U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NUMBER 1 TO
FORM 10-SB 12(g)
General Form For Registration of Securities of
Small Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
GLOBAL INNOVATIVE SYSTEMS INC.
(Name of Small Business Issuer in its Charter)
Nevada E.I.N. 98-0217653
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
5975 Selkirk Crescent
Prince George, B.C., Canada V2N 2G9
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (250) 964-2692
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which
to be so registered each class to be registered
Voting Common Stock OTC Bulletin Board Service
Page No.: 1
Total No. of Pages: 44
Exhibit Index Appears on Page: 20
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Page No. 2
PART I
Prospective readers of this Form 10-SB registration statement
should note that this document contains certain "forward looking statements,"
including without limitation, statements containing words "believes,"
"anticipates," "expects," "intends," "plans," "should," "seeks to," and
similar words. Prospective readers are cautioned that such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. Actual results may differ materially from those in the forward
looking statements as a result of various factors, including but not limited
to, decisions of the Board of Directors not to pursue a specific course of
action based on its re-assessment of the facts or new facts, changes in
the Company's business or general economic conditions and those other
factors set forth in this Registration Statement. The Company relies
upon the protection afforded forward-looking statements provided by the
United States Securities Act of 1933 and the Securities Exchange Act of 1934.
Item 1.Description of Business
I. Business Development.
A. Global Innovative Systems Inc.:
Global Innovative Systems Inc. (the "Company") was incorporated on
September 14, 1995, under the laws of the State of Nevada. The Company
has been inactive until it entered into a share exchange agreement with
Niew Industries Inc. By agreement dated December 1, 1999, the Company
agreed to acquire 100% of the issued and outstanding shares from the
stockholders of Niew Industries Inc. along with amounts owing to these
stockholders totaling $420,864 in exchange for 12 million common shares
of the Company. The transaction to acquire Niew Industries Inc. closed on
January 31, 2000. The Company has agreed to make the necessary applications
to be listed as a publicly reporting company with a class of publicly traded
securities. This registration statement follows. The Company employs three
people on a full time basis, Ken Bergestad, Walter Niemi and Lloyd Olson.
The Company has no part time employees.
The financial statements of the Company subsequent to the acquisition will
reflect the operations of Niew Industries Inc. pursuant to the accounting
requirements for reverse acquisitions. The reverse acquisition is achieved
resulting in a recapitalization of the Company as the former stockholders
of Niew Industries Inc. became the controlling stockholders of the Company
immediately upon conclusion of the acquisition.
B. Niew Industries Inc.: Niew Industries Inc. (referred to
hereafter as "Niew Industries" or "NII") was incorporated on January 15,
1997, under the British Columbia Company Act with the issuance of 100
shares of common stock at CAN $1.00 per share for proceeds of CAN $100.
NII issued an additional 4900 shares of common stock in April 15, 1998 at
CAN $1.00 per share for proceeds of CAN $4900. NII was
inactive until March 23, 1998, when it began the development of a twin
rotating asphalt mixing system. To date this has been NII's only activity.
Niew Industries' business objective was to create a simplified asphalt
mixing system that would be compact, environmentally friendly and easy
to mobilize. The Company intends to market such a system to worldwide
manufacturers and users of asphalt plants. NII has taken a step towards
this goal with the design and development of the Twin Rotating Asphalt
Mixing System ("TRAMS"). The main frame houses a Genset for electrical
power, all electrical components, a four bin feed system (split bins,
two side by side) a burner with a blower and an exhaust fan to dry the
aggregate and drum.
The drum was designed as a double tapered mixer-dryer with one drum
inside the other. This caused the overall drum length to be cut in half
thus allowing for more frame area. The drum's double tapered design
allows asphalt oil to be sprayed in with no fire contact. The asphalt
spray system was designed to arrest the majority of dry particulate from
the air and introduced back into the mixed product. The shape of the
drums allows the plant to be set up level rather than at an incline as
with conventional plants. The tapered drums also cause the air to slow
down on exit, thus any particles that may have escaped fall back into the
drum.
