covers 11,407,206 shares of the common stock, par
value $.001 per share, of GSI Technologies USA Inc. This figure includes
3,674,000 shares of common stock that we may issue in the future if currently
outstanding warrants are exercised. The common stock will be sold by the selling
stockholders identified under the section entitled "Selling Stockholders"
beginning on page 28. We will not receive any part of the proceeds from the
sale of any of these shares by the selling stockholders. However, we will
receive funds from the holders of the warrants if they choose to exercise their
warrants.
The Securities Offered Hereby Involve A High Degree Of Risk. Please
Read the "Risk Factors" Beginning On Page 3.
The selling stockholders will sell their shares of common stock at
various times for their own account (1) in the open market at the then
prevailing prices or (2) in private transactions at such prices as may be agreed
upon. The selling stockholders will pay all expenses with respect to the
offering and sale of these shares except the costs associated with the
registration of their shares and the preparation and printing of this
Prospectus.
---------------------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
Our principal executive offices are located at 2001 McGill College
Avenue, Suite 1310, Montreal Quebec H3A 1G1 CANADA. Our telephone number is
(514) 940-5262.
The date of the Prospectus is ________, 2000.
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AVAILABLE INFORMATION
Commencing April 16, 2000, we will be subject to the information
requirements of the Securities Exchange Act of 1934, as amended. This Act
requires us to file reports, proxy statements and other information with the
Securities and Exchange Commission. Copies of the reports, proxy statements and
other information we file can be inspected at the Headquarters Office of the
Securities and Exchange Commission located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at certain of its regional offices at the following
addresses:
o 7 World Trade Center, 13th Floor, New York, New York 10048; and
o 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the material we file may be obtained from the Public
Reference Section of the Commission, at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. at prescribed rates. The Commission also maintains a web site
that contains reports, proxy and information statements and other information
regarding us. This material can be found at http://www.sec.gov.
[Note - The TOC is placed here only for EDGAR]
TABLE OF CONTENTS
Page
Available Information 2
Risk Factors 3
Special Note Regarding
Forward-Looking Statements 9
Summary Historical Financial
Information 9
Plan of Operations 10
Use of Proceeds 13
Business 14
Management 22
Security Ownership of Certain
Beneficial Owners and Management 24
Executive Compensation 24
Certain Relationships and Related Transactions 25
Disclosure of Commission Position
on Indemnification for Securities
Act Liability 26
Description of Securities 26
Plan of Distribution 28
Selling Stockholders 28
Legal Matters 40
Experts 40
Financial Statements F-
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RISK FACTORS
You should carefully consider the following facts and other
information in this prospectus before deciding to invest in the shares. The
risks and uncertainties described below may not be the only ones we face. If any
of the following risks actually occur, our business, financial condition or
results of operations could be materially and adversely affected. In this event,
the trading price of our common stock could decline, and you may lose all or
part of your investment. Please see the "Special Note Regarding Forward-Looking
Statements" on page 9 of this Prospectus.
Risks Relating to our Viability
Since we have only a limited operating history, our business is difficult to
evaluate
We were incorporated in July 1998. We introduced our first products
in January 2000. Accordingly, we have only a very limited operating history, and
we face all of the risks and uncertainties encountered by early-stage companies.
Thus, our prospects must be considered in light of the risks, expenses and
difficulties associated with a new and rapidly evolving market for multimedia
entertainment and Internet technology. In sum, because of our limited history
and the youth and inherent risks of our industry, predictions of our future
performance are very difficult.
We have incurred substantial losses and anticipate continuing losses
From our inception in July 1998 through October 31, 1999, we
incurred an accumulated deficit of $259,530. We anticipate continuing to incur
significant losses until, at the earliest, we generate sufficient revenues to
offset the substantial up-front expenditures and operating costs associated with
developing and commercializing products utilizing our technology. There can be
no assurance that we will ever operate profitably. Our independent auditors have
included an explanatory paragraph in their report stating that recurring losses
during our development stage raise substantial doubt about our ability to
continue as a going concern.
We have no customers and generate no revenues
We have not entered into any agreements to utilize our technology
with any advertisers or retailers. We do not believe that we will generate
significant revenues in the immediate future. We will not generate any
meaningful revenues unless we obtain contracts with a significant number of
municipalities and major media groups. There can be no assurance that we will
ever be able to obtain contracts with a significant number of customers to
generate meaningful revenues or achieve profitable operations.
We need substantial additional financing
Our capital requirements relating to the commercialization of our
technology have been, and will continue to be, significant. We are dependent on
the proceeds of future financings in order to continue in business and to
develop and commercialize additional proposed products. We
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anticipate requiring at least $1.2 million in additional financing. There can be
no assurance that we will be able to raise the substantial additional capital
resources necessary to permit us to pursue our business plan. We have no current
arrangements with respect to, or sources of, additional financing and there can
be no assurance that any such financing will be available to us on commercially
reasonable terms, or at all. Any inability to obtain additional financing will
have a material adverse effect on us, such as requiring us to significantly
curtail or cease operations. See "Risk Factors - We plan to issue additional
shares which will dilute your holdings."
Risks Relating to Technology
There still remains some question regarding the efficacy of our technology
Although considerable time and financial resources were expended in
the development of our licensed technology, there can be absolutely no assurance
that problems will not develop which would have a material adverse effect on our
business. These potential problems include:
o the need for continued system refinement, enhancement and
development efforts which are subject to all of the risks
inherent in the development of new products and
technologies, including unanticipated delays, expenses,
technical problems or difficulties,
o the need to successfully adapt our software to satisfy
specific requirements of potential customers,
o the fact that since we have conducted only limited tests of
our hardware and software, we are uncertain if it will
perform all of the functions for which it has been designed
or prove to be sufficiently reliable in widespread
commercial use, and
o the fact that technologies as complex as those planned to be
incorporated into our product may contain errors which
become apparent only subsequent to commercial use.
Addressing these problems if they occur could delay our plans and
cause us to incur substantial additional costs.
Our infrastructure may not be reliable
Our operations will depend upon the capacity, reliability and
security of our system infrastructure. We currently have only limited system
capacity and will be required to continually expand our system infrastructure to
accommodate significant numbers of remote locations. Development and/or
expansion of our system infrastructure will require substantial financial,
operational and managerial resources. There can be no assurance that we will be
able to expand our system infrastructure to meet potential demand on a timely
basis or at a commercially reasonable cost. Our failure to develop and/or expand
our system infrastructure on a timely basis would have a material adverse effect
on us. In addition, we will be dependent upon online service providers for
access to our services.
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Our system infrastructure will also be vulnerable to computer
viruses, break-ins and similar disruptions from unauthorized tampering with our
computer systems. Computer viruses or problems caused by third parties could
lead to material interruptions, delays or cessation in service to our customers.
Inappropriate use of the Internet by third parties could also potentially
jeopardize the security of confidential information stored in the computer
systems of consumers. Security and privacy concerns of consumers may limit our
ability to develop a significant subscriber base.
Our systems or other systems on which we depend may fail
Our ability to generate revenues depends upon our ability to provide
continuous service. As a result, if our service is interrupted, our reputation
will be harmed and our customers may leave. Our systems and other systems upon
which we and our customers are dependent risk damage and/or disruption from
numerous forces, including:
o human error,
o natural disasters such as fire, floods, earthquakes and
storms,
o power loss,
o unannounced or unexpected changes in transmission protocols
or other technology,
o telecommunications failures, and
o sabotage or vandalism.
In addition to losing customers and our revenue base, we may be subject to legal
claims and be liable for losses suffered by our customers for disruption of
service or damage to customer equipment.
Risks Relating to Our Business Plan
Our business plan involves a new concept and it is uncertain if the market will
embrace our products
Our planned broadcasting solutions for reaching great numbers of
"viewers per day" represents a new business concept. As is typical in the case
of a new business concept, demand and market acceptance for a newly introduced
product is subject to a high level of uncertainty. Achieving market acceptance
for our new concept will require us to expend significant efforts and
expenditures to create awareness and demand by advertising agencies, multimedia
groups, municipalities and large retailers.
Our marketing strategy and preliminary and future marketing plans
may be unsuccessful and our plans are subject to change as a result of a number
of factors including:
o delays in our marketing efforts,
o changes in market conditions including the emergence of
potentially competitive products to our technology,
o the nature of possible license and distribution arrangements
which may or may not become available to us in the future,
and
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o regulatory and competitive factors.
If we are able to enter into satisfactory marketing and distribution
arrangements in the future, our success will be largely dependent on the success
of the advertisements and increased sales of their products. There can be no
assurance that our strategy will result in successful product commercialization
or that our efforts will result in initial or continued market acceptance for
our proposed services.
We face competition from larger and stronger companies
The markets that we are entering are intensely competitive. We
expect additional competition to come from the increasing number of new market
entrants who have developed or are developing potentially competitive products.
We will face competition from numerous sources, including:
o large media groups which may develop and market their own
competitive products and services,
o online and Internet service providers, and
o other entities with the technical capabilities and expertise
which would encourage them to develop and commercialize
competitive products.
Some of our competitors have certain advantages including,
o substantially greater financial, technical and marketing
resources;
o greater name recognition; and
o more established relationships in the industry
Our competitors may be able to utilize these advantages to
o expand their product offerings more quickly,
o adapt to new or emerging technologies and changes in
customer requirements more quickly,
o take advantage of acquisitions and other financing
opportunities more readily, and
o devote greater resources to the marketing and sale of their
products
The markets for our proposed products are characterized by rapidly
changing technology and evolving industry standards. Accordingly, our ability to
compete will depend upon our ability to continually enhance and improve our
software and our display products. There can be no assurance that we will be
able to compete successfully, that competitors will not develop technologies or
products that render our products obsolete or less marketable or that we will be
able to successfully enhance its products or develop new products.
We are dependent upon the success and growth of the Internet
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Part of our product development and marketing strategy is based upon
the Internet remaining a viable technology. The rapid growth of global commerce
and the exchange of information on the Internet and other online networks is
relatively new and still evolving, making it difficult to predict whether the
Internet will prove to be a long term viable technology. The Internet may not
prove to be a viable mechanism for communicating our messages to remote
locations due to inadequate development of the necessary infrastructure, such as
reliable network backbones, or complementary services, such as high speed
modems, to keep up with the anticipated traffic flow. If the necessary Internet
infrastructure or complementary services are not developed to effectively
support growth that may occur, our business, results of operations and financial
condition would be materially adversely affected.
We may find it difficult to market our products since they are a new concept
Our success is dependent on successful implementation of our
business plan. This involves developing and expanding our operations on a
profitable basis and developing non-traditional marketing and promotional
channels that would be available to promote third party products on a fee basis.
The Company is unaware of any other entity that has attempted to accomplish what
the Company proposed to do and there is no assurance that the Company will be
successful or that its marketing concept will be accepted in the industry or
result in the generation of significant revenues.
See "Business."
We may face liability because of the content transmitted over our systems
The liability we may face as a result of content disseminated
through our system could have a negative impact on our financial condition. The
law relating to the liability of businesses such as ours for content carried on
or disseminated through their system is currently unsettled. We could become
involved in litigation regarding the content transmitted over our system which
could create adverse publicity, significant defense costs and substantial damage
awards. In addition, because music content materials can be downloaded and may
be subsequently distributed to others, there is a potential that claims will be
made against us for defamation, negligence, copyright or trademark infringement
or other theories based on the nature and content of such materials. We could
also be exposed to liability in connection with the selection of materials that
may be accessible over our system. Claims could be made against us if material
deemed inappropriate for viewing by children could be accessed. While we intend
to carry insurance policies, our insurance may not cover potential claims of
this type or may not be adequate to cover liability that may be imposed or
related defense costs. There can be no assurance that we will not face claims
resulting in substantial liability for which we are partially or completely
uninsured. Any partially or completely uninsured claim against us would have a
material adverse effect on our ability to operate.
The protection of our proprietary information is limited
Our technology cannot be patented. We regard the hardware and
software we licensed as proprietary and intend to attempt to protect it with
copyrights, trade secret laws, proprietary rights
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agreements and internal nondisclosure agreements and safeguards. However, such
methods do not afford complete protection and there can be no assurance that
others will not independently develop know-how or obtain access to our know-how
or software codes, concepts, ideas and documentation.
We may be accused of infringing the proprietary rights of others
Our business may be adversely affected by a claim that we are
infringing the proprietary rights of others. We have not been notified that we
infringe the proprietary rights of third parties. However, we might face claims
of infringement in the future. Any claim, even if not meritorious, could be
time-consuming, result in costly litigation, or require us to modify our
business plan or enter into royalty or licensing agreements. Any royalty or
licensing agreements required might not be available at all or on terms
acceptable to us. Our inability to do any of the foregoing will have an adverse
impact on our ability to successfully remain in business.
General Business Risks We Face
The success of our business depends upon our ability to retain and hire the key
personnel we need
Our success depends upon the personal efforts of J. Michel de
Montigny and Michael Laplante, and other key personnel. Our success is also
dependent upon our ability to hire and retain additional qualified management,
marketing, technical, financial, and other personnel. Competition for qualified
personnel is intense and there can be no assurance that we will be able to hire
or retain additional qualified personnel. If we do not attract and retain
qualified management and other personnel we will be unable to successfully
implement our business plan.
We are subject to influence from a director and executive officer
One of our stockholders owns a large enough stake in us to have an
influence on matters presented to the stockholders. Our President, CEO and
Chairman, Mr. de Montigny, beneficially controls approximately 51% of our
outstanding common stock. Accordingly, he could determine, among other things,
the election and removal of directors and any merger, consolidation or sale of
all or substantially all of our assets. This concentration of ownership may
delay or prevent a change in control, merger, consolidation, takeover or other
business combination involving us. This may discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us. As a
result, this concentration of ownership may have an adverse effect on our value.
We plan to issue additional shares which will dilute your holdings
We currently contemplate the need to make a private offering of our
shares. In any such offering we are likely to offer shares of our common stock.
Also, we currently have approximately an additional 35 million shares that our
Board of Directors can issue in their sole discretion. If we issue
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these additional shares you will find your holdings drastically diluted, which
means that you will own a smaller percentage of our stock, your book value per
share will be reduced and the value of your holdings will decrease.
There are other factors that could have a negative impact on the market price of
our stock
o Under applicable state law, restrictions are placed on the
ability of persons to make take-over bids. These
restrictions could allow our management to entrench itself
which would inhibit take-over attempts generally. Since
take-over bids usually cause the price of stock to rise, our
shareholders would likely not get this benefit.
o We have never paid any dividends and do not foresee paying
any dividends in the future. This may depress the price of
our stock as it would not appeal to certain investors.
o There is currently no public market for our stock.
Accordingly, if a market develops no assurance can be given
that it will be sustained. Any market that develops will in
all likelihood be limited with fluctuating and volatile
prices.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Risk Factors," Plan of
Operations," "Business" and elsewhere in this prospectus are forward-looking
statements that involve risks and uncertainties. These forward-looking
statements include statements about our plans, objectives, expectations,
intentions and assumptions and other statements contained in this prospectus
that are not statements of historical fact. You can identify these statements by
words such as "may," "will," "should," "estimates," "plans," "expects,"
"believes," "intends" and similar expressions. We cannot guarantee future
results, levels of activity, performance or achievements. Our actual results and
the timing of certain events may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a discrepancy
include those discussed in "Risk Factors" and elsewhere in this prospectus. You
are cautioned not to place undue reliance on any forward-looking statements.
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following selected financial data for the year ended October
31, 1999 and for the period July 6, 1998 (inception) through October 31, 1999 is
derived from our audited financial statements included in this Prospectus.
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The following data should be read in conjunction with our
financial statements and those of our Predecessor.
Statement of Operations Data
For the Year From 7/6/98
Ended 10/31/99 (Inception)
to 10/31/99
Net Revenues $ -0- $ -0-
Operating Loss $ 259,530 $ 259,530
Income Taxes $ -0- $ -0-
Net Loss $ 259,530 $ 259,530
Loss Per Share $ (.042) $ (.042)
(Basic and Diluted)
Balance Sheet Data
October 31, 1999
Working Capital $ (15,853)
Total Assets $ 1,238,812
Total Liabilities $ 456,857
Stockholders' Deficit $ (259,530)
PLAN OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and related notes which are included elsewhere in this
prospectus. Statements made below which are not historical facts are
forward-looking statements. Forward-looking statements involve a number of risks
and uncertainties including, but not limited to, general economic conditions,
our ability to complete development and then market our products and services,
competitive factors and other risk factors detailed herein. See "Risk Factors"
and "Special Note Regarding Forward-Looking Statements."
We were initially formed in July 1998 and are currently still in
the development phase and preparing to begin commercial activity in the second
quarter of 2000.
Under a master license acquired in October 1999 from our Canadian
affiliate, GSI Technologies (3529363 Canada Inc.), we now have access to some of
the most advanced technology currently available in the field of electronic
advertising and interactive information display. In addition to production
capacity, through this continuing association we also benefit from their ongoing
research and development and the opportunity to broaden and enhance our product
lines.
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After four years of design and development, the full array of
operating software and systems were made available to us by GSI Technologies on
January 15, 2000. The most important technical success factors have been
assuring reliable on-line broadcasting from central locations to remote
locations and the design of the display units, including the encasements for the
computer hardware components and glass protectors for the screens that are
impervious to various climatic conditions and vandalism.
We believe we are currently in the pre-launch phase, and are now
in a position to offer a diverse range of products designed around the concept
of providing useful information and services in an attractive, convenient format
to people in their everyday environments. These products include the various
street-level display units--the interior or Citycolumn display units, the
exterior or Novacolumn display units (called "urban furniture" or "street
furniture" in the language of the major North American and European
advertisers); and the bus shelter or Servicolumn units. Following the assembly
of four prototype units in January and the completion of the alpha version of
the software and related systems, on January 15 we began a thirty day period of
beta testing. We anticipate production operations will be launched in late March
2000.