Other auxiliary equipment is required before and after the mixing process
(the mixing is done in the drum). These include a power source (generator),
gravel bins to feed the mixer, scale belts to weigh and calibrate the
aggregate supply, and a burner to dry the gravel and bring the material to a
specified temperature. Other equipment includes a control center to control
and monitor the integrated electronic system, liquid asphalt storage and pump
system to inject a specified percentage of gravel to oil ratio, a pollution
system to capture air-borne emissions, discharge system which moves the
properly heated and mixed material to a silo capable of holding 25 to 70
tons of finished product. The TRAMS trailer holds all but the silo and
liquid storage tank which is a unique feature compared to existing asphalt
plants.
NII's goal is to create a mixing system that is easier and quicker to
mobilize than conventional systems The TRAMS System is quicker and
easier to move than a conventional plant. It will be housed on two
trailers as compared to a conventional plant that must employ five or
six trailers.
Conventional plant drums are not tapered requiring them to be elevated and
blocked so the aggregate will flow downhill. The TRAMS doesn't require very
much blocking because the plant is setup level. This is because the drums
on the TRAMS are tapered like a funnel and so the drum is sloped when the
trailer is level. The TRAMS System is capable of producing
the same volume of asphalt as is delivered per hour by plants that take
three to four days to set up. The current conventional systems also
require five trucks to move all of the equipment that they require to
the production site. The TRAMS requires only two truck loads.
Management ascribes the objective benefits of the TRAMS System to
include: mobility, which lowers costs; productivity; improved product
quality; decreased environmental impact; and reduced costs for the
customer. The TRAMS System is patent pending in Canada and the U.S. under
the title "Multiple Drum Mixing System." The Company has copyrighted
in Canada the TRAMS operating software entitled "Asphalt Plant Control
System."
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Page No.: 3
In large urban areas asphalt plants are located on gravel sources that have
been appropriately zoned for such use, as well as situated on sites where
the aggregate materials are transported to the site (e.g. barged, trucked
or railed). These plants are semi-permanent operations. For non-urban
areas such as highways, airports, minesites, small communities and sawmills,
portable or mobile plants can be economically more viable or cost
competitive than stationary plants.
The asphalt is mixed in the asphalt plant which is normally located at a
gravel source, but can also be onsite if the gravel has been
stockpiled by the project where the finished product is required
(assuming that the proper permits are obtained in advance).
Because the TRAMS asphalt plant is closer to the work-site the cost of
transporting the finished product (asphalt hot mix) to the lay down
site is considerably less. (Trucking costs are normally 25-30% of
the operating costs to manufacture and lay asphalt material). Any
saving on trucking is an advantage in a competitive market.
After developing its prototype, NII identified areas where improved
performance of the TRAM System was possible. These areas included
improvements to the asphalt-oil injection system, pollution control
system, ramps, and a conveyor system. The majority of these changes
have occurred and have been successfully tested. For example, NII is
adding a conventional bag-house system in order to comply with the
2001 British Columbia air pollution regulations. (See: Regulatory
Background, discussed below).
NII completed development of the TRAM System prototype, attaining its
Phase I goal. Efforts to achieve its Phase II goals are now underway.
These include the identification of target markets, development of a
marketing plan, further testing in specific applications with potential
customers and, ultimately, the commercial production of the equipment
for sale or lease. To date, the Company has employed a third party
evaluator, Source Test Limited, to test the TRAMS' stack emissions.
A separate third party evaluator, Levelton Engineering Ltd., tested
the TRAMS aggregate, oil usage and hot mix asphalt cement.
To achieve this end, NII will build another trailer which will house a
self-erecting silo, asphalt, diesel and propane tanks. This project is
financed currently by the Company's principals. The plans for this
project have been created, but the construction funding is not in place.
See Item 2, Management's Discussion and Analysis, Liquidity and
Capital Resources. A conventional plant of comparable productivity has
a drum mixer which is twice the length of the TRAMS' Double Tapered Drum.
The TRAMS houses the drying/mixer drum, belt scales, four aggregate
feeders, bag-house, all electrical and electronic equipment, and a
312 KVA generator on one frame. Having a silo, asphalt tank, diesel and
propane tank on another load makes the TRAMS System a two pin (two
trailer) load to move. Setup time for the entire TRAMS system is 4
to 6 hours. A conventional plant has five to six pin loads and takes
from three to four days to setup.
Management believes that the asphalt industry will
find the package attractive due to the compactness and perceived
neatness of a totally self-contained asphalt plant in two loads.
Management projects revenue to be derived ultimately from sales of the TRAM
System, but is also considering the possibility of leasing the TRAM System to
potential customers. Management believes in a broad based appeal of the TRAMS
based upon its operational performance in categories such as environmental
compliance, quality control, integration of electrical and computer
programming, increased user friendliness and cost effectiveness.
In order to complete Phase II and to commence manufacturing of the asphalt
plants, NII will seek traditional debt, equity or principal funding.
At this time, NII has no facilities or commitments regarding the
manufacturing of asphalt plants.
NII has also negotiated an exclusive licensing agreement with Ian Westwood,
the inventor of a self-erecting silo, but this is not the same silo design
that will be used in Phase II. Mr. Westwood's silo design is referred to
as the "Silovation." The Silovation system can be used with any
existing asphalt plant, including the TRAMS.
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Page No.: 4
The Silovation will not be used by the Company in Phase II. The
Silovation is designed to sit alone on one tractor-trailer unit. The
TRAMS uses a single tractor trailer unit to contain a silo along with a
liquid asphalt storage tank, propane tank and a diesel tank. Thus the
TRAMS requires less equipment in the form of tractor-trailers than does
the Silovation. However some contractors will already have some of their
own equipment, including the tanks mentioned above, making the Silovation an
efficient choice.
The Silovation prototype was completed in May of 1999 and is currently owned
by the Everall Construction Company of Edmonton, Alberta. Everall does
not own any rights or other property relating to Mr. Westwood's silo
design. On November 8, 1999, Niew Industries Inc. and Mr. Westwood
executed their agreement pursuant to which Mr. Westwood licensed to
NII patents and all technical knowledge derived from the Portable
Overhead Bin used on the Silovation and the applicable patents pending
held by Mr. Westwood in exchange for the sum of CAN. $75,000. This sum
is payable in two installments. The first payment occurred in the
first quarter of 2000. The second is to occur on August 31, 2000.
Additional payments are due based upon the sales of equipment employing
the Portable Overhead Bin. See Exhibit 10 (ii) attached to the original
registration statement.
The Portable Overhead Bin used on the Silovation will be sold with the TRAMS
trailer if a customer prefers, for example, when a customer does not require
an asphalt tank. Management believes the Portable Overhead Bin to be a
valuable product, but to date only one has been sold-the prototype to
Everall Construction. The Bin is adaptable for use outside of the
asphalt industry as a water storage container, to load chipped waste
wood or any other bulk commodity.
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Page No.: 5
C. Global Innovative Systems, Inc.'s Corporate History:
The Company was incorporated as Legacy Bodysentials Inc. by the
Nevada Secretary of State on Sept. 14, 1995, for the purpose of developing
and marketing of cosmetic products. The Company has been inactive
since incorporation.
On September 30, 1995, Legacy Bodysentials accepted from twelve
individuals subscription agreements to purchase a total of 10,000,000
shares from the Company pursuant to a Rule 504 offering under Regulation D.
The Board authorized Legacy to proceed with the sale of its shares pursuant
to the subscriptions received for the sale of 10,000,000 shares at a price of
$0.01 per common share. Pacific Stock Transfer Company was appointed
as the transfer agent of the common shares of Legacy.
The Company is aware of approximately 75 transactions involving these
shares. The Company currently has approximately 71 shareholders. These
transactions are summarized in Item 4 - Transfers Involving the Original
Twelve Certificates.
On September 25, 1996, Legacy Bodysentials changed its name to Legacy
Minerals Inc. after an affirmative vote by the Company's Board of Directors
to change the name. A new business plan was adopted focusing upon
mineral exploration, which was not implemented.