The operating plan for the year-ending October 31, 2000 calls for
the sale and installation of a total of 280 display units; consisting of 250
Citycolumn units and 30 Novacolumn units. (While we believe there is the
potential for some orders of the Servicolumn units before the end of the year,
we have not reflected this in the baseline plan.) We anticipate 40 Citycolumn
units will be installed by the end of March 2000, continuing at a rate of 30
units a month for the balance of the year. Subject to successful negotiations
with host municipalities, the current plan calls for the first 15 Novacolumns to
be installed in September 2000 with a continuing rate of 10 to 15 a month for
the balance of the year.
In addition to the software and technical operating systems, the
main direct cost elements are the screen, the projector, the casing structure,
the computer, the CEMU or computerized environmental management unit (comprising
cooling, heating, and ventilating units), and the shatter-proof glass windows.
On a cost-indicated basis, product pricing has been formulated to enhance market
penetration. The basic models will likely have a target price in the range of
$17,000-18,000 per unit. More advanced models with additional features such as
internet access, transactional capabilities, and wireless phone systems will
probably sell for approximately $23-24,000 per unit. The high-end Citycolumn
unit comes with two or three screens and, accordingly, the price will likely be
set at $35,000 per unit.
A standard Novacolumn model is currently projected to be priced
at $28,000. The additional features that are available on the Citycolumn are
also available on the Novacolumn. Pricing for the initial Servicolumn unit has
not yet been set owing to the high level of customization likely to be required
for the product.
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According to this pricing, we anticipate generating an average
gross margin of approximately 45% for the basic Citycolumn and approximately 31%
for the Novacolumn; or a weighted average of approximately 40% overall.
In addition to revenue from product sales we anticipate that this
should be augmented by revenues from our other products and services such as
multimedia content management, network management, broadcasting, consulting, and
from the sale of sub-licenses.
While our principal market in the area of advertising is mature
and dominated by a relatively small number of large, well-developed companies
(Pattison, JC Decaux, Outdoor Systems, Adshel Eller Media), we believe that the
opportunities to both supplant old, static forms of advertising signage and to
increase exposure (in terms of hits or "viewers per day") at the street level
are significant. Although our products have widespread application, the
marketing plan for the first year of operations is to concentrate on the North
American market and to focus, particularly during the first half of the year, on
significant opportunities that have been identified in Canada, beginning in
Montreal and the surrounding area and Quebec City. With the scheduled opening of
a Sales Office in New York City in March 2000, we intend to pursue opportunities
in the American market. Major urban centers and commercial shopping malls, theme
parks, and airports will also be targeted.
Building on the extensive network of affiliations and strategic
alliances of its affiliated company in Canada, we are now in a position to
completely outsource the integration and production of the required units.
Orders will be placed with a prime contractor, HiTech Neon, currently the
largest and longest operating division of GSI Technologies Canada. This
affiliated supplier will also be responsible for the production of the
encasement modules.
Subject to a competitive ordering process, computer hardware
components will be supplied from the Lexton Group, networking and cabling
services from ITS Service Interteck. Although we will outsource the advertising
services, GSI Canada's New Media Division will provide the content. While all
key suppliers have the required capacity to complete the planned production
schedule, the greatest challenge will be for HiTech Neon to meet accelerating
demand. Additional manpower and space will be required to gear up to the planned
production schedule. Labor relations at the HiTech Neon plant in Montreal are
considered excellent.
As part of our strategy to grow and expand in the information
technology and multimedia industries, we intend to pursue an aggressive mergers
and acquisitions program. The program is designed to help us reach a critical
mass of activity, to achieve substantial vertical integration and control over
the production processes, as well as to create a strong financial underpinning
for the continued development of its core business. We have not currently
identified any specific transaction.
Following the successful private equity offering in October 1999
in the amount of $1 million, we believe we have sufficient funds until May 2000
at which time further funding in the amount of at least $1.2 million will be
required. We are currently negotiating operating lines of credit
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with two major commercial banks, although the process is too early to venture an
opinion about the outcome. Additional funding will likely be required to help
finance acquisitions and capitalize on emerging opportunities.
Further strengthening the senior management team, a
Vice-President of Business Development and a Corporate Controller have recently
been appointed and a search is in process for a Director of Operations. Other
required resources to effectively sustain operations are available from our
Canadian affiliates, and, in order to maintain flexibility and minimize
overhead, outsourcing to consultants and other professionals will be made as
required. Beginning in February 2000, we are based in our new principal business
office in Place Mercantile in the center of Montreal. Capital expenditures and
leasehold improvements are currently estimated at $105,000, principally for the
relocation and equipment purchases.
As reflected in the financial statements as of October 31, 1999,
the accumulated deficit to date of $259,530 resulted mainly from costs
associated with our recent financing as well as professional fees. A further
loss of at least as much is anticipated in the first quarter of 2000.
Effect of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." ("SFAS No. 133"), which requires companies
to recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. The Company does not
presently enter into any transactions involving derivative financial instruments
and, accordingly, does not anticipate the new standard will have any effect on
its financial statements.
Year 2000 Disclosure
We are Year 2000 compliant and we do not anticipate any internal
problems. In the event any internal problems should arise, we have many expert
computer technicians on our payroll and we believe that we will be able to
satisfactorily address any such problems. However, we are dependent on the
integrity of the Internet being maintained to derive income from the sale of
advertising spots at remote locations via the Internet and if the Internet
should fail or if our hosts or Internet Service Providers should fail, we could
be adversely impacted. Given the currently available information this does not
appear to be a likely scenario and, accordingly, we do not believe that our
potential for profitability or operations will be materially affected by the
Year 2000 problem.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of
common stock by the selling stockholders. However, we will receive the exercise
price of the warrants if they are exercised.
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The net proceeds to us from the exercise of all warrants for
which the underlying common stock is registered herewith, would be approximately
$4,000,000. There can be no assurance that we will receive any proceeds from the
exercise of the warrants as not all (or any) warrants may be exercised. This
could result in our receiving none or only minimal proceeds from this offering.
Any proceeds received from the exercise of the warrants will be
added to working capital. We have no definite plans for the use of any proceeds
from this offering and we have made no specific allocations as to the use of
such proceeds. The proceeds could be used for current administrative, marketing
and other expenses, the acquisition of businesses or repayment of debt. Any such
application of the proceeds of this offering will be at the discretion of our
Board of Directors.
BUSINESS
The following discussion should be read in conjunction with the
financial statements and related notes which are included elsewhere in this
prospectus. Statements made below which are not historical facts are
forward-looking statements. Forward-looking statements involve a number of risks
and uncertainties including, but not limited to, general economic conditions,
our ability to complete development and then market our products and services,
competitive factors and other risk factors detailed herein. See "Risk Factors"
and "Special Note Regarding Forward-Looking Statements."
We are a Delaware corporation, established in July 1998. We
acquired an exclusive worldwide license from GSI TECHNOLOGIES (3529363 Canada
inc.) 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 (GSMs), fibre optics
and short waves. The Company also acquired broadcasting server technology from
GSI CANADA.
The Company participates in the Information Technology 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 potential market for which the Company's intends to sell its
products is enormous. The advertising industry is always looking for new ways to
reach consumers. Having acquired our license, we are now able to respond to
their needs as well as those of other industries seeking to deliver messages to
large audiences. Whereas traditional media groups such as television, radio, and
newspapers used to specialize in their respective activities, the current trend
is to utilize newly developed electronic media in order to maintain and extend
their reach.
Historical Background
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In 1995, after gaining extensive experience consulting to the
advertising and retail industries, J. Michel de Montigny founded the Solcom
Group, an R& D firm dedicated to fulfilling his vision of bringing television
and advertising to the street level. Mr. Denis Renaud, a computer graphics
artist, became a key member of the new team. A large number of potential
applications became increasingly apparent. Originally serving the casino and
stadium industries, Solcom soon identified many diverse locations across North
America in which to successfully install, and, after appropriate Beta testing,
to manage by remote control the automated network systems. From 1996 through
September 1998, the team controlled large electronic automated signs in
Vancouver, Edmonton, Toronto, Montreal, Las Vegas, and Biloxi Mississippi.
With the rapid evolution of electronic sign capabilities via full
video broadcast signals, companies began to seek new ways of transferring images
and information from remote stations to signs in a compressed and secure
environment. Effective use of 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 hardware-software package, Solcom applied
for the most innovative and advantageous Canadian governmental grants available
in the area of multimedia R&D.
In September 1998, GSI Technologies (3529363 Canada inc.) was
incorporated in order to qualify for and receive a CDTI Cite Multimedia research
license. Cite Multimedia is a major Quebec government-sponsored project in
Montreal designed to bring together, in the same location, companies working in
the information and communications technology field. The grant is an exclusive
twelve-year program of incentives which includes: 40% of salaries, 40% of the
capital cost for specialized equipment, as well as other tax credits and
exemptions.
In January 1999, Mr. Yves LeBel, an experienced entrepreneur,
joined the GSI Canada team as Executive Vice-President and Chief Financial
Officer. A series of mergers and acquisitions have since been completed in
Canada, first to achieve a degree of vertical integration as well as to continue
the process of horizontal integration and growth. These include the Lexton Group
(computers), Inter Teck ITS (networks), and HiTech Neon (signs).
In June 1999, Mr. Michel Laplante, an expert in the field of
information technology, joined the GSI Canada team as Vice-President Research &
Development and Chief Information Officer. By August 1999, GSI Canada had
finished preliminary testing of the server system and software package required
to reliably operate and broadcast.
The GSI organization currently employs 88 people of which 9 are
direct employees of the Company.
As part of GSI Canada's business planning, strategies have been
developed in the area of product and marketing licensing. The Company was formed
to facilitate the pursuit of this strategy, begin the creation of an
international profile, provide access to important capital markets and worldwide
expansion and market development.
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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 Multimedia Pack
Technology we have 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.
By utilizing our products and services, media and advertisers
will have a way of reaching consumers right in their daily environment, outside
their homes, and especially in the downtown cores where thousands of people
circulate daily as pedestrians, by car or as they use public transportation
going to and from work or to shop. One such location can represent 100,000 and
more "viewers per day". Just multiplying by 1,000 sites, for example, the
traffic count becomes 10 million hits per day.
Hardware
To achieve its sales goals the Company is commercializing
products such as Novacolumn, Citycolumn, Servicolumn and Skycolumn.
Novacolumn is an outdoor billboard column (10 ft X 42") on which
can be broadcast full-size video and 3D animation in 16.7M color along with
stereo sound. This unit can be remotely controlled and reprogrammed via our
software from anywhere in the world. Adding a remote control unit can extend
Novacolumn's capabilities. We can also provide advertisers with interactive
applications. We can also integrate wireless telephones.
Citycolumn is an interior display unit consisting of three
television screens (ranging from 40" to 51"). "Full-size" video, 3D animations
and stereo sound can be broadcast on these units. These units can also be
remotely controlled and reprogrammed via our software from anywhere in the
world. Adding a remote control unit can also extend Citycolumn's capabilities by
providing advertisers with interactivity.
Servicolumn is a customized display unit designed to be
incorporated into transit shelters and to provide other amenities and services
such as wireless phones and interactive computer displays.
Skycolumn is a giant outdoor screen (16.7 million color), capable
of transmitting video images from a server located anywhere in the world.
Examples of this application include Time Square, Sport stadiums, large
expressways, etc.
We also offer Netcom EyeBall in-home Internet, multimedia
interactive screen savers containing advertisements updated through channels
(active server pages ).
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These products can all be marketed via Sublicensing agreements.
Software
Our software provides unique broadcasting capabilities. The basic
pack comprises four elements:
o Multimedia Content Management enables users to access
multimedia data bases and make their selection.
o Scheduling software enables users to create specific
broadcast schedules.
o File Transfer Manager is a multilevel software pack which
enables users to select the content and the site to be
broadcast to or from.
o Player plays compressed or uncompressed multimedia files.
Additional modules are available on demand, such as a Billing
Module that can be connected to invoicing software and various data bases such
as Oracle.
We are developing other applications for advertisers who want a
Web-based access to its network of outdoor and indoor displays. WebCom is
designed to help advertisers in selecting the number of units reserved along
with site information. A Web-based content management system is currently under
development which will provide data and information with regard to the content
being broadcast.
Service
On site service and maintenance is available for all
installations worldwide. We will offer our customers continuous 24 hour
broadcasting; customized advertising and multimedia content; "state-of-the-art"
software packages; Network Management and Maintenance service with 24 hour
monitoring and technical support.
While our customers are primarily responsible for the content of
what is broadcast, as an internal policy we will attempt to monitor the content
and only broadcast information and graphic images that are in accordance with
locally accepted standards.
Our products are susceptible to defacement at installation sites,
but are designed to be relatively impervious to other forms of vandalism and to
most weather conditions as well.
The Market
Globalization is the current dominant trend. Once branded in
their domestic markets, companies are seeking opportunities to penetrate
elsewhere, particularly in non-traditional, unexploited markets such as Russia,
Eastern Europe, Africa, and South America. We believe that expansion in
traditional North American and European sites that offer a high volume of
"viewers per
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day" will occur by way of replacing older, static technology with
Internet-driven multimedia broadcast products.
We have identified the market for our products in terms of
territory and large media groups. In the development of our market we intend to
initially focus on:
In North America: USA/Canada
In Europe: France/United Kingdom
In Asia: Japan/China/Australia
In North Africa: To be determined
In South America: To be determined
The Company anticipates doing business with at least 10 of the
major media groups. The Company has been negotiating with 4 of them (JC Decaux,
Adshel, Outdoor Systems, Pattison Group) since June 1999. Discussions with
others will hopefully be initiated in due course, including Disney, Dentsu
Young and Rubicam.
At the beginning of the 1990's advertising and media money was
mostly spent in the television industry which garnered an estimated 80% of the
market. Advances in technology now enable the consumer to select from more than
250 television channels at home. Many of these are specialized channels and pay
television that do not broadcast advertising. As a result, TV broadcasters
cannot pretend to reach the same number of in-home "viewers per day" as they
used to. Since in-home advertising does not offer the same "viewers per day"
reach, it has become strategically imperative for the media to seek other
out-of-home possibilities. Mainly through mergers and acquisitions, media groups
are now increasingly able to offer the advertisers a variety of multimedia-based
approaches.
Examples abound in North America. In Canada, the broadcasting
company Radio-Mutuel was strictly involved in radio as late as 7 years ago.
Since then it has acquired Omni outdoor advertising, Much Music Broadcast, CKMF,
CKVL, and other stations. Another company based in Canada and now a major
multinational, Quebecor, was once only in newspaper publishing and printing.
During its rapid growth it has acquired TQS (broadcasting), Archambault (music),
and Quebec-Livre (books). Another example in Canada is Videotron which initially
offered only cable television and is now operating TVA (a broadcast network) and
with whom they have become associated in order to create an Internet service.
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Outdoor Advertising
The major world-class companies, that are obvious potential
targets for us, are ClearChannel, JC Decaux, TDI, Outdoor Systems, and Chancelor
Media Corp. Doing business on five continents, the largest is ClearChannel.
Their subsdiaries include Adshel and Eller Media. They have also acquired
Dauphin Advertising group and they now own over 400,000 outdoor signs worldwide.
Besides outdoor advertising, JC Decaux markets urban furniture
which also presents advertizing opportunities to exploit. Their most recent
acquisition was Avenir Publicite Group, a $2 billion transaction in July 1999.
JC Decaux operates in more than forty countries.
Indoor Advertising
The major players in outdoor advertising are now seeking
opportunities to penetrate the advertising, commercial, and information display
market which is largely untapped and is still in an embryonic stage of
development.
Interactive Television
The convergence of television, telecommunications, and computers
now present the advantages of interactivity including choice of content and the
ability to order on demand. Different manufacturers are developing new products
such as set-top boxes that will incorporate Internet, audio and video as well as
informational databases. The Company is working closely with GSI Canada and is
currently developing a similar product.
Key Success Factors
Experience
The Company has an available pool of knowledge and experience
regarding the rapidly evolving market. Our associated company (now GSI Canada)
has been controlling signs from remote locations and selling advertising on
electronic screens since 1995; as well as using and selling Internet and other
software since 1992. Extensive experience has been gained with various
electronic signs manufacturers and companies involved in controlling
interactivity such as Dacktronics, Saco, Smartvision, Adtronics, A.D.E.
Intellectual Property
We have acquired an exclusive worldwide license from GSI Canada,
which has proprietary rights on the software required to operate the system.
These rights are governed by applicable commercial law. We intend to take all
reasonable and practicable steps to obtain patent and trademark protection, when
available, to protect our rights to the licensed technology.
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On-going Research and Development
GSI Canada qualifies for a 12-year program of grants and
governmental support which will facilitate the continuing development of
leading-edge broadcasting systems and related products in the field of
multimedia. The Company expects to derive economic benefits directly from this
association in terms of lower product cost and the ability to obtain cutting
edge technology.
Effective Marketing
Our expertise is in the creation of three minutes loops, based on
advertising "spots" of 10 seconds each and, through GSI Canada, in the assembly
and the integration of various hardware products. The content of the broadcast
information has been developed after considerable market research and target
customers have been identified and are being approached by our representatives.
We believe we can effectively respond to our customers' needs by pinpointing
specific services and information sponsored by the advertisers.
A strategic licensing plan has been developed for the worldwide
deployment of our products and services. We intend to open a sales office in New
York, and we are planning further commercial activities in Los Angeles and
Paris.
At present we have no competitors. We currently intend to price
our products and services on the achievement of rapid market penetration.
Sales and Marketing Strategy
Our products are designed to provide a highly reliable, efficient
means of broadcasting information that addresses the needs of people in
fast-paced environments and brings the advantages of interactive multimedia to
the street level. Our main targets are:
o media owners
o municipalities
o consumers
The consumer will have the benefit of daily pinpoint area
information ("news you can use") and interactive capabilities such as:
o Weather reports
o Traffic conditions reports
o News updates
o Sports results
o Local community messages
o Emergency alerts
o Postings of local events
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The advertiser will have the opportunity to reach many more
consumers per day, and to increase brand recognition by providing better
information content.