On August 27, 1997, by a vote of the Company's Board of Directors,
300,000 issued and outstanding shares were redeemed to treasury and
canceled.
On May 18, 1998, Legacy Minerals Inc. changed its name to Global
Commonwealth Inc. after a vote by the Company's Board of Directors to
change the name. The Board contemplated and evaluated various business
plans, without adopting any.
On November 12, 1999, Global Commonwealth Inc. changed its name to
Global Innovative Systems Inc. (the "Company") after an affirmative vote
by the Company's Board of Directors to change the name. Other than the
above described acquisition by of the Company of NII, the Company does
not have any plans, proposals, arrangements or understandings with respect
to future acquisitions.
The Company has had no business operations prior to the acquisition of NII.
Business of Issuer.
The Company's objective to create a simplified asphalt mixing system
which would be compact, environmentally friendly and easy to mobilize
has been materially advanced with the design and development of the
TRAMS System. The main frame houses a Genset for electrical power,
all electrical components, a four bin feed system (split bins, two side by
side) a burner with a blower, an exhaust fan to dry the aggregate and a drum.
For a more in depth discussion of the TRAMS System, see the discussion of
Niew Industries Inc., above.
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Page No.: 6
III. Industry Overview and Competition.
There are at present, about eight major asphalt plant manufacturers
situated in the central and eastern United States. Together they sell
approximately 150 units per year all across North America. The Company
intends to complete Phase II, then to locate the asphalt plant at a
gravel pit, whose location has already been selected, and to record set
up time, conduct anti-pollution equipment testing, and record
promotional videos.
Research and Development.
When testing the mixing system (Phase I) the TRAMS was set up in
Columbia Bitulithic Ltd.'s Aldergrove, British Columbia pit and used
NII's asphalt mix. Columbia Bitulithic Ltd. is a British Columbia paving
company. There is no affiliation among the Company or Niew Industries and
Columbia Bitulithic Ltd. Columbia Bitulithic used the material produced
by the TRAMS to build an all weather road in their operations center
in Abbotsford, B.C. They did not bear or otherwise help to pay any of
the research and development costs of the TRAMS.
Once Phase II testing has been completed, the Company will sell or lease
the prototype to an asphalt firm for a paving season to further
test the system's performance and dependability. Upon receipt of positive
results, management intends to commence manufacturing the TRAM System.
Research and development expenditures are charged to expense when incurred.
Research and development costs consist of the cost of materials and services
consumed, salaries and wages of personnel directly engaged in research and
development and the costs of patent applications. The cost of the research
and development is reduced by investment tax credits accrued in respect
to qualifying costs of research and development. (The investment tax
credit program is available to qualifying companies as a Canadian government
incentive to carry on research and development activities. Upon closing of
the share exchange agreement with the NII stockholders, it is expected
that NII will no longer qualify for this incentive). Costs incurred to
date consist of the following:
Jan 15, 1997 (incorporation Year Ended 09/30:
to Sept. 30, 1999
(Cumulative) 1999 1998
---------------------------- --------- --------
Materials and supplies $ 268,710 $ 44,627 $ 224,083
Salaries and benefits 135,354 85,782 49,572
Patent applications 14,173 9,443 4,730
Investment tax
credits recovery (95,486) (51,250) (44,236)
--------------------------- --------- --------
$ 322,751 $88,602 $234,149
=========================== ========= ==========
Certain specific scientific or technological objectives were identified
at the outset of research and development activities in 1999. In fact,
these were a continuation of the activities commenced in 1998. NII
sought to prove that it could develop an asphalt manufacturing plant that:
(1) provides an integrated system that was able to improve dramatically
on pollution control which is virtually non-existent in conventional systems
without bag-houses or settling ponds; (2) improves the durability of the
finished product by the introduction of a different production process; and
(3) improves in the recovery of fine aggregate in the production process
with the result that the finished product has a higher grade and a longer
life.