Municipal governments will be able to reach their citizens on a
daily basis and to better measure the impact of their community programs and
services. They will also be able to share in revenues derived from renting city
space for the installation of the networks and to communicate information about
local events or emergencies instantly with a simple phone call, fax, or e-mail.
The media industry will benefit from an impressive Eye Ball
Network linked to other locations world wide. They will be able to broadcast
information in specific locations by remote access and reach millions of
"viewers per day". Advertising can be sold at very high quality standards and at
very affordable prices giving local businesses the same opportunities, at this
point in the evolution of outdoor and indoor advertising, as enjoyed by larger
companies.
The infrastructure created by the installation of our products
and services may also generate other beneficial associations; for example, in
the area of video-conferencing; with electronic smart card distributors; with
municipal parking meter authorities; and with ticket distributors for
entertainment and sporting events.
We are currently building an advanced modular remote control
server station which will be installed in New York City shortly. We also plan to
install redundant remote stations in Los Angeles, Paris, and London in 2000. By
means of graphic 3D animated broadcasts, studio ad agencies, for example, can
offer their customers a worldwide range of visibility for important campaigns.
We will also provide back-up for the installed networks at GSI
Canada's Research Center located in Montreal, Canada. We are currently working
on creating our own server system to minimize dependence upon other hosts and
Internet Service Providers.
As a way of demonstrating the public service power of the
product, we plan to associate ourself with child finding organizations
worldwide. Using our technology, with its instant remote broadcasting
capability, pictures of missing children can be shown in a specific area on
short notice, thereby increasing the chances of a successful recovery.
Employees
We currently have nine full time employees of which three are
executives, three are engaged in financial activities and three are engaged in
marketing activities. Additional financing permitting, we intend to hire up to
five additional employees. None of our employees are represented by a labor
union. We believe that relations with our employees are good.
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Properties
Our facilities are located in approximately 6,000 square feet of
leased office space in Montreal and we share some office space in Ft.
Lauderdale. The lease in Montreal expires on December 31, 2004 and provides for
an annual rental of approximately $75,000 and in Ft. Lauderdale the lease
expires on December 1, 2001 and provides for an annual rental of approximately
$3,800. We have only negligible costs relating to environmental compliance laws.
Legal Proceedings
We are not involved in any material legal proceedings.
MANAGEMENT
Officers and Directors
Our officers and directors are as follows:
Name Age Position
J. Michel de Montigny 41 President, Chief Executive Officer and Chairman
James A. Hone 55 Senior Vice President Administration, Chief
Financial Officer, Secretary and Director
Michel Laplante 42 Senior Vice President Sales and Marketing and
Director
J. Michel de Montigny founded the Company in 1998 and has been
its President, CEO and Chairman since such time. Mr. de Montigny has over twenty
years of hands-on and management experience in the multimedia/advertising
industry. In 1995 he founded Solcom Group. From 1990 to 1992, he was President
of Groupe Actuel Design, crafting the design concepts behind the Bell Canada
Boutiques, the Yves Rocher boutiques and the Societe des Alcools du Quebec
Stores. From 1988 to 1990 he was President of College Inter-Dec, a technical
college in Montreal. Prior thereto, he was Director of Operations and Director
of Marketing in a variety of companies. As an advertising and marketing
consultant, he was the driving force behind some of Montreal's most innovative
advertising campaigns of the 1990's. A consultant to companies such as Labatt,
Budweiser, and Michelin, he was also involved in projects creating an
interactive bus shelter for Budweiser, special effects for the film Mortal
Kombat (Alliance Films), and the inauguration campaign for a new Air Canada
aircraft. Mr. de Montigny received an MBA from the University of Quebec.
James A. Hone joined the Company in June 1999 as its Chief
Financial Officer. A graduate of McGill University and York University in
Commerce and Business Administration in 1966 and 1969, respectively, Mr. Hone
has extensive financial management and administrative experience with five major
multinational companies in the automotive, aerospace, building systems, forest
products, and telecommunications industries. After 10 years with Ford Motor
Company, both in Toronto and Detroit, where he achieved the position of Manager,
Collection he became Treasurer of
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Pratt & Whitney Canada in Montreal until 1982. He then served as Assistant
Treasurer-International- Finance of United Technologies Corporation in Hartford,
Connecticut until 1988; as Vice President- Treasurer of Abitibi-Price in Toronto
and as Vice-President Finance of the Commercial Paper Group based in Quebec City
and New York City until 1994; and, most recently, as Vice President-Finance and
Administration of TMI Communications, a subsidiary of BCE Inc. in Ottawa.
Michel Laplante joined the Company in June 1999 and became its Senior
Vice President Sales and Marketing in December 1999. Mr. Laplante has been
involved in the multimedia industry for the past 20 years. He has acquired
extensive experience in the field of television broadcasting and recording and
expertise in the area of training in high-tech environments. From 1985 to 1991
he served as an account manager for Yamaha. From 1991 to 1992 he was a
consultant for various firms such as Commodore Business Machines and Kawai. In
1992 he became National Sales Manager for MDL Technologies, a Desktop Video
equipment distributor and integrator based in Montreal, serving clients such as
Department of National Defense and top Fortune 500 companies. Before joining GSI
Canada in June 1999 as Vice-President of Research and Development and Chief
Information Officer, Mr. Laplante owned a consulting firm specializing in audio
and video computer applications, IT, Networking, Video compression and
broadcasting. He has also served as a Multimedia consultant to the multimedia
division of CESAM, a large consortium with representation from, among others,
Bell Canada, CAE Electronics, Quebecor Multimedia, Teleglobe, and the four
universities in Montreal.
Indemnification of Directors and Officers
Neither our By-Laws nor our Certificate of Incorporation currently provide
indeminification to our officers and directors. In an effort to continue to
attract and retain qualified individuals to serve as our directors and officers,
we intend to adopt provisions providing for the maximum indemnification
permitted by Delaware law.
Compensation of Directors
Directors do not receive any compensation for their service as
members of the Board of Directors.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1999,
information regarding the beneficial ownership of our common stock based upon
the most recent information available to us for (i) each person known by us to
own beneficially more than five (5%) percent of our outstanding common stock,
(ii) each of our officers and directors and (iii) all of our officers and
directors as a group. Each stockholder's address is c/o GSI Technologies USA
Inc., 2001 McGill College Avenue, Suite 1310, Montreal, Quebec, CANADA, H3A 1G1.
Number of
Shares Owned
Name Beneficially % of Total
3633730 Canada Inc. (1)(2) 8,037,128 39.9%
3633632 Canada Inc. (1)(3) 1,397,938 6.8%
Totalcom Inc. (1)(4) 1,546,794 7.6%
J. Michel de Montigny(5) 500,000 2.4%
Michel Laplante (6) 20,000 *
James A. Hone (7) 90,000 *
All Officers and Directors
as a Group (3 persons)(8) 11,591,860 54.2%
- - ----------------
* less than 1%
(1) Owned by J. Michel de Montigny, the Company's President, CEO and Chairman.
(2) Includes 260,954 shares underlying currently exercisable warrants.
(3) Includes 347,938 shares underlying currently exercisable warrants.
(4) Includes 34,794 shares underlying currently exercisable warrants.
(5) Consists of currently exercisable warrants. President, CEO and Chairman.
(6) Vice President Sales and Marketing and a Director.
(7) Includes 50,000 shares underlying currently exercisable warrants.
(8) Includes the shares owned indirectly by Mr. de Montigny through wholly
owned entities and an aggregate of 1,193,686 shares underlying currently
exercisable warrants.
EXECUTIVE COMPENSATION
From inception through the fiscal year ended October 31, 1999, no
compensation was paid to any of our executive officers.
Employment Agreements
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On October 29, 1999, Mr. de Montigny entered into a three year
employment agreement commencing January 1, 2000. The agreement provides for an
annual salary of $100,000 and warrants to purchase 500,000 shares at an exercise
price of $1.10 per share. Mr. de Montigny may also receive bonuses as determined
by the Board of Directors.
On October 29, 1999, Mr. Hone entered into a one year employment
agreement commencing January 1, 2000. The agreement provides for an annual
salary of $60,000, warrants to purchase 50,000 shares at an exercise price of
$1.10 per share and 50,000 shares vesting over equally over five months. Mr.
Hone may also receive bonuses as determined by the Board of Directors.
On January 1, 2000, Mr. Laplante entered into a one year employment
agreement. He will receive an annual salary of $60,000 for 2000. In addition, he
will receive bonuses based on the achievement of quarterly sales targets. He
will also be eligible to receive additional shares and warrants during the
course of his contract.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We delivered a note payable dated October 31, 1999 in the amount of
$279,667 to GSI Canada, one of our stockholders, for payment of license fees of
$200,000 and reimbursement of expenditures in the amount of $79,667 paid by GSI
Canada on our behalf during the fiscal year ended October 31, 1999. The note is
unsecured and bears interest of prime plus two percent and matures on October
31, 2000. We also issued GSI Canada 600,000 shares of common stock as payment
for the license.
On October 31, 1999, we accrued financing expenses in the amount of
$10,000 due to Totalcom Inc., one of our stockholders, for finder fees
associated with our October 1999 private offering. Mr. J. Michel de Montigny,
our President, CEO and Chairman, owns Totalcom Inc.
On October 31, 1999, we accrued financing expenses in the amount of
$15,000 due to 3633730 Canada Inc., one of our stockholders, for finder fees
associated with our October 1999 private offering. Mr. J. Michel de Montigny,
our President, CEO and Chairman, is now a 100 percent shareholder of 3633730
Canada Inc.
On August 17, 1999, we entered into an agreement with Maxima Capital
Inc., one of our stockholders, for services related to obtaining an OTC:BB
listing. The fee for such services totaled $12,000 of which $7,500 has been
accrued in the financial statements. On October 31, 1999, we accrued financing
expenses in the amount of $86,500 due to Maxima Capital Inc. for finder fees
associated with our October 1999 private offering. Mr. Pierre Saint-Aubin is the
Director of Maxima Capital Inc. and one of our stockholders.
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DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Neither our By-Laws nor our Certificate of Incorporation currently
provide indeminification to our officers and directors. In an effort to continue
to attract and retain qualified individuals to serve as our directors and
officers, we intend to adopt provisions providing for the maximum
indemnification permitted by Delaware law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore unenforceable.
DESCRIPTION OF SECURITIES
Authorized and Outstanding Stock
Our authorized capital stock consists of 55,000,000 shares of
Class B Common Stock, $.001 par value, and 5,000,000 shares of Class A Common
Stock, $1.00 par value. As of December 31, 1999, there were 20,185,472 shares of
Class B Common Stock outstanding, which were held by approximately 252
stockholders of record and no shares of Class A Common Stock were outstanding.
Common Stock
Subject to legal and contractual restrictions on payment of
dividends, the holders of common stock are entitled to receive such lawful
dividends as may be declared by the Board of Directors. In the event of our
liquidation, dissolution or winding up, the holders of shares of common stock
are
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entitled to receive all of our remaining assets available for distribution to
stockholders after satisfaction of all liabilities and preferences. Holders of
our common stock do not have any preemptive, conversion or redemption rights and
there are no sinking fund provisions applicable to our common stock. Record
holders of our common stock are entitled to vote at all meetings of stockholders
and at those meetings are entitled to cast one vote for each share of record
that they own on all matters on which stockholders may vote. Stockholders do not
have cumulative voting rights in the election of our directors. As a result, the
holders of a plurality of the outstanding shares can elect all of our directors,
and the holders of the remaining shares are not able to elect any of our
directors. All outstanding shares of common stock are fully paid and
non-assessable, and all shares of common stock to be offered and sold in this
offering will be fully paid and non-assessable.
Warrants
We currently have 3,674,000 warrants outstanding, each of which
entitles the registered holder thereof to purchase, at any time until the close
of business on January 31, 2002, one share of Class B Common Stock at a price of
$1.10. All of the Warrants contain provisions which protect the holders thereof
against dilution by adjustment of the exercise price and number of warrants, in
certain events, such as stock dividends, stock splits, mergers, sale of
substantially all of our assets, and for other extraordinary events.
Transfer Agent and Registrar
The stock transfer agent and registrar for our common stock is
Intercontinental Registry and Stock Transfer, located at 900 Buchanan blvd # 1,
Boulder City, Nevada 89005-2100.
Dividend Policy
Under applicable law, dividends may only be paid out of legally
available funds as proscribed by a statute, subject to the discretion of the
board of directors. In addition, it is currently our policy to retain internally
generated funds to support future expansion of our business. Accordingly, even
if we do generate earnings, and even if we are not prohibited from paying
dividends, we do not currently intend to declare or pay cash dividends on our
common stock for the foreseeable future.
Shares Available for Future Sale
On the date of this Prospectus, all 7,733,206 shares included in
this Prospectus will generally be freely tradeable without restriction imposed
by, or further registration under, the Securities Act. An additional 12,452,266
shares of our common stock may be deemed "restricted securities," as that term
is defined under Rule 144 promulgated under the Securities Act. Such shares may
be sold to the public, subject to volume restrictions, as described below.
Commencing at various dates, these shares may be sold to the public without any
volume limitations.
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In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including one of our
affiliates, or persons whose shares are aggregated with affiliates, who has
owned restricted shares of common stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed 1% of the total number of outstanding shares of the same class. In
the event our shares are sold on an exchange or are reported on the automated
quotation system of a registered securities association, you could sell during
any three-month period the greater of such 1% amount or the average weekly
trading volume as reported for the four calendar weeks preceding the date on
which notice of your sale is filed with the SEC. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about us. A person who has not been
one of our affiliates for at least the three months immediately preceding the
sale and who has beneficially owned shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
You should note that we anticipate that our shares of common
stock will initially be included for quotation on the OTC Bulletin Board.
Pursuant to SEC regulations, the OTC Bulletin Board is not considered an
"automated quotation system of a registered securities association" and Rule 144
will only permit sales of up to 1% of the outstanding shares during any three
month period.
PLAN OF DISTRIBUTION
The sale of the shares of common stock by the selling
stockholders may be effected by them from time to time in the over the counter
market or in such other public forum where our shares are publicly traded or
listed for quotation. These sales may be made in negotiated transactions through
the timing of options on the shares, or through a combination of such methods of
sale, at fixed prices, which may be charged at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The selling stockholders may effect such transactions by
selling the shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders and/or the purchasers of the shares for which such
broker-dealer may act as agent or to whom they sell as principal, or both. The
compensation as to a particular broker-dealer may be in excess of customary
compensation.
The selling stockholders and any broker-dealers who act in
connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act, and any
commissions received by them and any profit on any sale of the shares as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act.
SELLING STOCKHOLDERS
We are registering (1) shares of common stock purchased by
investors in our 1999 private placement offerings, (ii) a portion of the shares
of common stock owned by our founders and (iii) a portion of the shares of
common stock received as a distribution from GSI Canada; and (2) 3,674,000
shares of common stock underlying currently outstanding warrants. Other than the
costs of
28
<PAGE>
preparing this Prospectus and a registration fee to the SEC, we are not paying
any costs relating to the sales by the selling stockholders. Each of the selling
stockholders, or their transferees, and intermediaries to whom such securities
may be sold may be deemed to be an "underwriter" of the common stock offered
hereby, as that term is defined under the Securities Act. Each of the selling
stockholders, or their transferees, may sell these shares from time to time for
his own account in the open market at the prices prevailing therein, or in
individually negotiated transactions at such prices as may be agreed upon. The
net proceeds from the sale of these shares by the selling stockholders will
inure entirely to their benefit and not to ours.
Except as indicated below, none of the selling stockholders has
held any position or office, or had any material relationship with us or any of
our predecessors or affiliates within the last three years, and after completion
of this offering will own the amount of our outstanding common stock listed
opposite their name. The shares reflected by each selling stockholder is based
upon information provided to us by our transfer agent and from other available
sources in December 1999.
These shares may be offered for sale from time to time in
regular brokerage transactions in the over-the-counter market, or, either
directly or through brokers or to dealers, or in private sales or negotiated
transactions, or otherwise, at prices related to the then prevailing market
prices. Thus, they may be required to deliver a current prospectus in connection
with the offer or sale of their shares. In the absence of a current prospectus,
if required, these shares may not be sold publicly without restriction unless
held by a non-affiliate for two years, or after one year subject to volume
limitations and satisfaction of other conditions. The selling stockholders are
hereby advised that Rules 10b-6 and 10b-7 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934 will be applicable to
their sales of these shares. These rules contain various prohibitions against
trading by persons interested in a distribution and against so-called
"stabilization" activities.
The selling stockholders, or their transferees, might be deemed
to be "underwriters" within the meaning of Section 2(11) of the Act and any
profit on the resale of these shares as principal might be deemed to be
underwriting discounts and commissions under the Act. Any sale of these shares
by selling shareholders, or their transferees, through broker-dealers may cause
the broker-dealers to be considered as participating in a distribution and
subject to Rule 10b-6 promulgated under the Securities Exchange Act of 1934, as
amended. If any such transaction were a "distribution" for purposes of Rule
10b-6, then such broker-dealers might be required to cease making a market in
our equity securities for either two or nine trading days prior to, and until
the completion of, such activity.