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Page No.: 7
V. Regulatory Background:
The Province of British Columbia, the Ministry of Environment and
more specifically the Waste Management Act R.S.C.B. of 1996, specify
in strict detail the amount of emissions permitted from new asphalt plant
operations. The three most important parameters deal with airborne
particulates, organics and carbon monoxide. These are outlined in the
Act and all asphalt operators are expected to submit stack emission
tests to the Environment Ministry on an annual basis.
The prototype asphalt plant designed and manufactured by NII was
meant to meet and exceed these strict requirements. The new concept
and drum technology developed by the Company was tested during
operational trials in the Spring of 1999. The test results, which are
included below, were obtained without the use of either of the two
pollution control methods that are currently used by the asphalt industry -
the bag-house and the wet scrubber.
Parameters Specifications Test Result
----------- --------------- ---------------
Particulates 90mg / m3 105.41mg / m3
Organics 60mg / m3 24mg / m3
Carbon Monoxide 200mg / m3 196mg / m3
The British Columbia Provincial Waste Management Act Regulations
specify that all new asphalt plants meet these specifications immediately
while older or existing plants must be up-graded to comply by the year
2001.
The bag-house will be used on all future TRAMS, as the wet scrubber
application is becoming out dated and obsolete. Most asphalt plants only
have two means to deal with pollution control; The wet scrubber system
or a bag-house. The first system uses recycled water to reduce dust to
water born particulate (mud) and requires at least two settlement ponds,
one for the mud and one for the recycled water. The second system or
bag-house is a sophisticated vacuum that sucks particulate or dust from
the exhaust gases and traps them in cotton bags. These collected fines
are eventually added back into the mixing process to be recycled.
The prototype results, described above, were extremely gratifying
to Management. The TRAMS prototype passed all of the emissions
standards, other than the particulate standard, without the use or
application of any form of conventional pollution control device - no
bag-house or wet scrubber was used.
The TRAMS failed the regulatory specification for new plants in B.C. for
particulates but management believes the TRAMS would pass in other
provinces with lower standards. Management believes that with a
bag-house, which is proven technology, the TRAMS will not only meet
B.C.'s stringent specifications but will surpass them. Without the bag-house,
management was uncertain as to whether the plant would comply with
standards. Management was pleased that the results were close enough to
standards to suggest that alterations including the bag-house would help
them ensure they met the standards. Carbon monoxide levels can be reduced
without impacting the TRAMS' performance appreciably by adjusting the burner.
Management believes that the TRAMS System, with its double tapered drums
will meet the B.C. specifications when the bag-house is completed.
The results from the pollution tests shows how close the TRAMS came to
passing without either proven pollution system in place. Though the
TRAMS failed its test for B.C., it has the most stringent
emissions requirements in Canada. In the U.S., California and New
Jersey are more stringent than the other states. In New Jersey
one must use a bag-house. If the TRAMS didn't meet the specifications,
its market is narrowed, but not significantly considering the Asian,
and South American markets which have hardly been touched.
In the event of emission level violations, regulators would not level
fines against the Company but rather against the Contractor who owns
the plant. The Company would have to make full disclosure to the buyer
of the TRAMS' pollution testing results as each province and state has
different specifications.
Management predicts that the use of a bag-house will result in compliance
with particulate emission requirements under all existing emission
standards. However, testing of the TRAMS with a bag-house has not
yet been undertaken.
According to a report done by the Canadian Ministry of Environment, Lands
and Parks' Air Resources Branch from November 22, 1995, entitled "A
Technical Report for the Development of Regulations for Asphalt Paving
and Recycling Plants" there are currently over 60 asphalt plants in
operation in B.C.
The same report shows that the other provinces do not have waste
management acts similar to that found in B.C. Thus, B.C. is more
stringent than the other provinces. The TRAMS would meet the requirements
in the other provinces. Existing acts in other provinces are not currently
being upgraded.
Management is confident that after completing a retrofit that includes a
mini-bag-house installation the unit will meet the requirements set out in
the Provincial Waste Management Act and can meet current North American
anti-pollution requirements.