SHARES BENEFICIALLY OWNED
Before After
NAME OF SELLING SECURITY HOLDER Offering Offering Offering
3633730 Canada inc. (1) 7,776,174 2,566,000 5,210,174
Tim McLean 209,888 69,000 140,888
29
<PAGE>
SHARES BENEFICIALLY OWNED
Before After
NAME OF SELLING SECURITY HOLDER Offering Offering Offering
3633632 Canada inc. (1) 1,050,000 347,000 703,000
Totalcom inc. (1) 1,512,000 499,000 1,013,000
9035-2899 Quebec inc 70,000 23,000 47,000
Denis Renaud 70,000 23,000 47,000
Interlink Investment And Holding 258,982 85,000 173,982
Chambers Investment And Holding 258,982 85,000 173,982
Paul A. Cyr 100,000 33,000 67,000
Michel Laplante (2) 20,000 7,000 13,000
Knick-knack Investment And Holding 147,000 49,000 98,000
Illaria Investment And Holding 154,162 51,000 103,162
Pierre Addison 5,000 2,000 3,000
Tony Della Cioppa 7,500 2,000 5,500
Mario Iannicello 7,500 2,000 5,500
Israel Martineau 50,000 17,000 33,000
Anthony Santucci 2,284 1,000 1,284
George Zervakos 10,000 3,000 7,000
Melanie Lacombe 1,000 -- 1,000
W.A.F.A. Corporation 662,500 219,000 443,500
O.S.F.A. Corporation 175,000 58,000 117,000
Paul Roy 175,000 58,000 117,000
9064-6167 Quebec inc 175,000 58,000 117,000
Maxima Capital Inc (3) 281,250 93,000 188,250
Pierre Saint-Aubin (3) 281,250 93,000 188,250
Lipalsc 700,000 231,000 469,000
Majella Boucher 87,500 29,000 58,500
Renee Sylvestre 87,500 29,000 58,500
Daniel Riopel 87,500 29,000 58,500
Steve Larochelle 87,500 29,000 58,500
Gerald Deslandes 87,500 29,000 58,500
Jocelyne Langelier 87,500 29,000 58,500
Alain Chicoine 87,500 29,000 58,500
Gilles Leduc 87,500 29,000 58,500
Monique Petit 87,500 29,000 58,500
Jean-Guy Petit 87,500 29,000 58,500
Patrick Petit 87,500 29,000 58,500
Marcel Hebert 87,500 29,000 58,500
Serge Paquin 52,500 17,000 35,500
Suzie Beauchemin 35,000 12,000 23,000
Ginette Barnabe 87,500 29,000 58,500
Robert Bazinet 87,500 29,000 58,500
Pierre Champagne 87,500 29,000 58,500
Serge Cote 87,500 29,000 58,500
Yves Tremblay 87,500 29,000 58,500
Gilles Villemaire 87,500 29,000 58,500
Michel Lefebvre 87,500 29,000 58,500
30
<PAGE>
SHARES BENEFICIALLY OWNED
Before After
NAME OF SELLING SECURITY HOLDER Offering Offering Offering
Monique Lussier 87,500 29,000 58,500
Gestion Jacques Plantes inc 262,500 87,000 175,500
Denis Adam 87,500 29,000 58,500
Francine Goyette 87,500 29,000 58,500
Isabel Marques 87,500 29,000 58,500
Yvan Dery 87,500 29,000 58,500
Danielle Dubuc 175,000 58,000 117,000
Renald Racine 87,500 29,000 58,500
D. et M. Gariepy 87,500 29,000 58,500
Louise Beauvolsk 87,500 29,000 58,500
Sebastien Leduc 87,500 29,000 58,500
Louise Nadeau 87,500 29,000 58,500
Juliette A. Bourque 87,500 29,000 58,500
Richard Bourque 87,500 29,000 58,500
Jean-Jacques Lajoie 175,000 58,000 117,000
Paul-Andre Lepage 87,500 29,000 58,500
Simon Francoeur 87,500 29,000 58,500
Bruno Girouard 87,500 29,000 58,500
Investissement Dumont 87,500 29,000 58,500
Paul Nolin Auto 87,500 29,000 58,500
Power Group 50,000 17,000 33,000
Andre Desjardins 25,000 8,000 17,000
BBT Consulting Group 500,000 158,206 341,794
3529363 Canada inc 600,000 600,000 0
Addison, Pierre 1,000 1,000 0
Akhavan, Hooman 2,000 2,000 0
Anagnostaras, Con 5,000 5,000 0
Anderson, Vivian 1,000 1,000 0
Angers, Dyan 1,000 1,000 0
Angers, Jocelyne 1,000 1,000 0
Angers, Sylvain 2,000 2,000 0
Anthabian, Tigran 1,500 1,500 0
Antun, Emilio 2,000 2,000 0
Araujo, Jose 15,000 15,000 0
Araujo, Jose 5,000 5,000 0
Arvanitakis, Irene 1,500 1,500 0
Arvanitakis, Maria 2,000 2,000 0
Audate, Martine 1,847 1,847 0
Bachellerie, Yan 1,000 1,000 0
Batchelder, Todd 1,000 1,000 0
Bao, Nick 2,000 2,000 0
Bazinet, Marie-France 10,000 10,000 0
Bazzarelli, Ernest 1,000 1,000 0
Beheshti-Zavareth, Hossein 728 728 0
Beaudin, Bert 2,000 2,000 0
31
<PAGE>
SHARES BENEFICIALLY OWNED
Before After
NAME OF SELLING SECURITY HOLDER Offering Offering Offering
Beaulieu, Pauline 1,981 1,981 0
Beauregard, Micheline 3,855 3,855 0
Beauregard, Sonia 1,313 1,313 0
Benoit, Gaetan 5,000 5,000 0
Berger, Louise 3,000 3,000 0
Blais, Francine 1,981 1,981 0
Blais, Sylvain 930 930 0
Boivert, Jacques 2,000 2,000 0
Bouchard D'amico, Louise 5,000 5,000 0
Boucher, Yan 1,981 1,981 0
Brouillard, M 3,220 3,220 0
Bussiere, Robert 2,300 2,300 0
Cardinal, Frederic 1,998 1,998 0
Cardinal, Raymond 1,146 1,146 0
Cardinal, Carole 1,153 1,153 0
Calisto, Mike 2,000 2,000 0
Campagnale, Vince 2,000 2,000 0
Cannuli, Diane 1,000 1,000 0
Carnevale, Benny 1,500 1,500 0
Carruthers, William 33,000 33,000 0
Chiminian, Hagop 1,000 1,000 0
Christofaro, Joseph 2,650 2,650 0
Chu, Kun Chu 30,000 30,000 0
Coiteux, F 3,250 3,250 0
Collins, Ginette 2,000 2,000 0
Cote, Michel 6,661 6,661 0
Cote, Pierre-Paul 2,740 2,740 0
Courchesne, Lyne 1,000 1,000 0
Cunningham, Diane 1,000 1,000 0
Daigle, Claude 5,000 5,000 0
D'Amico, Carlo 1,500 1,500 0
Dansereau, J. F 1,417 1,417 0
Daviau, Louise 9,800 9,800 0
De Nardis, Luigi 10,000 10,000 0
De Nardis, Mena 1,000 1,000 0
Deruyter, Ellen 2,670 2,670 0
Desjardins, G 20,000 20,000 0
Disalvo, Joseph 5,000 5,000 0
Dore, Michelle 5,274 5,274 0
Dolar, Jirayr 10,000 10,000 0
Dulude, Valerie 4,000 4,000 0
Dugas, Yves 975 975 0
Ediflex inc 3,318 3,318 0
Edition Louis Martin 3,318 3,318 0
Eliopoulos, Georges 2,000 2,000 0
32
<PAGE>
SHARES BENEFICIALLY OWNED
Before After
NAME OF SELLING SECURITY HOLDER Offering Offering Offering
Fafard, Andree 14,400 14,400 0
Favas, Emanuel 11,936 11,936 0
Felsher, Melvyn 10,000 10,000 0
Ferner, Susan 2,000 2,000 0
First-Guardian International Corporation 10,000 10,000 0
Fontaine, Bernard 1,600 1,600 0
Ford, Marjorie 20,000 20,000 0
Fortier, Denis 4,000 4,000 0
Foster, Linda J 2,000 2,000 0
Furman, Mitchel 2,000 2,000 0
Giannini, Giuseppe 3,000 3,000 0
Goldfinch, Stephanie 1,000 1,000 0
Gravas, Spiros et Arvanitakis, Panayiota 2,000 2,000 0
Guerin, Carl 2,665 2,665 0
Guerin, Gilles 3,961 3,961 0
Guerin, Jean-Francois 1,336 1,336 0
Guernon, Jean 3,278 3,278 0
Hancock, Richard 10,000 10,000 0
Hancock, Richard 4,989 4,989 0
Harel, Hubert 10,000 10,000 0
Hartvigsen, Kris 1,200 1,200 0
Hebert, Fernande 10,000 10,000 0
Hebert, Jean 23,300 23,300 0
Hebert, Jean 23,396 23,396 0
Hoyt, Randy 1,000 1,000 0
Jamalouden, Nazmoon 15,000 15,000 0
Kaklamanos, Leonidas 3,000 3,000 0
Kalafatidis, James 3,400 3,400 0
Kastelorizios, Maria 8,000 8,000 0
Karteris, Maria 13,422 13,422 0
Karteris, John 16,680 16,680 0
Karteris, John 16,780 16,780 0
Kirakossian, Garabet 11,000 11,000 0
Kirakossian, Hourie 2,500 2,500 0
Kirakossian, Vartivar 6,000 6,000 0
Lachapelle, Sylvain 5,200 5,200 0
Lacroce, Vincenzo 3,000 3,000 0
Lalande, Sophie 3,000 3,000 0
Lamorgese, Caroline 1,000 1,000 0
Lamorgese, Tony 2,000 2,000 0
Lanoie, Pierre 2,130 2,130 0
Laverdiere, Chantal 1,000 1,000 0
Lebel, Yannick 1,000 1,000 0
Leroux, Guylaine 8,000 8,000 0
L.I.B. Invest. Club 2,000 2,000 0
33
<PAGE>
SHARES BENEFICIALLY OWNED
Before After
NAME OF SELLING SECURITY HOLDER Offering Offering Offering
Lintzeris, Peter 2,000 2,000 0
Luniewski, Renee 2,000 2,000 0
Mady, Chady 3,014 3,014 0
Malenfant, Robert 20,700 20,700 0
Malenfant, Veronique 7,950 7,950 0
Marcos, Marcel 1,000 1,000 0
Markov, Nikolaos 1,500 1,500 0
Martin, Jacques 50,000 50,000 0
Martin, Philippe 2,000 2,000 0
Martinez, Alvaro 2,000 2,000 0
Mathieu, Josee 4,916 4,916 0
Mineo, Serge 1,000 1,000 0
Morazain, Luc 2,000 2,000 0
Morel, Remy 600 600 0
Morin, Pierre 9,460 9,460 0
Morissette, Solange 900 900 0
Morgia, Anne-Marie 1,000 1,000 0
Muller, Peter 1,000 1,000 0
Natale R. Gennaro 8,000 8,000 0
Pacheco John et Pacheco Joe 1,313 1,313 0
Panaccione, Fabio 10,000 10,000 0
Papadakos, Georgia 15,000 15,000 0
Pappappicco, Mariella 5,000 5,000 0
Pare, Richard 3,341 3,341 0
Perreault, Daniel 1,600 1,600 0
Petit, Patrice 3,137 3,137 0
Pires, Joa 20,000 20,000 0
Poulin, Christian 1,336 1,336 0
Poulopoulos, N 5,000 5,000 0
Purcell, Anita 1,000 1,000 0
Rea, Karen 3,000 3,000 0
Renaud, Denis 3,318 3,318 0
Richard, Martin 1,500 1,500 0
Riopel, Nicole 1,400 1,400 0
Rioux, Pierre Sam 2,015 2,015 0
Roque, Christina 1,000 1,000 0
Salas Fernandez, Carlos Luis 1,982 1,982 0
Santucci, Anthony 1,000 1,000 0
Santucci, Gianni 10,000 10,000 0
Santucci, Mario 1,000 1,000 0
Santucci, Mario 16,500 16,500 0
Sauve, Diane 2,000 2,000 0
Shou, Judy 1,000 1,000 0
Sistatsis, Georges 1,000 1,000 0
Stefaros, Bill 12,000 12,000 0
34
<PAGE>
SHARES BENEFICIALLY OWNED
Before After
NAME OF SELLING SECURITY HOLDER Offering Offering Offering
Stinziani, Giovanni 8,000 8,000 0
Stockden, Gary 2,000 2,000 0
Taddeo, Anthony 1,000 1,000 0
Tartaglia, Nick 5,929 5,929 0
Tassone, Vittoria 5,000 5,000 0
Tolias, Maria 4,000 4,000 0
Therrien, Eric 2,500 2,500 0
Therrien, Ghislaine 2,500 2,500 0
Tremblay, Marc 16,700 16,700 0
Trudeau, Wayne 3,000 3,000 0
Vaccarella, Vincent 14,000 14,000 0
Vassiliou, Joanne 1,000 1,000 0
Vassiliou, Vicky 3,400 3,400 0
Veilleux, Vincent 6,661 6,661 0
Virgilio, Giuseppe 6,500 6,500 0
Ward, Lance 1,660 1,660 0
Woods, James 5,000 5,000 0
Winikoff, Mark 1,000 1,000 0
Zervakos, Georges 29,000 29,000 0
Zervakos, Georges 4,989 4,989 0
Zervakos, Kostantinos 2,000 2,000 0
Zervakos, Melinda 2,000 2,000 0
Zervakou, Rosa 1,000 1,000 0
3101-5464 Quebec inc 35,000 35,000 0
9008-5085 Quebec inc 15,000 15,000 0
(1) Controlled by our President, CEO and Chairman.
(2) Our Senior Vice President Sales and Marketing and a Director.
(3) Mr. Pierre Saint-Aubin is a director of this entity.
35
<PAGE>
WARRANTS BENEFICIALLY OWNED*
Before After
NAME OF WARRANT HOLDER Offering Offering Offering
3633730 Canada inc. (1) 260,954 260,954 0
3633632 Canada inc. (1) 347,938 347,938 0
Totalcom inc. (1) 34,794 34,794 0
9035-2899 Quebec inc 34,794 34,794 0
Denis Renaud 26,095 26,095 0
Interlink Investment And Holding 17,397 17,397 0
Chambers Investment And Holding 17,397 17,397 0
W.A.F.A. Corporation 75,000 75,000 0
O.S.F.A. Corporation 75,000 75,000 0
Paul Roy 75,000 75,000 0
9064-6167 Quebec inc 75,000 75,000 0
Maxima Capital Inc. (2) 375,000 375,000 0
Pierre Saint-Aubin (2) 104,381 104,381 0
Lipalsc 100,800 100,800 0
Majella Boucher 12,600 12,600 0
Renee Sylvestre 12,600 12,600 0
Daniel Riopel 12,600 12,600 0
Steve Larochelle 12,600 12,600 0
Gerald Deslandes 12,600 12,600 0
Jocelyne Langelier 12,600 12,600 0
Alain Chicoine 12,600 12,600 0
Gilles Leduc 12,600 12,600 0
Monique Petit 12,600 12,600 0
Jean-Guy Petit 12,600 12,600 0
Patrick Petit 12,600 12,600 0
Marcel Hebert 12,700 12,600 0
Serge Paquin 7,560 7,560 0
Suzie Beauchemin 5,040 5,040 0
Ginette Barnabe 12,600 12,600 0
Robert Bazinet 12,600 12,600 0
Pierre Champagne 12,600 12,600 0
Serge Cote 12,600 12,600 0
Yves Tremblay 12,600 12,600 0
Gilles Villemaire 12,600 12,600 0
Michel Lefebvre 12,600 12,600 0
Monique Lussier 12,600 12,600 0
Gestion Jacques Plantes inc 37,800 37,800 0
Denis Adam 12,600 12,600 0
Francine Goyette 12,600 12,600 0
Isabel Marques 12,600 12,600 0
Yvan Dery 12,600 12,600 0
Danielle Dubuc 25,225 25,225 0
Renald Racine 12,600 12,600 0
D. et M. Gariepy 12,600 12,600 0
Louise Beauvolsk 12,600 12,600 0
Sebastien Leduc 12,600 12,600 0
Louise Nadeau 12,600 12,600 0
Juliette A. Bourque 12,600 12,600 0
Richard Bourque 12,600 12,600 0
Jean-Jacques Lajoie 25,225 25,225 0
Paul-Andre Lepage 12,600 12,600 0
Simon Francoeur 12,600 12,600 0
Bruno Girouard 12,600 12,600 0
Investissement Dumont 12,600 12,600 0
Paul Nolin Auto 12,600 12,600 0
BBT Consulting Group 500,000 500,000 0
Addison, Pierre 1,000 1,000 0
Akhavan, Hooman 2,000 2,000 0
36
<PAGE>
Anagnostaras, Con 5,000 5,000 0
Anderson, Vivian 1,000 1,000 0
Angers, Dyan 1,000 1,000 0
Angers, Jocelyne 1,000 1,000 0
Angers, Sylvain 2,000 2,000 0
Anthabian, Tigran 1,500 1,500 0
Antun, Emilio 2,000 2,000 0
Araujo, Jose 15,000 15,000 0
Araujo, Jose 5,000 5,000 0
Arvanitakis, Irene 1,500 1,500 0
Arvanitakis, Maria 2,000 2,000 0
Audate, Martine 1,847 1,847 0
Bachellerie, Yan 1,000 1,000 0
Batchelder, Todd 1,000 1,000 0
Bao, Nick 2,000 2,000 0
Bazinet, Marie-France 10,000 10,000 0
Bazzarelli, Ernest 1,000 1,000 0
Beheshti-Zavareth, Hossein 728 728 0
Beaudin, Bert 2,000 2,000 0
Beaulieu, Pauline 1,981 1,981 0
Beauregard, Micheline 3,855 3,855 0
Beauregard, Sonia 1,313 1,313 0
Benoit, Gaetan 5,000 5,000 0
Berger, Louise 3,000 3,000 0
Blais, Francine 1,981 1,981 0
Blais, Sylvain 930 930 0
Boivert, Jacques 2,000 2,000 0
Bouchard D'amico, Louise 5,000 5,000 0
Boucher, Yan 1,981 1,981 0
Brouillard, M 3,220 3,220 0
Bussiere, Robert 2,300 2,300 0
Cardinal, Frederic 1,998 1,998 0
Cardinal, Raymond 1,146 1,146 0
Cardinal, Carole 1,153 1,153 0
Calisto, Mike 2,000 2,000 0
Campagnale, Vince 2,000 2,000 0
Cannuli, Diane 1,000 1,000 0
Carnevale, Benny 1,500 1,500 0
Carruthers, William 33,000 33,000 0
Chiminian, Hagop 1,000 1,000 0
Christofaro, Joseph 2,650 2,650 0
Chu, Kun Chu 30,000 30,000 0
Coiteux, F 3,250 3,250 0
Collins, Ginette 2,000 2,000 0
Cote, Michel 6,661 6,661 0
Cote, Pierre-Paul 2,740 2,740 0
Courchesne, Lyne 1,000 1,000 0
Cunningham, Diane 1,000 1,000 0
Daigle, Claude 5,000 5,000 0
D'Amico, Carlo 1,500 1,500 0
Dansereau, J. F 1,417 1,417 0
Daviau, Louise 9,800 9,800 0
De Nardis, Luigi 10,000 10,000 0
De Nardis, Mena 1,000 1,000 0
Deruyter, Ellen 2,670 2,670 0
Desjardins, G 20,000 20,000 0
Disalvo, Joseph 5,000 5,000 0
Dore, Michelle 5,274 5,274 0
Dolar, Jirayr 10,000 10,000 0
Dulude, Valerie 4,000 4,000 0
Dugas, Yves 975 975 0
Ediflex inc 3,318 3,318 0
Edition Louis Martin 3,318 3,318 0
Eliopoulos, Georges 2,000 2,000 0
Fafard, Andree 14,400 14,400 0
37
<PAGE>
Favas, Emanuel 11,936 11,936 0
Felsher, Melvyn 10,000 10,000 0
Ferner, Susan 2,000 2,000 0
First-Guardian International Corporation 10,000 10,000 0
Fontaine, Bernard 1,600 1,600 0
Ford, Marjorie 20,000 20,000 0
Fortier, Denis 4,000 4,000 0
Foster, Linda J 2,000 2,000 0
Furman, Mitchel 2,000 2,000 0
Giannini, Giuseppe 3,000 3,000 0
Goldfinch, Stephanie 1,000 1,000 0
Gravas, Spiros et Arvanitakis, Panayiota 2,000 2,000 0
Guerin, Carl 2,665 2,665 0
Guerin, Gilles 3,961 3,961 0
Guerin, Jean-Francois 1,336 1,336 0
Guernon, Jean 3,278 3,278 0
Hancock, Richard 10,000 10,000 0
Hancock, Richard 4,989 4,989 0
Harel, Hubert 10,000 10,000 0
Hartvigsen, Kris 1,200 1,200 0
Hebert, Fernande 10,000 10,000 0
Hebert, Jean 23,300 23,300 0
Hebert, Jean 23,396 23,396 0
Hoyt, Randy 1,000 1,000 0
Jamalouden, Nazmoon 15,000 15,000 0
Kaklamanos, Leonidas 3,000 3,000 0
Kalafatidis, James 3,400 3,400 0
Kastelorizios, Maria 8,000 8,000 0
Karteris, Maria 13,422 13,422 0
Karteris, John 16,680 16,680 0
Karteris, John 16,780 16,780 0
Kirakossian, Garabet 11,000 11,000 0
Kirakossian, Hourie 2,500 2,500 0
Kirakossian, Vartivar 6,000 6,000 0
Lachapelle, Sylvain 5,200 5,200 0
Lacroce, Vincenzo 3,000 3,000 0
Lalande, Sophie 3,000 3,000 0
Lamorgese, Caroline 1,000 1,000 0
Lamorgese, Tony 2,000 2,000 0
Lanoie, Pierre 230 2,130 0
Laverdiere, Chantal 1,000 1,000 0
Lebel, Yannick 1,000 1,000 0
Leroux, Guylaine 8,000 8,000 0
L.I.B. Invest. Club 2,000 2,000 0
Lintzeris, Peter 2,000 2,000 0
Luniewski, Renee 2,000 2,000 0
Mady, Chady 3,014 3,014 0
Malenfant, Robert 20,700 20,700 0
Malenfant, Veronique 7,950 7,950 0
Marcos, Marcel 1,000 1,000 0
Markov, Nikolaos 1,500 1,500 0
Martin, Jacques 50,000 50,000 0
Martin, Philippe 2,000 2,000 0
Martinez, Alvaro 2,000 2,000 0
Mathieu, Josee 4,916 4,916 0
Mineo, Serge 1,000 1,000 0
Morazain, Luc 2,000 2,000 0
Morel, Remy 600 600 0
Morin, Pierre 9,460 9,460 0
Morissette, Solange 900 900 0
Morgia, Anne-Marie 1,000 1,000 0
Muller, Peter 1,000 1,000 0
Natale R. Gennaro 8,000 8,000 0
Pacheco John et Pacheco Joe 1,313 1,313 0
Panaccione, Fabio 10,000 10,000 0
38
<PAGE>
Papadakos, Georgia 15,000 15,000 0
Pappappicco, Mariella 5,000 5,000 0
Pare, Richard 3,341 3,341 0
Perreault, Daniel 1,600 1,600 0
Petit, Patrice 3,137 3,137 0
Pires, Joa 20,000 20,000 0
Poulin, Christian 1,336 1,336 0
Poulopoulos, N 5,000 5,000 0
Purcell, Anita 1,000 1,000 0
Rea, Karen 3,000 3,000 0
Renaud, Denis 3,318 3,318 0
Richard, Martin 1,500 1,500 0
Riopel, Nicole 1,400 1,400 0
Rioux, Pierre Sam 2,015 2,015 0
Roque, Christina 1,000 1,000 0
Salas Fernandez, Carlos Luis 1,982 1,982 0
Santucci, Anthony 1,000 1,000 0
Santucci, Gianni 10,000 10,000 0
Santucci, Mario 1,000 1,000 0
Santucci, Mario 16,500 16,500 0
Sauve, Diane 2,000 2,000 0
Shou, Judy 1,000 1,000 0
Sistatsis, Georges 1,000 1,000 0
Stefaros, Bill 12,000 12,000 0
Stinziani, Giovanni 8,000 8,000 0
Stockden, Gary 2,000 2,000 0
Taddeo, Anthony 1,000 1,000 0
Tartaglia, Nick 5,929 5,929 0
Tassone, Vittoria 5,000 5,000 0
Tolias, Maria 4,000 4,000 0
Therrien, Eric 2,500 2,500 0
Therrien, Ghislaine 2,500 2,500 0
Tremblay, Marc 16,700 16,700 0
Trudeau, Wayne 3,000 3,000 0
Vaccarella, Vincent 14,000 14,000 0
Vassiliou, Joanne 1,000 1,000 0
Vassiliou, Vicky 3,400 3,400 0
Veilleux, Vincent 6,661 6,661 0
Virgilio, Giuseppe 6,500 6,500 0
Ward, Lance 1,660 1,660 0
Woods, James 5,000 5,000 0
Winikoff, Mark 1,000 1,000 0
Zervakos, Georges 29,000 29,000 0
Zervakos, Georges 4,989 4,989 0
Zervakos, Kostantinos 2,000 2,000 0
Zervakos, Melinda 2,000 2,000 0
Zervakou, Rosa 1,000 1,000 0
3101-5464 Quebec inc 35,000 35,000 0
9008-5085 Quebec inc 15,000 15,000 0
-
* We are registering the shares underlying the warrants. References in
the chart to "Warrants" before or after sale are all references to the
underlying shares. The list has been presented in two parts to distinguish
between the actual shares and the shares underlying the warrants. Each warrant
is exercisable into one share of Class B Common Stock at a price of $1.10.
(1) Controlled by our President, CEO and Chairman.
(2) Our Senior Vice President Sales and Marketing and a Director.
(3) Mr. Pierre Saint-Aubin is a director of this entity.
39
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with this offering are being
passed upon by the law firm of Heller, Horowitz & Feit, P.C., New York, New
York.
EXPERTS
Our audited financial statements as of October 31, 1999 and for
the fiscal year then ended are included herein and in the registration statement
in reliance upon the report of Mark Cohen C.P.A., an independent certified
public accountant, appearing elsewhere herein, and upon the authority of said
person as an expert in accounting and auditing.
40
<PAGE>
Mark Cohen C.P.A.
1772 East Trafalgar Circle
Hollywood, Fl 33020
(954) 922 - 6042
----------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
GSI Technologies USA, Inc.
We have audited the accompanying balance sheet of GSI Technologies USA, Inc. (a
company in the development stage) as of October 31, 1999 and the related
statements of operations, shareholders' equity (deficiency) and cash flows for
the year 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. 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, 1999, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 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 4. 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
December 23, 1999
<PAGE>
BALANCE SHEET
Assets
------
Current Assets
Cash and cash equivalents $ 350,019
Receivables, net 90,985
-----------
Total current assets .. 441,004
Other assets 797,808
-----------
Total assets $ 1,238,812
===========
Liabilities and Shareholder's Equity
------------------------------------
Current Liabilities
Accounts payable $ 119,000
Note Payable 279,667
Other current liabilities 58,190
-----------
Total current liabilities 456,857
Shareholder's Equity
Common Stock, class A, $1.00 par value; authorized --
5,000,000 shares; issued and
outstanding none in 1999
Common Stock, class B, $.001 par value; authorized 19,608
55,000,000 shares; issued and
outstanding 19,608,372 in 1999
Paid in Capital 1,021,877
Deficit accumulated during the development stage (259,530)
-----------
Total Shareholder's Equity 781,956
-----------
Total liabilities and shareholder's equity $ 1,238,812
===========
F-1
<PAGE>
INCOME STATEMENT
Year Ended
October 31, 1999
------------------
Operating Expenses:
Selling, general and administrative expenses $ 259,530
-----------
Net Loss $ (259,530)
===========
Basic weighted average common shares outstanding 6,185,628
===========
Basic Loss per common share $ (0.0420)
===========
F-2
<PAGE>
<TABLE>
EQUITY
<CAPTION>
Accumulated
Common Class A Common Class B Deficit
-------------- ----------------------------- during
Par Paid in Development Cost per
Shares Amount Shares Value Amount Capital Stage Share
------ ------ ---------- ------ ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning: -- $ -- -- -- $ -- $ -- $ -- --
June 30, 1999
Proceeds from the sale of Class B -- -- 18,085,472 0.00 18,085 -- -- 0.001
September 16, 1999
Contract Settlement - BBT Consulting Group, Inc. -- -- 500,000 0.00 500 -- -- 0.001
October 22, 1999
Proceeds from the sale of Class B through -- -- 384,700 0.00 385 384,315 -- 1.000
circular offering
October 26, 1999
Issuance of stock to GSI Technologies -- -- 600,000 0.00 600 599,400 -- 1.000
(3529363 Canada Inc.) for license rights
October 27, 1999
Proceeds from the sale of Class B through -- -- 18,000 0.00 18 17,982 -- 1.000
circular offering
October 29, 1999
Proceeds from the sale of Class B through -- -- 20,200 0.00 20 20,180 -- 1.000
circular offering
Net loss year ended October 31, 1999 -- -- -- -- (259,530) --
-- ---- ---------- ------ ------ ---------- --------- -----
Balance, ending: -- $ -- 19,608,372 $0.00$ $19,608 $1,021,877 $(259,530) 0.053
== ==== ========== ====== ======= ========== ========= =====
</TABLE>
F-3
<PAGE>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (259,530)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 2,192
Changes in Operating assets and liabilities:
Accounts Receivable (90,985)
Accounts Payable and Accrued Liabilities 177,190
-----------
Net cash provided by/(used in) operating activities (171,134)
CASH FLOWS FROM INVESTING ACTIVITIES:
License rights (800,000)
-----------
Net cash provided by/(used in) investing activities (800,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Notes payable, principally related parties 279,667
Sales of common stock 440,985
Issuance of stock for license rights, principally related parties 600,000
Issuance of stock for contract settlement 500
-----------
Net cash provided by/(used in) financing activities 1,321,152
-----------
Net increase (decrease) in cash and cash equivalents 350,019
Cash and cash equivalents, beginning of period --
-----------
Cash and cash equivalents, end of period $ 350,019
===========
F-4
<PAGE>
GSI TECHNOLOGIES USA, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Year Ended OCTOBER 31, 1999
------------------------------------------
Basis of accounting:
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.
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 of cash and equivalents, accounts receivable, accounts
payable and accrued liabilities approximate their fair values because of
the short duration of these instruments.
Impairment of long-lived assets:
Long-lived assets and certain identifiable intangibles held and used by the
Company are reviewed for possible impairment whenever events or
circumstances indicate the carrying amount of an asset may not be
recoverable. Intangible assets have been written down to their net
estimated realizable value.
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,
1999 approximates the fair value at such date.
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.
F-5
<PAGE>
Per share amounts:
Loss per share is computed by dividing net loss by the weighted average
number of shares outstanding throughout the year.
Recent Accounting Pronouncements:
The Statement of Financial Accounting Standards Board (SFAS) No. 130,
"Reporting Comprehensive Income," was issued by the Financial Accounting
Standards Board (FASB) in June 1997. This Statement establishes standards
for the reporting and display of comprehensive income and its components.
Comprehensive income including, among other things, foreign currency
translation adjustments and unrealized gains and losses on certain
investments in debt and equity securities. Also in June 1997, the FASB
issued SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information." This Statement establishes standards for reporting
information about operating segments in annual financial statements, and
requires that an enterprise report selected information about operating
segments in interim reports issued to shareholders. Both of these
Statements are effective for fiscal periods beginning after December 15,
1997. The Company does not expect the adoption of these statements to have
a material impact on its financial condition or results of operations.
F-6
<PAGE>
GSI TECHNOLOGIES USA, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
Year Ended October 31, 1999
------------------------------------
1. Organization and business
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.
2. Concentrations of credit risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash, cash equivalents
and accounts receivable. The credit risk associated with cash and cash
equivalents is considered low due to the credit quality of the financial
institutions. The Company maintains, when appropriate, an allowance for
uncollectible receivables. Therefore, no additional credit risk beyond
amounts provided for collection losses is believed inherent in the
Company's receivables and to date have been within management's
expectations.
3. Details of financial statement components
Receivables:
Receivable - GSI Technologies, Canada $ 18,085
Receivable - Maxima Capital 72,900
----------
$ 90,985
Other Assets:
License rights $ 800,000
Accumulated amortization (2,192)
----------
$ 797,808
Other Current Liabilities:
Due to A. Adouelouafa $ 5,900
Accrued Expenses 52,290
----------
$ 58,190
4. Commitments, contingencies and litigation
OTC Bulletin Board Listing:
The company contracted on September 16, 1999 with BBT Consulting Group
Ltd. to assist in obtaining a (NASDAQ) OTC Bulletin Board listing of
its common shares. The agreement states a fee of $50,000.00 to BBT
Consulting Ltd.. all of which has been accrued in the financial
statements.
F-7
<PAGE>
Commitments, contingencies and litigation (continued)
Employment Contracts:
On October 29, 1999, the Company executed a three year employment
agreement (which starts on January 01, 2000) with its President, Mr.
J. Michel de Montigny.
On October 29, 1999, the Company executed a one year employment
agreement (which starts on January 01, 2000) with its Vice President
Finance, Mr. James Hone.
Year 2000 compliance:
The year 2000 issue is the result of computer programs being written
using two (2) digits rather than four (4) digits to define the year.
Any of the Company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than
2000. This problem could force computers to either shut down or
provide incorrect data or information. The Company utilizes generic
software programs developed, maintained and upgraded by independent
computer software providers. In response to the year 2000 issue,
management is of the opinion that the providers of these software
programs will resolve the date sensitive issue so that all critical
systems will be in compliance prior to the year 2000. The Company does
not anticipate any material adverse impact on the business.
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 $259,530 for the year ended October 31, 1999. As reported on
the statement of cash flows, the Company incurred negative cash flows
from operating activities of $171,134 from inception. To date, this
has been financed principally through the sale of common stock
($440,985) and short term debt ($279,667) which is related party debt.
Additional capital and/or borrowings will be necessary in order for
the Company to continue in existence until attaining and sustaining
profitable operations. Management has continued to develop a strategic
plan to develop a management team, maintain reporting compliance and
seek new expansive areas in broadcasting solutions. In October 1999,
the Company acquired the licensing rights to market the technology,
processes, methods and techniques to provide electronic advertising
services on a commercial basis. Management anticipates that an
additional investment of several million dollars will be needed to
develop an effective sales and marketing program and fund purchases of
future acquisitions before the organization will generate sufficient
cash flow from operations to meet current operating expenses and
overhead.
5. Comprehensive income (loss)
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income". SFAS 130 establishes
standards for the reporting and display of comprehensive income (loss)
and its components in the financial statements. The adoption of this
statement did not result in a change in the Company's disclosure.
6. Related Parties
Note payable to stockholder:
The company has a note payable dated October, 31, 1999 in the amount
of $279,667 to GSI Technologies (3529363 Canada Inc.), a shareholder
of the company. This note is for settlement of payment for license
rights agreement of $200,000 and reimbursements of expenditures in the
F-8
<PAGE>
Related Parties (continued)
amount of $79,667 paid by GSI Technologies (3529363 Canada Inc.)
during the fiscal year ended October 31, 1999 on behalf of GSI
Technologies USA, Inc. The note is unsecured and bears interest of
prime plus two percent and matures on October 31, 2000.
Issuance of stock for license rights:
On October 26, 1999, the Company issued 600,000 shares of common
stock, class B, to GSI Technologies (3529363 Canada Inc.), a
shareholder of the company, in settlement of the license rights
agreement in the amount of $600,000.