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Page No.: 8
Item 2. Management Discussion and Analysis or Plan of Operation
The Company was incorporated on September 14, 1995 in Nevada while
NII was incorporated on January 15, 1997 in British Columbia. Prior to the
acquisition of NII, the Company was inactive. Since the operations of
the surviving entity will be those of NII, the discussion below pertaining
to periods prior to the acquisition date (January 31, 2000) relate to a
discussion of the financial results of NII and management's plan of
operations for the consolidated entity. The financial results of NII
were consolidated with the financial statements of the Company in the
2nd quarter of the Company's 2000 fiscal year.
RESULTS OF OPERATIONS
Statement of Operations Data
Six months Year ended
ended March 31, September 30,
2000 1999 1999 1998
-------- --------- --------- ---------
(UNAUDITED)
Revenue $ - $ - $ - $ -
-------- --------- --------- ---------
Expenses
General and administrative
23,360 22,238 45,154 21,110
Accounting, audit & legal 17,079 4,045 11,539 5,844
Research and development 17,711 29,626 88,602 234,149
Interest Income (2,675) (25) (76) (729)
Loss on terminated proposed
business acquisition 46,145 - - -
-------- ---------- ---------- ---------
101,620 55,884 145,219 260,374
--------- ---------- --------- ---------
Net loss for the period
$ (101,620) $ (55,884) $ (145,219) $ (260,374)
========= ========== ========= =========
General and administrative expenses include automotive, bank charges
and interest, consulting, depreciation, director fees insurance, office
and supplies, rent, telephone and travel expenses.
NII is a development stage company and therefore has not had any
revenue generating activities.
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Page No.: 9
Balance Sheet Data
March 31, September 30,
2000 1999 1999 1998
--------- ---------- -------- ---------
(UNAUDITED)
Working capital
(deficiency ) $(141,664) $(319,778) $ 417,129 $256,009
Total assets 129,979 108,036 113,231 91,158
Accumulated deficit (507,213) (324,993) (405,593) (260,374)
Stockholders' deficit ( 86,980) (309,996) (408,079) (248,521)
Six months ended March 31, 2000 compared to six months
ended March 31, 1999.
The research and development costs in the six month period ended
March 31, 2000 of $17,711 declined by $11,915 over the corresponding
period in 1999 because the development is almost completed
and NII turned its attention to finalizing the acquisition of the company
by Global, the registration of Global's stock and arranging for additional
financing. Further development and testing of the TRAMS System has
been deferred until NII completes its registration statement and
can obtain additional funding. General and administrative costs have
increased by $1,122 from the comparative period in 1999 due to $23,360
the current focus on the registration of the Company's stock.
Accounting, audit and legal expenses increased by $13,034 to $17,079 in
1999 as a result of additional costs incurred in connection
with NII's plans and intentions to become a public company. One
component of this increase was to engage a firm to audit the Company's
Financial Statements which previously were only compiled for tax purposes.
Management of NII had investigated a proposed acquisition of a Canadian
business involved in the development of a secure locking system for
explosives magazines. In that regard, NII had advanced $46,245 in
anticipation of acquisition in fiscal year 2000. NII performed its
due diligence in connection with the acquisition and has re-evaluated
the proposal and decided not to pursue the acquisition. As a result,
the initial advances have been written off. The company to which the
funds were advanced and Global have one common director.
Interest income earned on refund of 1998 investment tax credits increased
by $2,650 to $2,675 in the six months ended March 31, 2000.
Year ended September 30, 1999 compared to the year ended
September 30, 1998
During 1998, NII began the construction of its prototype TRAMS System.
Research and development costs in 1998 of $234,149 were higher by $145,547
because the majority of the expenditures were for materials for the
actual construction of the prototype. With the completion of a
substantial portion of construction in 1998, costs in 1999 involved
testing and refining of the prototype.
The general and administrative costs are increased by $24,044 to $45,154 in
1999 because NII was active for the entire year in 1999 while in 1998, it
was active only for approximately half the year.
Accounting, audit and legal expenses increased by $5,695 to $11,539 as a
result of additional costs incurred in connection with NII's
plans and intentions to be a public company.