Accrued financing expenses:
On October 31, 1999, the Company accrued financing expenses in the
amount of $10,000 due to Totalcom Inc., a shareholder of the company.
This amount is for finder fees associated with the circular offering.
Mr. J. Michel de Montigny is a 49 percent shareholder of Totalcom Inc.
as well.
On October 31, 1999, the Company accrued financing expenses in the
amount of $15,000 due to 3633730 Canada Inc., a shareholder of the
company. This amount is for finder fees associated with the circular
offering. Mr. J. Michel de Montigny is a 100 percent shareholder of
3633730 Canada Inc. as well.
On October 31, 1999, the Company accrued financing expenses in the
amount of $15,000 due to 9035-2899 Quebec Inc., a shareholder of the
company. This amount is for finder fees associated with the circular
offering.
On October 31, 1999, the Company accrued financing expenses in the
amount of $86,500 due to Maxima Capital Inc., a shareholder of the
company. This amount is for finder fees associated with the circular
offering. Mr. Pierre Saint-Aubin is the Director of Maxima Capital
Inc. and a shareholder of GSI Technologies USA, Inc.
Professional services:
On August 17, 1999, the Company entered into an agreement with Maxima
Capital Inc., a shareholder of the company, for consulting services
related to obtaining an OTC Bulletin Board listing. The fee for such
services totaled $12,000 of which $7,500 has been accrued in the
financial statements. Mr. Pierre Saint-Aubin is a Director of Maxima
Capital Inc. and a shareholder of GSI Technologies USA, Inc.
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
carryforwards, because of uncertainty regarding its realizability.
8. Warrants and Options
On June 30, 1999, the Company issued 2,174,000 warrants to founding
shareholders. Each warrant entitles the registered holder thereof to
purchase at any time one share of common stock at a price of $1.10.
F-9
<PAGE>
Warrants and Options (continued)
On September 16, 1999, the Company issued 500,000 warrants to BBT
Consulting Group, Inc. as part of its contractual agreement to obtain
a (NASDAQ) OTC Bulletin Board listing of its common shares. Each
warrant entitles the registered holder thereof to purchase at any time
one share of common stock at a price of $1.10.
From October 22, 1999 to October 29, 1999, the Company, in accordance
with it offering circular to sell no less than 300,000 and up to
1,000,000 units (each unit consisting of one (1) share of common stock
and (1) warrant), sold 422,900 shares of common stock. Each warrant
entitles the registered holder thereof to purchase at any time from
the date of the offering until the close of business January 31, 2002,
one share of common stock at a price of $1.10.
On October 29, 1999, the Company executed a three year employment
agreement (which starts on January 01, 2000) with its President, Mr.
J. Michel de Montigny, which allows the purchasing of up to 500,000
warrants at $1.10 cents per warrant during his employment.
9. Earnings (Loss) per common share
Basic earnings (loss) per share is computed using the weighted-average
number of common shares outstanding during the period.
10. Subsequent Events
Circular Offering:
From November 01, 1999 to November 30, 1999, the Company, in
accordance with it offering circular to sell no less than 300,000 and
up to 1,000,000 units (each unit consisting of one (1) share of common
stock and (1) warrant), completed its offering by selling the
remaining 577,100 shares of common stock. Each warrant entitles the
registered holder thereof to purchase at any time from the date of the
offering until the close of business January 31, 2002, one share of
common stock at a price of $1.10.
Office rent agreement:
On November 01, 1999, the company entered into an office rent
agreement with Fernand Lamothe Inc. for office space. This agreement
is for a term of 1 year and the annual rental amount is $3,816. Mr.
Fernand Lamothe, the president of Fernand Lamothe Inc., is also the
President of Power Group Consultants, LLC., a shareholder in GSI
Technologies USA, Inc.
Consulting agreement:
On November 04, 1999, the Company entered into a consulting agreement
with Power Group Consultants, LLC., a shareholder of the company. The
fee is $10,000 and relates to preparation of financial statements for
management and assisting management throughout the audit of the
October 31, 1999 financial statements.
F-10
<PAGE>
-----------------------------------------
11,407,206 Shares of Common Stock
GSI TECHNOLOGIES USA INC.
PROSPECTUS
_____________ , 2000
-----------------------------------------
You should only rely on the information contained in this document or other
information that we refer you to. We have not authorized anyone to provide you
with any other information that is different . You should note that even though
you received a copy of this Prospectus, there may have been changes in our
affairs since the date of this Prospectus. This Prospectus does not constitute
an offer to sell securities in any jurisdiction in which such offer or
solicitation is not authorized
TABLE OF CONTENTS PAGE
Page
Available Information 2
Risk Factors 3
Special Note Regarding
Forward-Looking Statements 9
Summary Historical Financial
Information 9
Plan of Operations 10
Use of Proceeds 13
Business 14
Management 22
Security Ownership of Certain
Beneficial Owners and Management 24
Executive Compensation 24
Certain Relationships and Related Transactions 25
Disclosure of Commission Position
on Indemnification for Securities
Act Liability 26
Description of Securities 26
Plan of Distribution 28
Selling Stockholders 28
Legal Matters 40
Experts 40
Financial Statements F-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following statement sets forth the estimated expenses in
connection with the offering described in the Registration Statement, all of
which will be borne by the Registrant.
Securities and Exchange Commission Fee ....................... $ 3,568
Accountants' Fees ............................................ $15,000
Legal Fees ................................................... $20,000
Company's Administrative Expenses ............................ $30,000
Printing and engraving ....................................... $10,000
Miscellaneous ................................................ $ 1,432
TOTAL ........................................................ $80,000
=======
Item 14. Indemnification of Directors and Officers.
Neither our By-Laws nor our Certificate of Incorporation currently provide
indeminification to our officers and directors. In an effort to continue to
attract and retain qualified individuals to serve as our directors and officers,
we intend to adopt provisions providing for the maximum indemnification
permitted by Delaware law.
Item 15. Recent Sales of Unregistered Securities
In June 1999, Registrant sold an aggregate of 18,085,472
shares at par value and issued an aggregate of 2,174,000 warrants to purchase
one share of Class B Common Stock at $1.10. All of shares were restricted and
were issued pursuant to the exemption from registration contained in Regulation
S.
II-1
<PAGE>
In September 1999, Registrant issued 500,000 restricted
shares to one consultant as payment for consulting services pursuant to the
exemption from registration contained in Section 4(2).
In October 1999, Registrant issued 600,000 restricted shares
to an affiliated entity as a licensing fee. This issuance was pursuant to the
exemption from registration contained in Section 4(2).
In October/November 1999, Registrant sold 1,000,000 units
consisting of one share of Class B Common Stock and one warrant to purchase one
share of Class B Common Stock at a price of $1.10. The Units were sold pursuant
to the exemptions from registration contained in Regulation S and Regulation D,
Rule 506.
Item 16. Exhibits and Financial Statements Schedules.
3.1 Certificate of Incorporation, as amended
3.2 By-Laws
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate
5 Opinion of Heller, Horowitz & Feit, P.C.
10.1 Master License Agreement between GSI Technologies
USA Inc. and GSI Technologies (3529363 Canada Inc.)
23.1 Consent of Heller, Horowitz & Feit, P.C.
(included in the Opinion filed as Exhibit 5)
23.2 Consent of Mark Cohen, C.P.A.
27 Financial Data Schedule
- ---------------
Item 17. Undertakings.
------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the registration statement; and
notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the
form of prospectus filed with Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price
II-2
<PAGE>
set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) Include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement provided, however,
that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission
by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(iv) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration statement of the
securities offered and the offering of the securities at that time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and has authorized this
registration statement or amendment to be signed on its behalf by the
undersigned, in the City of Montreal on the _____ day of February 2000.
GSI TECHNOLOGIES USA INC.
By: /s/J. Michel de Montigny
J. Michel de Montigny, President and CEO
In accordance with the requirements of the Securities Act,
this registration statement or amendment was signed by the following persons in
the capacities and on the dates stated:
Signature Title Date
/s/J. Michel de Montigny
J. Michel de Montigny President, Chief February 10, 2000
Executive Officer
and Chairman
/s/James A. Hone
James A. Hone Senior Vice President February 10, 2000
Administration, Chief
Financial Officer
and Director
/s/Michel Laplante
Michel Laplante Vice President
Sales and Marketing
and Director February 10, 2000
II-4
<PAGE>
Exhibit 3.1
STATE of DELAWARE
CERTIFICATE of INCORPORATION, AS AMENDED TO DATE
A STOCK CORPORATION
FIRST: The name of the corporation is GSI Technologies USA Inc.
SECOND: It's registered office in the State of Delaware is to be located at 1,
Center, Suite 600, Twelfth & Orange Streets, Wilmington, New Castle County, DE
19899-0511.
THIRD: The nature of the business and the objects and purposes proposed to be
transacted, promoted and carried on, are to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The amount of the total authorized stock of this corporation is:
5,000,000 of Class A common stock having 1.00 par value and 55,000,000 of Class
B common stock having .001 par value.
FIFTH: The name of the incorporator is Access Incorporation Services, 21550
Oxnard Street, Suite 300, Woodland Hills, CA 91367.
I, the undersigned, being the incorporator, for the purpose of
forming a corporation under the laws of the State of Delaware do make, file and
record this Certificate and do certify that the facts herein stated are true.
<PAGE>
Exhibit 3.2
BY - LAWS
OF
GSI TECHNOLOGIES USA INC.
------------------------------
ARTICLE I - OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be established and
maintained at 721 S.E. 17th Street, suite 200, Fort Lauderdale in the state of
Florida.
SECTION 2. OTHER OFFICES. The corporation may have other offices, either within
or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
ARTICLE II - MEETING OF STOCKHOLDERS
SECTION I. ANNUAL MEETINGS. Annual meetings of stockholders for the election of
directors and for such other business as may be stated in the notice of the
meeting, shall be held at such place, either within or without the State of
Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting. In the event the
Board of Directors fails to so determine the time, date and place of meeting,
the annual meeting of stockholders shall be held at the registered office of the
corporation in Florida on 721 S.E. 17th Street, suite 200, Fort Lauderdale.
If the date of the annual meeting shall upon a legal holiday, the meeting shall
be held on the next succeeding business day. At each annual meeting, the
stockholders entitled to vote shall elect a Board of Directors and may transact
such other corporate business as shall be stated in the notice of the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose other than
the election of directors may be held at such time and place, within or without
the State of Delaware, as shall be stated in the notice of the meeting.
SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the
terms and provisions of the Certificate of Incorporation and these By-Laws shall
be entitled to one vote, in person or by proxy, for each share of stock entitled
to vote held by such stockholder, but no proxy shall be voted after three years
from its date unless such proxy provides for a longer period. Upon the demand of
any stockholder, the vote for directors and upon any question before the meeting
shall be by ballot. All elections for directors shall be decided by majority
vote except as otherwise provided by the Certificate of Incorporation or the
laws of the State of Delaware.
SECTION 4. STOCKHOLDER LIST.The officer who has charge of the stock ledger of
the corporation shall at least 10 days before each meeting of stockholders
prepare a complete alphabetical addressed list of the stockholders entitled to
vote at the ensuing election, with the number of shares held by each. Said list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held. Which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall be
available for inspection at the meeting.
SECTION 5. QUORUM. Except as otherwise required by law, by the Certificate of
Incorporation or by these By-Laws, the presence, in person or by proxy, of
stockholders holding twenty percent (20 %) of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournment
thereof.
SECTION 6. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the directors
or stockholders entitled to vote. Such request shall state the purpose of the
proposed meeting.
SECTION 7. NOTICE OF MEETINGS. Written notice, stating the place, date and time
of the meeting, and the general nature of the business to be considered, shall
be given to each stockholder entitled to vote thereat at his address as it
appears on the records of the corporation, not less than ten nor more than fifty
days before the date of the meeting.
SECTION 8. BUSINESS TRANSACTED. No business other than that stated in the notice
shall be transacted at any meeting without the unanimous consent of all the
stockholders entitled to vote threat.
SECTION 9. ACTION WITHOUT MEETING. Except as otherwise provided by the
Certificate of Incorporation, whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any provisions
of the statutes or the Certificate of Incorporation or these By-Laws, the
meeting and vote of stockholders who would have been entitled by vote upon the
action if such meeting were held, shall consent in writing to such corporate
action being taken.
ARTICLE III - DIRECTORS
SECTION 1. NUMBER AND TERM. The number of directors shall be three (3).
The directors shall be elected at the annual meeting of the stockholders and
each directors shall be elected to serve until his successor shall be elected
and shall qualify. The number of directors nay not be less than three (3) except
where all the shares of the corporation are owned beneficially and of record by
either one or two stockholders, the number of directors may be less than three
(3) but not less than the number of stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for unexpired term and until his
successor shall be duly chosen.
SECTION 4. REMOVAL. Any director or directors may be removed either for
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for a purpose and the vacancies thus
created may be filled at the meeting held for the purpose of removal, by the
affirmative vote of a majority in interest of the stockholders entitled to vote.
SECTION 5. INCREASE OF NUMBER. The number of directors may be increased
by amendment of these By-Laws by the affirmative vote of a majority of the
directors, though less than a quorum, or, by the affirmative vote of a majority
in interest of the stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional directors may be chosen
at such meeting to hold office until the next annual election and until their
successors are elected and qualify.
SECTION 6. COMPENSATION. Directors shall not receive any stated salary
for their services as directors or as a member of committees, but by resolution
of the board a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation thereof.
SECTION 7. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors, or any committee thereof, may
be taken without a meeting, if prior to such action a written consent thereto is
signed by all members of the board, or such committee as the case may be, and
such written consent is filed with the minutes of proceedings of the board or
committee.
ARTICLE IV - OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall consist of a
President, a Treasurer, and a Secretary, and shall be elected by the Board of
Directors and shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect a Chairman, one or more
Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as it
may deem proper. None of the officers of corporation need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS.The Board of Directors may appoint
such officers and agents as it may deem advisable, who shall hold their offices
for such terms and shall exercise such power and perform such duties as shall be
determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors if one be
elected, shall preside at all meeting of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive
officer of the corporation and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. He shall preside at all meeting of the stockholders if present
thereat, and in the absence or non-election of the Chairman of the Board of
Directors, at all meeting of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation. Except as
the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages, and other contracts in behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him
by the directors.
SECTION 6. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
<PAGE>
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 7. SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By-Laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the President, or by the directors, or stockholders, upon whose requisition
the meeting is called as provided in these By-Laws. He shall record all the
proceedings of the meetings of the corporation and of directors in a book to be
kept for that purpose. He shall keep in safe custody the seal of the
corporation, and when authorized by the Board of Directors, affix the same to
any instrument requiring it, and when so affixed, it shall be attested by his
signature or by the signature of any assistant secretary.
SECTION 8. ASSISTANT TREASURERS & ASSISTANT SECRETARIES. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall assigned to them,
respectively, by the directors.
ARTICLE V
SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the
corporation shall entitled to have a certificate, signed by, or in the name of
the corporation by, the chairman or vice-chairman of the board of directors, or
the president or a vice-president and the treasurer or an assistant treasurer,
or the secretary of the corporation, certifying the number of shares owned by
him in the corporation. If the corporation shall be authorized to issue more
than one class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as other
wise provided in section 202 of the General Corporation Law of Delaware, in lieu
of the foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of such
preferences and/or rights. Where a certificate is countersigned (1) by a
transfer agent other than the corporation or its employee, or (2) by a registrar
other than the corporation or its employee, the signatures of such directors may
be facsimiles.
SECTION 2. LOST CERTIFICATES. New certificates of stock may be issued
in the place of any certificate therefore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate or his legal representatives, to
give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against it on
account of the alleged loss of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock and transfer books and ledgers, or
to such other persons as the directors may designate, by who they shall be
cancelled, and new certificates shall thereupon be issued. A record shall be
made of each transfer and whenever a transfer shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the day of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation the Board of Directors may, out of funds legally available thereof
at any regular or special meeting, declare dividends upon the capital stock of
the corporation as and when they deem expedient. Before declaring any dividends
there may be set apart out of any funds of the corporation available for
dividends, such sum or sums as the directors from time to time in their
discretion deem proper working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6, SEAL. The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the worlds
"CORPORATE SEAL DELAWARE". Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall
be determined by resolution of the Board of Directors.
SECTION 8. CHECKS. All checks, drafts, or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by the officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage prepaid, addressed to the
person entitled thereto at his address as it appears in the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed proper notice.
ARTICLE VI - CLOSE CORPORATIONS : MANAGEMENT BY SHAREHOLDERS
If the certificate of Incorporation of the corporation states that the
business and affairs of the corporation shall be managed by the shareholders of
the corporation rather than by a board of directors, then, whenever the context
so requires the shareholders of the corporation shall be deemed the directors of
the corporation for purpose of applying any provision of these By-Laws.
ARTICLE VII - AMENDMENTS
These By-Laws may be altered and repealed and By-Laws may be made at
any annual meeting of the stockholders or at any special meeting thereof if
notice thereof is contained in the notice of such special meeting by the
affirmative vote of a majority of the stock issued and outstanding or entitled
to vote thereat, or by the regular meeting of the Board of Directors, at any
regular meeting of the Board of Directors, or at any special meeting of the
Board of Directors, if notice is contained in the notice of such special
meeting.
<PAGE>
Exhibit 4.1
FORM COMMON STOCK CERTIFICATE
GSI TECHNOLOGIES USA, INC.
Incorporated under the Laws of the State of Delaware
Authorized Capital Stock 55,000,000 Shares Class B
Par Value $0.001
No. Shares
CUSIP 981918 10 5
THIS CERTIFIES THAT IS THE OWNER OF
Fully paid and non-assessable shares of GSI TECHNOLOGIES USA, INC. Common Stock
transferable only on the books of the Corporation, in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Certificate of Incorporation and the
Bylaws of this Corporation, and all amendments thereto, copies of which are on
file at the principal office of this Corporation. In Witness Whereof, the said
Corporation has caused this Certificate to be signed by the facsimile signatures
of its duly authorized officers and to be sealed with the facsimile seal of this
Corporation. This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
[SEAL]
/s/ /s/
Secretary President
Countersigned
Intercontinental Registrar and Trust Agency, Inc.
By:_______________________________________
Transfer Agent and Registrar Authorized Person
<PAGE>
Reverse Side of Stock Certificate
Signatures must be guaranteed by a firm which is a member of a
registered national stock exchange; or by a bank or a trust company. The
following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<PAGE>
TEN COM - as tenants in common UNIF FIT MIN ACT-________Custodian__________
(Cust) (Minor)
TEN ENT - as tenants by the
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act__________________________
survivorship and not as tenants in common (State)
<PAGE>
Additional abbreviations may also be used though not in the above list.
For Value Received,_____________________________hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------------
- ------------------------------------------------
- ------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- -----------------------------------------------------------------
- ------------------------------------------------------------------
__________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ______________________ Attorney to transfer
the said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated_________________________
-------------------------------------------------
NOTICE: The signature to this assignment must correspond with the
name as written upon the face of the Certificate, in every
particular, without alteration or enlargement or any change
whatever. The signature must be medallion guaranteed by an
eligible guarantor institution with membership in an approved
signature medallion guarantee program pursuant to S.E.C. Rule
17AD-15.
<PAGE>
Exhibit 4.2
Number
Warrants
GSI TECHNOLOGIES USA, INC.
(a Delaware Corporation)
WB
This Warrant Certificate Certifies That
CUSIP 36230E 11 3
or registered assigns, is the registered holder of the number of Warrants
("Warrants") set forth above. Each Warrant Entitles the holder thereof to
purchase from GSI Technolgies USA, Inc., a Delaware corporation (the "Company"),
subject to the terms and conditions set forth in the Warrant Agreement, one
fully paid and non-assessable share of Class B common stock. $0.001 par value,
of the Company (the "Class B Common Stock") upon payment of $1.10, subject to
adjustments (the "Exercise Price"), for each Warrant held, and any applicable
taxes paid either in cash or by certified or official bank check to the order of
the Company, and upon presentation and surrender of this Warrant Certificate
(with the instructions for the registration and delivery of the Class B Common
Stock completed), at any time prior to midnight, Pacific Daylight Time, January
31, 2002, at the offices of the stock transfer office in Boulder City, Nevada,
of Intercontinental Registrar & Transfer Agency, Inc., warrant agent of the
Company ("the "Warrant Agent"), or any successor Warrant Agent, or, if there be
no successor Warrant Agent, at the offices of the Company at Montreal, Quebec,
Canada. The Exercise Price and the number and type of securities received upon
exercise are subject to adjustment in certain events to prevent dilution.
The Company shall not be required to issue fractions of Warrants, Class B Common
Stock or other securities upon the exercise of the Warrants, in the case of the
exercise if less than all the Warrants represented hereby. The Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrants Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrant.
The Company shall not be obligated to deliver any securities pursuant to the
exercise of this Warrant unless a registration statement under the Securities
Act of 1933, as amended, and under the applicable state securities law with
respect to such securities is effective or there is an available exemption from
such Federal and State registration requirements. This Warrant shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
This Warrant shall not be valid unless countersigned by the Warrant Agent.
ADDITIONAL PROVISIONS OF THIS WARRANT ARE CONTAINED ON THE REVERSE HEREOF.
DATED:
<PAGE>
REVERSE SIDE OF WARRANT
GSI TECHNOLOGIES USA, INC.
1.PROTECTION AGAINST DILUTION. The Warrants are subject to adjustment of the
exercise price in certain events, such as stock dividends, stock splits,
mergers, sale of substantially all of the Company's assets, and for other
extraordinary events in which additional shares of Class B Common Stock of the
Grantor are issued in a transaction not involving cash consideration, by
increasing or decreasing the amount of Shares subject to this Warrant in the
same proportion as the increase or decrease in additional shares of Class B
Common stock of the Grantor outstanding, fully diluted, after such transaction.
2.EXERCISE OF WARRANT. This Warrant may be exercised by the Holder, in whole at
any time or in part from time to time prior to midnight, Pacific Daylight Time,
January 31, 2002.
3.Method of Exercise. The Warrant shall be exercisable by a
written Form of Exercise signed by an authorized representative of Holder or his
assigns which shall (a) state Holder's election to exercise the Warrant; (b) the
person in whose name the certificate for such shares is to be registered, his
address and social security number; (C) be delivered in person or by certified
mail to the Warrant Agent..
4.ASSIGNABILITY OF WARRANT. The Warrant may be detached from the Unit and
assigned or sold by Holder at any time during the term of the Warrant by
providing to Grantor a written notice of assignment in the form as shown below
on this certificate.
5.REPRESENTATIONS AND WARRANTIES OF GRANTOR. Upon exercise of the Warrant in
full by holder or his assigns, the shares underlying the Warrant shall be free
and clear of all liens, claims, charges and encumbrances. Grantor agrees to
indemnify hand hold harmless Holder in connection with any claim, loss damage or
expense, including attorneys' fees, trail and appellate levels, in connection
with any breach of the foregoing.
6.SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations, warranties,
covenants and agreements set forth herein shall be continuous and shall survive
the termination of this agreement or any part thereof.
7. MISCELLANEOUS
<PAGE>
GSI TECHNOLOGIES USA, INC.
a) Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the transactions
contemplated hereby, and this Agreement supersedes in all respects all
written or oral understandings and agreements heretofore existing
between the parties hereto.
b) Counterparts. This Agreement may be executed in one or more
counterparts, and all such counterparts shall constitute one and the
same instrument.
c) Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process with
regard hereto shall be in writing and shall be deemed to have been duly
given, when delivered by hand or three (3) days after deposited into
the United States mail, by registered or certified mail, return receipt
requested, postage prepaid.
d) Additional Documents. At any time and from time to time, the parties
hereto shall execute such documents as are necessary to effect this
Agreement.
e) Jurisdiction Venue. The parties to this Agreement agree that
jurisdiction and venue shall properly lie in the State of Delaware, or
in the United States District Court for the State of Delaware, with
respect to any legal proceedings arising from this Agreement.
f) Attorneys' Fees. In the event any suit or legal proceeding is brought
for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be
entitled to recover attorneys' fees, including attorneys' fees for any
appeal, and costs incurred in bringing such suit or proceeding.
g) Governing Law. This agreement has been negotiated and prepared and
shall be performed in the State of Delaware, and the validity,
construction and enforcement of, and the remedies under. this Agreement
shall be governed in accordance with the laws of the State of Delaware.
<PAGE>
GSI TECHNOLOGIES USA, INC.
FORM OF EXERCISE
Number of Warrants Exercised
The undersigned hereby elects to exercise the right to purchase represented by
the within Warrant for, and to purchase thereunder, shares of the stock provided
for therein, and requests that certificates for such --------------- shares be
issued in the name of:
(Name and Social Security Number)
(Street Address)
(State, Zip Code)
and if said number of shares shall not be all the shares purchasable thereunder,
that a new Warrant for the balance remaining of the shares purchasable under the
within Warrant be registered in the name of the undersigned Warrantholder or his
Assignee as below indicated and delivered to the address stated below.
Dated: 19 .
----------------------------- ----
(Name of Warrantholder or Assignee)
(Street Address)
(City, State, Zip Code)
(Signature of Warrantholder)
(Signature of Joint Owner)
ASSIGNMENT
(To Be Executed Only Upon the Assignment of the Warrant)
For Value Received, the undersigned hereby sells, assigns and transfers unto
(Name and Social Security Number)
(Street Address)
(City, State, Zip Code)
the within Warrant, hereby irrevocably constituting and appointing as his true
and lawful attorney in fact to transfer said Warrant on the books of the
Company, with full power of substitution in the premises.
Dated: 19 .
----------------------------- ----
Signature Guaranteed:
(Signature of Warrantholder)
(Signature of Joint Owner)
Note: The above signature must correspond with the name written upon the face of
this Warrant in every particular, without alteration or enlargement or any
change whatever unless this Warrant has been assigned.
<PAGE>
Exhibit 5
February 11, 2000
GSI Technologies USA, Inc.
2001 McGill College Avenue,
Suite 1310
Montreal H3A 1G1
Quebec
Gentlemen:
As counsel for your Company, we have examined your Articles of
Incorporation, By-Laws, and such other corporate records, documents and
proceedings and such questions of law as we have deemed relevant for the purpose
of this opinion.
We have also, as such counsel, examined the Registration
Statement (the "Registration Statement") of your Company on Form SB-2, covering
the registration under the Securities Act of 1933, as amended, of the proposed
offer and resale of up to 11,407,206 shares of Common Stock by the holders
thereof (the "Common Shares"). Our review has included the exhibits and form of
prospectus for the resale of the Common Shares.
On the basis of such examination, we are of the opinion that:
i. The Company is a corporation duly authorized and validly existing and in good
standing under the laws of the State of Delaware, with corporate power to
conduct the business which it conducts as described in the Registration
Statement.
ii. The Common Shares have been duly and validly authorized and issued and are
fully paid and non-assessable shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
/s/Heller, Horowitz & Feit, P.C.
HELLER, HOROWITZ & FEIT, P.C.
<PAGE>
Exhibit 10.1
MASTER LICENSING AGREEMENT
OCTOBER 26TH, 1999
Page 17 de 17
MASTER LICENSING AGREEMENT
MEMORANDUM OF AGREEMENT MADE IN THE CITY OF MONTREAL, PROVINCE OF QUEBEC ON THE
26TH DAY OF OCTOBER, 1999.
BY AND BETWEEN :
GSI TECHNOLOGIES (3529363 CANADA INC.), a body politic and
corporate duly incorporated according to the laws of Canada
and having its Head Office and principal place of business
in the city of Montreal, at 385 Place d'Youville, Suite 300,
Province of Quebec, H2Y 2B7, herein represented by its
President, Mr. J. Michel de Montigny, duly authorized as he
so declares;
(hereinafter referred to as "GSI CANADA")
AND:
GSI TECHNOLOGIES USA INC., a body politic and corporate duly
incorporated according to the laws of Delaware
(United-States of America) and having its Head Office at
721, S.E. 17th Street, #200 in Fort Lauderdale, Florida
33316 and its principal business office in the city of
Montreal, at 385 Place d'Youville, Suite 300, Province of
Quebec, H2Y 2B7, herein represented by its President, Mr. J.
Michel de Montigny, duly authorized, as he so declares;
(hereinafter referred to as "GSI USA" or "Licensee")
INTRODUCTION
WHEREAS GSI CANADA has acquired and/or developed technology, processes, methods
and techniques to provide electronic advertising services on a commercial basis;
and
WHEREAS the Technology license includes software, hardware and telecommunication
control systems ("the Broadcasting System") to be able to broadcast full motion
video and other graphical images (called hereafter "the Technology"); and
WHERAS this System offers multiple possibilities to deliver images through the
Internet, JPS, fiber optics, or short waves from a central location to remote
locations; and
WHEREAS the Technology license also includes products developed by GSI CANADA,
such as NOVACOLUMN and CITYCOLUMN; and
WHEREAS GSI CANADA is the sole owner of all rights relating to the Technology;
and
WHEREAS GSI USA wishes to market the Technology as well as other products; and
WHEREAS the parties have jointly concluded that their respective needs and
interests will be served by GSI CANADA granting to GSI USA an exclusive Master
Technology license to use and to market the Technology, including the
Broadcasting System and other products and that, in return, GSI USA will pay GSI
CANADA a fee under the conditions stated in the present Agreement
THIS AGREEMENT WITNESSETH THAT IN CONSIDERATION OF THE COVENANTS, AGREEMENTS,
WARRANTIES AND PAYMENTS HEREIN SET OUT AND PROVIDED FOR, THE PARTIES HERETO
RESPECTIVELY COVENANT AND AGREE AS FOLLOWS:
1. INTERPRETATION
A) Terminology
Where used herein or in any amendments hereto, the following terms shall
have the following meanings respectively:
i) Agreement
"Agreement" means the present agreement including its introduction and
schedules and all future amendments to the agreement;
ii) Technology license or Master license
"Technology license" means all rights relative to the use, sale and
sublicense of the Technology developed by GSI CANADA;
iii) Technology
"Technology" means Intellectual Property, Industrial Secret, Know-how,
Broadcasting System, Derivative, Maintenance and Enhancement in their
individual and collective form;
iv) Intellectual Property
"Intellectual property" means acronyms, designs, brand marks, symbols,
pictograms, slogans, signs, posters, plates, forms, stationery and
other identification items, methods and techniques which are created,
developed or used by GSI CANADA as owner, holder, author, registered
user, authorized user or in any other qualification used in relation
with the marketing of the Technology, copyrights, patents, industrials
designs and trademark as well as all such items which may be acquired
in the future by GSI CANADA and/or the Licensee;
v) Industrial Secret
"Industrial Secret" means any confidential information normally not
revealed by GSI CANADA and/or Licensee to their competitors, any
knowledge acquired by the Licensee in relation to the present
Agreement without which the Technology will be deprived of some of its
originality, efficiency and/or exclusivity as well as any procedure
not patented;
vi) Know-how
"Know-how" means all technical information, procedures, formulas,
industrial secrets, technical uses, diagrams, designs, specifications,
lists of materials, production guides and information developed or
used by GSI CANADA and/or the Licensee in relation to the Technology;
vii) Broadcasting System
"Broadcasting System" means all the systems providing interactive and
multimedia global networking capabilities and based on the following
components:
- - Software: all programs and other operating information used by the
Broadcasting system such as:
- - Player Software
- - Receiving Software
- - GSI Multimedia Production Center
- - Primary Broadcasting Server;
- - Hardware: mechanical and electronic components of the products,
developed by GSI CANADA, and known as NOVACOLUMN and CITYCOLUMN,
including the following, but not limited to:
- - Plasma screen
- - Projectors
- - Metallic Column
- - Adjustable (x,y,z) projector stand
- - Backup Server
- - Broadcasting Unit
- - Computerized environment management unit (C.E.M.U.);
- - Proprietary "fail-safe device";
viii) Maintenance Services
"Maintenance Services" means any modifications or revisions to the
System which correct errors, support new releases of the operating
systems which the System is designed to operate, support new
input/output devices, or provide updates and corrections. It also
means the 24 hour maintenance service delivery to the sub-licensee and
the Broadcasting software networking;
ix) Enhancement
"Enhancement" means changes or additions, including all new releases
and all updates developed by GSI CANADA that add significant new
functions or substantially improve the performance of the Technology;
x) Derivatives
"Derivatives" means any work that is based upon one or more
pre-existing works, such as revisions, modifications, translations,
abridgements, expansions or any other form in which pre-existing works
may be recast, transformed, or adapted and that, if prepared without
authorization of the owner of the pre-existing work, would constitute
a copyright infringement or infringement to the proprietary rights of
the owner therein. "Derivatives" can also mean any works of reverse
engineering, de-compilation and disassembly;
xi) Fees
"Fees" means the monies received by GSI CANADA from the total revenues
of the Licensee, accounted for during a calendar quarter;
xii) Territory
"Territory" means all countries, territories and areas of the world;
xiii) Legal Representatives
"Legal representatives" means for each party, depending upon its
condition and structure, its executors, heirs, assignees or agents;
B) Jurisdiction
i) Subjection
This Agreement, its interpretation, performance, application, validity
and effects shall be subject to the applicable laws, in effect, in the
Province of Quebec and in Canada, which partly or totally govern the
scope of provisions herein contained;
ii) Presumption
Any provision contained in the present Licensing Agreement which is not
in conformity with the applicable laws shall be deemed null and void,
insofar as such measure is prohibited by one of said laws. And so it
shall be for any subordinate stipulation or bound to such disposition
insofar as such measure or applicability depends on said disposition;
iii) Adaptation
In any case where a provision shall violate an applicable law, it shall
be interpreted, as the case may be, as a means of conforming to said
applicable law, or failing to do so, in the most susceptible method in
order to respect the intention or both parties without waiving the
prescriptions of any applicable law that parties wish to respect;
iv) Continuation or Avoidance
Where the present Licensing Agreement shall contain an interdiction,
all other provisions of said Licensing Agreement shall remain valid and
binding upon the parties, unless the provision(s) contrary to an
applicable law is (are) deemed essential to the adequate performance of
the Licensing Agreement or to the stability of the respective
provisions of the parties and where no compatible interpretation with
any applicable law(s) may correct the deficiency, in which case the
present Licensing Agreement shall be found null ab initio and the
parties returned to their original and respective position since the
duration of the Agreement, in order to come to an equivalent
adjournment, as the case may be;
v) Priority
The present Licensing Agreement shall constitute the total and integral
understanding reached between the parties and excludes any other
document, contract or previous verbal promise or concomitance that may
have taken place in the framework of the transactions that proceeded
the final performance of the Licensing Agreement; that the parties
declare inadmissible any elements susceptible of modifying or
hindering, in any way, any of the provisions of the present Licensing
Agreement;
2. General
A) Time of the Essence
Time shall be the essence in this Agreement. In the calculation of any
time limit provided for in the present Agreement, the following rules
have effect:
(i) The first day is not taken into account but the last day is;
(ii) Non legal days are accounted for; but if the last day of the time limit is
a non legal day, then the time limit ends on the next legal day;
(iii) When used in present Agreement, the term "month" refers to calendar
months;
If the Agreement refers to a precise date which is a non legal day,
then the Agreement should be read with that precise date referring to
the next legal date;
B) Concurrence
All rights stipulated in the present Agreement are concurrent and not
alternate. Any waiver of an agreed right by one or the other party, in
favor of the other, shall not be interpreted as a waiver of any other
right herein accepted, unless the wording of a provision indicates by
exception the necessity of such choice;
C) American Funds
All amounts referred to in the present Agreement shall be considered
to be American Funds (US);
D) Gender and Number
Where the understanding of the wording is required, the masculine
expression shall also include feminine and vice versa; the same shall
apply for a word expressing a number where singular shall also include
plural and vice versa. Any sentence containing a versatility in the
wording, shall be interpreted where the sense demands, in a way to
accommodate the appropriate version of such word, with all the
grammatical changes required in order to confer a logical meaning to
the sentence concerned;
E) Titles
The titles used in the present Agreement have no real interpretative
value - they serve as classification and identification elements of the
constitutive provisions of the Agreement between the parties recorded
in the instrument and, for this reason, they cannot influence the
interpretation of a provision.