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Page No.: 10
Liquidity and Capital Resources
As of March 31, 2000, NII has expended $340,462 (net of investment tax
credits of $95,486) on direct research and development on the
prototype. During this stage known as Phase I, NII constructed the
prototype but is still improving it to make it more efficient and to
ensure that it meets government standards for pollution control.
Management estimates that the completion of Phase I will
require approximately $25,000 consisting of $15,000 for testing and
materials and $10,000 for labor and subcontracts. At the completion of
Phase I, management plans to sell its prototype, the proceeds of which
would be used to finance the construction of another Phase I TRAMS System.
NII has plans for Phase II in which it will build a second trailer which will
have a self-erecting silo, asphalt, diesel and propane tanks. NII
intends to sell the commercial version of the two machines as a package,
but would also be able to sell them individually. Management estimates
the cost of Phase II to be as follows:
Materials $ 84,000
Overhead 16,000
Salaries 50,000
-----------
$150,000
=============
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Page No. 11
To date, the operations of NII have been primarily financed by private
loans from directors and related parties totaling
$ 587,803 at March 31, 2000, as well as $95,486 of refundable
Canadian government investment tax credits on eligible research
expenditures. Upon conclusion of the share exchange with NII resulting
in NII no longer being Canadian owned, further investment tax credits
will not be available.
At March 31, 2000, the Company has cash of $19,987 available for completion
of Phase I development and to finance the costs necessary in the process
of going public in the United States. Going public is important for the
Company since it requires access to capital to finance construction of
additional units and to complete its development initiatives. The
Company does not have sufficient funds on hand to complete its Phase I
development and the public registration process. Deficiencies in cash
will be covered by additional loans and advances by the Company's
directors until such time that the Company can attract equity investors.
Should the Company be unable to attract equity investors, cutbacks
and deferrals of the planned development and production schedule would
occur until such funds were otherwise available externally or from
the proceeds received on sale of the Phase I prototype. Alternatively,
the Company could consider a joint venture to proceed with its plans.
At this point in time management has focused its efforts on the completion
of Phase I. Completion of Phase II has been deferred until stock
registration process is completed and cash flow is available to the
Company. Management believes there is a market for the Phase I product
without being dependant upon Phase II.
Plan of Operations
In the next twelve months, the Company intends to complete Phase I and
possibly, Phase II and then produce the machine for commercial sale.
NII has also acquired a license to manufacture a self-erecting silo which is
different from the silo that is going to be used in Phase II. Management
also intends to manufacture this silo for commercial sale. At the present
time, further development of Phase I and Phase II has been suspended to
devote attention to the registration of the Company's common stock and
listing of its securities on the NASD OTC: BB market.
These objectives are currently being financed by the Company's controlling
stockholders. The Company believes it requires approximately $25,000
to complete the development and testing of Phase I at which time
management believes it can sell the prototype. Proceeds from the sale
and additional financing will be used to finance production of
additional units. The Company intends to seek traditional debt, equity
or principal funding to further finance the manufacturing process.
The Company anticipates it will be able to complete the stated plan of
operations if the additional financing can be achieved. The actual
expenditures and business plan of the Company may differ from the stated
plan of operations. The Board of Directors of the Company may decide
not to pursue the stated plan of operations. In addition, the Company may
modify the stated plan of operations based on the available amount of
financing in the event that the Company cannot achieve the required equity
financing to complete the stated plan of operations. The Company does not
have any arrangement in place for any debt or equity financing which would
enable the Company to meet the stated plan of operations.
In the event the Company is not successful in achieving any further sales of
its common stock, the Company anticipates that it could not sustain its
business operations without short-term financing from the Company's
controlling stockholders based on the Company's current cash position and
the absence of a current revenue stream. Due to the Company's lack of
operating history, there exists substantial doubt about the Company's
ability to continue as a going concern, as stated in Note 1 to NII's
financial statements.
The Company anticipates continuing operating losses in the foreseeable future.
The Company bases this expectation in part on the basis that the Company
will incur substantial operating expenses in completing its stated plan of
operations. The Company's future financial results are also uncertain due
to a number of factors, many of which are outside of the Company's control.