3. TECHNOLOGY LICENSE
A) Master License
Conditional upon full respect by the Licensee of its obligations under the
present Agreement, GSI CANADA grants to the Licensee an exclusive right to
use and sublicense the Technology worldwide, including the Broadcasting
license and the right to sell all products developed and manufactured by
GSI CANADA. This Technology license also includes the network management of
the Broadcasting system, the Maintenance service and all the Enhancements
of the Technology;
The parties hereto each acknowledge and agree that the Licensee is the sole
and exclusive Licensee of all rights granted by the Licensor under this
Agreement;
B) Sublicense
By way of this Technology license, GSI Canada grants the Licensee the right
to sublicense the Technology in whole or in part during the term of the
Agreement.
All sublicenses granted by the Licensee under this Agreement shall be
subject and subordinate to terms and conditions of this Agreement;
GSI CANADA at its sole discretion can accept or refuse any sale of a
sublicense;
4. PAYMENT
A) Price of the Master License
The price of the Master license has been fixed at 10% of forecasted sales
of sublicenses.
The Licensee undertakes to pay to GSI CANADA a one time consideration in
the amount of EIGHT HUNDRED THOUSAND DOLLARS (US$ 800 000) payable as
follows:
i) TWO HUNDRED THOUSAND DOLLARS (US$ 200 000) on acceptance of the
present Agreement;
ii) SIX HUNDRED THOUSAND SHARES (600 000) of GSI TECHNOLOGIES USA INC.
at $1.00 per share;
B) Fees from Sublicenses
The Licensee also undertakes to pay to GSI CANADA continuous fees as
follows:
- - SIXTY PERCENT (60%) of the sale price of every Technology sublicense
as enters into the accounts of the Licensee.
- - Fees will be paid at the end of every calendar quarter;
5. REPRESENTATIONS AND WARRANTIES OF GSI CANADA
GSI CANADA covenants, represents and warrants as follows and acknowledges that
the Licensee is relying upon such covenants, representations and warranties to
enter into the present Agreement:
A) Status
GSI CANADA has been duly incorporated and organized and is validly
subsisting and in good standing according to the Laws of Canada;
B) Capacity
GSI CANADA has the legal capacity to enter into the Agreement contemplated
hereby and to fulfill all and any of its obligations under the present
Agreement. The granting of the recent License is not subject to any
restriction;
6. REPRESENTATIONS AND WARRANTIES OF GSI USA
The Licensee covenants, represents and warrants as follows and acknowledges that
GSI CANADA is relying upon such covenants, representations and warranties to
enter into the present Agreement:
A) Status
The Licensee has been duly incorporated and organized and is validly
subsisting and in good standing according to the Laws of Delaware;
B) Capacity
The Licensee has the legal capacity to enter into the Agreement
contemplated hereby and to fulfill all and any of its obligations under the
present Agreement. The granting of the resent License is not subject to any
restriction;
7. COVENANTS OF GSI CANADA
GSI CANADA covenants and agrees with the Licensee that:
A) Exclusivity
As long as the present Agreement is in effect, GSI CANADA will not grant to
anybody else any license with respect to the Technology;
B) Peaceful enjoyment
GSI CANADA will deploy its best efforts so the Licensee can enjoy
peacefully the rights granted to him under the present Agreement;
C) Takeover
GSI CANADA retains the right to repossess the license granted to the
Licensee in the case of a takeover of the Licensee company;
D) Application for Patent
The decision to file for any patent in respect of the Technology will be
at the sole discretion of GSI CANADA;
8. COVENANTS OF THE LICENSEE
The Licensee covenants and agrees with GSI CANADA that:
A) Best Efforts
The Licensee undertakes to engage actively and to the greatest extent
possible to market worldwide the Technology according to its projected use,
in conformity with the terms of the present Agreement;
B) Marketing Plan
Within one hundred and twenty (120) days of the signing of the present
Agreement, the Licensee undertakes to present to GSI CANADA a marketing
plan the content of which will allow GSI CANADA to estimate the foreseen
progress of the marketing of the Technology worldwide;
C) Perpetuate Activities
If the Licensee does not exercise his right of sublicensing and is not
engaged in continuous activities in accordance with the marketing plan for
a period of three (3) months, GSI CANADA will be entitled to repossess the
Technology license at any time;
D) Products
All products as NOVACOLUMN and CITYCOLUMN and all other products further
developed by GSI CANADA, and all parts of the Broadcasting system, as
defined in Section 1, must be purchased exclusively from GSI Canada for the
duration of this Agreement;
E) Departure and Modifications
The Licensee undertakes not to depart or modify from any of the
specifications of the Technology or enhancement to the Technology developed
by GSI CANADA or from any eventual patents in respect of the Technology
without the prior written consent of GSI CANADA to this effect.
The Licensee undertakes not to make any Derivatives of the Broadcasting
system and to inform GSI CANADA of any modifications to any component of
the Technology;
F) Book-keeping and Records
The Licensee undertakes to maintain complete and detailed records, books of
account and ledgers, to keep a full, precise and detailed accounting and to
keep in these accounting books all pertinent information relating to plans
where the Technology will be installed and serviced by the Licensee.
Furthermore, the Licensee grants to the representatives designated by GSI
CANADA the right to inspect and audit these books, ledgers and other
documents, at any time during normal business hours, for the full length of
the present Agreement and for one (1) more year thereafter;
G) Financial Reports
The Licensee undertakes to supply GSI CANADA, starting with the first
payment of fees due according to Section 1 of the Agreement, a financial
report, including all pertinent information to determine the amount of fees
due to GSI CANADA according to Section 1 of the Agreement. These reports
must be signed by the Directors of the Licensee and audited by the auditors
of the Licensee and certified by them to GSI CANADA as accurate;
H) Signings
The Licensee undertakes to sign any and all documents necessary or useful
to acknowledge and/or protect the rights granted to GSI CANADA under the
Agreement;
I) Confidentiality
The Licensee hereby acknowledges that all information or knowledge relating
to the Technology is confidential and a trade secret of GSI CANADA. The
Licensee hereby acknowledges that the non-authorized disclosure of such
information and/or knowledge can cause serious harm to GSI CANADA.
Therefore, the Licensee covenants and agrees with GSI CANADA, the
following:
The Licensee will use its best efforts to protect the trade secrets
relating to the Technology against any non-authorized third party;
The Licensee will use its best efforts to make sure all and any of its
employees act in accordance with its obligation under the sub-paragraph
herein above;
The Licensee undertakes to obtain the previous written consent of GSI
CANADA before divulging any trade secret relating to the Technology to any
third party and only if such disclosure is necessary for the fulfillment of
the Licensee's obligations under the present Agreement and if the said
third party has previously agreed to the same confidentiality covenants and
agrees to keep confidential the description of the Technology, if the said
description or any part of it is not patented, as much as any other
information permitting or facilitating the marking of elements of the
Technology or the use for such elements;
The obligation of the Licensee and GSI CANADA (and each of sub-licensee) to
protect the proprietary information of the other party hereto shall survive
any termination of this Agreement (or sub-license) or a five (5) years
period from the date of termination, however caused.
9. SPECIAL PROVISIONS
A) Protection of the Technology
The Licensee undertakes to promptly notify GSI CANADA, upon being informed
of it, of any infringement or violation of all and any present or future
patents relating to the Technology or all and any present or future patents
relating to the Technology. GSI CANADA and the Licensee covenant and agree,
in such and eventuality, to consult each other in order to determine a
proper way of action. If both parties then agree to initiate judicial
proceeding, then the Licensee will be responsible, at his own expenses, to
take and carry such judicial proceeding.
If one of the two parties is of a mind to not initiate judicial proceedings
at its own expense, GSI CANADA then always has recourse against the
Licensee for reimbursement of costs and/or damages incurred or sustained
directly or indirectly. The mechanism provided for under the present
section will be applicable up to the Court of last resort.
In the case of any action or other legal proceedings against the Licensee
based upon the fact that the operation of the Technology is an infringement
of a patent or industrial design owned by a third party, the Licensee
undertakes to notice promptly GSI CANADA of such action or legal
proceedings and to promptly transmit to GSI CANADA all related documents
given or served to the Licensee. The Licensee covenants and agrees to
closely and fully collaborate with GSI CANADA in challenging such court
action or legal proceeding, including without limiting the generality of
the previous undertaking, to make available promptly to GSI CANADA all and
any files, information, samples and other pertinent elements.
Subject to the following requirements, GSI CANADA undertakes to take sides
with the Licensee in all and any such court action or legal proceedings.
The Licensee covenants and agrees that no out of court settlement will be
entered into without the prior written consent of GSI CANADA.
All and any compensation paid in relation to these court or other legal
proceedings must be deposited into a trust account managed jointly by a
legal representative to each GSI CANADA and the Licensee and will be
apportioned between GSI CANADA and the Licensee after reimbursement of the
related legal fees and costs which have to be paid by the Licensee.
B) Force Majeure
Neither party hereto shall be liable for, failure to perform its
obligations hereunder for reasons beyond its reasonable control including,
without limitation, acts of God or the common enemy, the elements,
earthquake, floods, fires, riots, strikes, lockouts and work stoppages;
C) Party relations
Nothing in the present Agreement should be interpreted as creating between
GSI CANADA and the Licensee a principal-agent relationship, a partnership,
an employer-employee relationship or making the Licensee or GSI CANADA a
legal representative of the other party. Furthermore, the Licensee has no
legal power to enter into legal agreement on the behalf of GSI CANADA.
The parties acknowledge that they act as independent contractors and each
is free to run its own business as it sees fit in respect of the terms of
the present Agreement;
D) Non assignment
The License may not assign this Agreement on any of its rights and
obligations hereunder without the prior written consent of GSI CANADA all
and any of such assignment in breach the present Section is null and void
and non opposable to the other party;
E) No warranty
The Licensee acknowledges that GSI CANADA and/or its employees and/or its
legal representatives are making no representation nor giving no warranty,
even the usual implicit commercial warranty of good value and/or
suitability to the Licensee in respect to the Technology;
GSI CANADA does not warrant, nor represent that neither the Technology, nor
the right of any other person within the Territory, nor does GSI CANADA
warrant that "prior art" to such Technology existed no where in the
Territory;
GSI CANADA warrants, however, that neither GSI CANADA or its employees,
officers and directors have any reason to believe in the existence of, any
such infringement or prior art, the existence of which would render
Technology unable to be converted by any form of intellectual property
protection.
The Licensee will notify GSI CANADA if any claim of infringement is
brought.
Nothing in this Agreement shall be construed as:
i) A warranty or representation that anything made, used, sold, or
otherwise disposed of under any license granted in this Agreement is
or will be free from infringement or patents or third parties; or
ii) An obligation to bring or prosecute actions or suits against third
parties for infringement of any patents;
F) Limit of liability
The parties hereby covenant and agree that GSI CANADA cannot be held
responsible for any damage sustained by the Licensee or any third party in
relation with the operation of the Technology;
GSI CANADA expressly makes no representative or warranty whatsoever as to
the functioning, safety or suitability for the intended use of the
Technology;
The Licensee agrees that GSI CANADA shall not be liable to the Licensee,
any sub-licensee or user of the Technology made used, or sold by the
Licensee, for any lost, costs or damage of any kind suffered by the
Licensee, or any sub-licensee or user of the Technology, which may arise
out of the manufacture, use or sale of the Technology;
Furthermore the Licensee undertakes to promptly indemnify GSI CANADA for
any claims against GSI CANADA in relation to the license granted by the
present Agreement or the operation of the Technology;
10. GENERAL PROVISIONS
A) Schedules
All the schedules to the present Agreement initialed by the parties for
identification are one integral part of the present Agreement;
B) Arbitration
Any claim arising from the present Agreement which is challenged, any
controversy or dispute regarding the execution of the present Agreement,
including its annulment, as well as any dispute with regard to the
interpretation or application of the present Agreement must be submitted to
arbitration to the exclusion of the courts, the whole in accordance with
the procedure hereinafter established.
Any party to the present Agreement wishing to submit a claim, conflict,
dispute or disagreement to arbitration must forward to the other party a
written notice (hereinafter referred to as "Notice to Arbitrate"),
containing the following items:
A reasonably detailed description of the claim, conflict, dispute or
disagreement to be submitted to arbitration;
The name, address and profession of the person proposed to act as either a
sole arbitrator or on a board of three (3) arbitrators; the other party
must, within a delay of ten (10) days as of the receipt of the Notice to
Arbitrate, forward to the plaintiff party a notice confirming the choice of
the proposed arbitrator or the name, address and profession of the person
proposed ad the second arbitrator. In the event of the default by the other
party to contest in writing the choice of the proposed arbitrator within
the prescribed delay, such other party shall be deemed to have accepted the
proposed arbitrator who shall act alone;
If a second arbitrator has been nominated in accordance with the proceeding
provisions, the two (2) arbitrators so nominated must, within ten (10) days
of the nomination of the second arbitrator, proceed with the nomination of
the third arbitrator. In the event of the default by the two (2) first
arbitrators to choose the third arbitrator within the prescribed delay, or
should the two (2) first arbitrators fail to occur on the choice of the
third arbitrator within the prescribed delay, the appointment of the third
arbitrator shall be referred to and made by a court of competent
jurisdiction upon the motion of the more diligent party;
The date of hearing of the parties in dispute must be held twenty (20) days
following the receipt of the Notice to Arbitrate (if the appointment of a
second arbitrator has not been made in accordance with the preceding
provisions), or within ten (10) days of the appointment of the third
arbitrator, as the case may be. The award of the arbitrator or board of
arbitrators must be rendered in writing and served to the parties within
fifteen (15) days following the hearing of the parties. Any such award
which is rendered shall be final and without appeal, and shall become
executable as a judgement against the parties upon ratification.
The parties to these presents agree that the provisions presently in effect
in the Code of Civil Procedure of Quebec, shall receive auxiliary
application to any arbitration proceeding undertaken of held by virtue of
the present division. In the event of a contradiction within the provisions
of the present division and the provision of the aforementioned sections of
the Code of Civil Procedure of Quebec, the provisions of the present
division shall have precedence;
C) Notice
Any notice required under the present Agreement shall be in writing and
shall be delivered by a communication mode permitting to the sending party
to prove its delivery to the addresses at the address hereby mentioned at
the beginning of this Agreement. Any party hereto may change its address
for service by written notice given as aforesaid;
D) Amendment
No amendment of this Agreement shall be binding unless expressly provided
in an instrument duly executes by parties hereto;
E) Non-Renunciation
The silence of the part of one party or its negligence or tardiness in
exercising a right or recourse which has been granted or made available to
it by virtue on the present Agreement shall never be interpreted or held
against such party as a renunciation to any right or recourse;
11. TERMINATION AND EXPIRY
GSI CANADA shall have the right to terminate this Agreement:
A) If the Licensee fails to pay in due time an amount due under section 1
of the present Agreement and fails to remedy such default within five
(5) days of the sending of a written notice to GSI CANADA to the
Licensee asking to do so;
B) For breach or default of any of its provisions by the Licensee if the
Licensee fails to remedy such breach or default within thirty (30) days
after GSI CANADA has given the Licensee a written notice specifying the
nature of such breach or default, and;
C) If proceedings for the voluntary winding up or liquidation of the
Licensee are commenced or if bankruptcy, insolvency or other similar
proceedings for such purposes brought by another are commenced against
the Licensee (unless such proceedings are part of a scheme for
reconstruction in such manner that the company resulting, if a
different legal entity, shall effectively agree to be bound by or
assume the obligations of this Agreement) or if a trustee, manager or
receiver be appointed to the whole or part of the assets of the
Licensee;
Notwithstanding the termination and expiry of the present Agreement, the
Licensee shall continue to be bound by the declarations concerning
Confidentiality included in the present Agreement;
12. TERM
This Agreement will be effective as of the date of execution by the parties
and shall continue in full force and effect for a period of five (5) years
thereafter, renewable at the end of this period for another five (5) years.
This agreement will be automatically renewed unless the Licensee gives GSI
CANADA thirty (30) days written notice.
13. SUCCESSORS IN INTEREST
This Agreement and the provisions hereof shall ensure to the benefit of and
be binding upon the parties and their respective successors and assigns;
14. LANGUAGE
The parties have required that this Agreement and all contracts, documents
or notices relating thereto be in the English language; les parties ont
exige que cette convention et tout contrat, document ou avis afferents
soient en langue anglaise.
IN WITHNESS WHEREOF, the parties have executed this Agreement in Montreal, on
October 26th, 1999.
"GSI CANADA" "GSI USA"
J. Michel de Montigny, President J. Michel de Montigny, President
James A. Hone, Vice President, CFO
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
I consent to the use in this Registration Statement on Form
SB-2 of GSI Technologies USA Inc., of my report dated December 23, 1999,
appearing in the Prospectus which is part of this Registration Statement.
I also consent to the reference to me under the heading
"Experts" in such Prospectus.
/s/Mark Cohen
Mark Cohen C.P.A.
Hollywood, Florida
February 11, 2000
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<NAME> GSI TECHNOLOGIES USA INC.
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