These factors include, but are not limited to general economic conditions,
government environmental regulations and increased industry competition,
which include the following:
Willingness of external investors to advance capital to the Company
to finance continued development and production;
Uncertainty regarding whether the Company can meet new British
Columbia environmental regulations in 2001, whether it can comply
with environmental regulations in other North American jurisdictions
or whether the Company can continue to meet new regulatory
requirements as they arise;
That there will be a market for the Company's Phase I or II
products once the development is complete and demand for the
product at that time will be such to support economically viable
production.
The Company believes that it has access to funds sufficient to complete
the development and negotiate the sale of the Phase I prototype. There
can be no assurance that such additional funding would be available to
us, or if available that the terms of such additional financing will be
acceptable to the Company.
<PAGE>
Page No.: 12
Impact of Inflation
The Company believes that inflation has not had a material effect on
its past business.
Year 2000 Computer Problems
All of the Company's mission critical and non-mission critical computer
systems are Year 2000 compliant. Management foresees no extraordinary
expenditures on its operating systems as a result of any computer problems
arising from the arrival of the Year 2000.
Item 3. Description of Property.
The Company maintains its principal executive offices in Prince George,
British Columbia at the address shown on the facing page. Because this
office is in the residence of Ken Bergestad, the Company pays no rent for
the use of this space. The Company rents on a month to month basis 1500
square feet of space formerly used by NII located at 402 Elm Street, Quesnel,
British Columbia, V2J 3W9. The Company pays the property owner
approximately CAN $275.00 per month commencing March 1, 2000 for this
space which is used primarily as a work shop.
Item 4. Security Ownership of Certain Beneficial Owners and Management
I. Security Ownership of Certain Beneficial Owners.
The date of the information presented in this table is as of March 31, 2000.
Title of Class Name & Address Amount and Nature of Percent of Class
of Beneficial Owner Beneficial Owner
-------------- ---------------- ----------------------- ----------------
Common Lloyd Olson(1) 2,400,000 11.05%
_________________________________________
(1) Lloyd Olson is an employee of the Company, but is not an officer or a
director, nor is he related to any person in management. Mr. Olson's address
of record is RR 08 Box 13 Bjornson Site, Quesnel, British Columbia,
Canada V2J 5E6.
<PAGE>
Page No.: 13
II. Security Ownership of Management.
The date of the information presented on this table is March 31, 2000.
Title of Class Name and Address of Amount Percent of
Beneficial Owner (1) Class
--------------- ---------------------- --------- --------------
Common Stock Walter Niemi 7,200,000 33.18%
Common Stock Ken Bergestad 2,400,000 11.05%
--------- -------------
9,600,000 44.23%
_____________________________ ========= =============
(1) The address of record for these shareholders is 5975 Selkirk Crescent,
Prince George, British Columbia, Canada V2N 2G9
III. Transfers Involving the Original Twelve Certificates.
The Company is aware of approximately 33 transactions involving the original
twelve common stock certificates. These transactions are summarized below:
VENDOR(1) PURCHASER DATE VOLUME
Brenna Baumgartner 900,000
Cert. No. 2512 38 Purchasers(2) March 16, 2000 900,000
Andrew Beers 500,000
Cert. No. 2510
(the shares
represented by this
certificate have never
been transferred).
Jan Beers 500,000
Cert. No. 2511 Feb. 5, 1996
Andrew McNeilly 100,000
Andrew McNeilly 100,000
Andrew McNeilly 100,000
Josephine Page 100,000
Josephine Page 100,000
Kerry J. Garvin 900,000
Cert. No. 2507
(the shares
represented by this
certificate have never
been transferred).
Arthur G. Lang 900,000
Cert. No. 2508 38 Purchasers(2) March 16, 2000 900,000
Mary L. Lang 900,000
Cert. No. 2509
(the shares
represented by this
certificate have never
been transferred).
Barbara J. McMullin. 900,000
Cert. No. 2501
(the shares
represented by this
certificate have never
been transferred).
Brent M. McMullin 900,000
Cert. No. 2502 Nov. 21, 1996
Donald Byers 300,000
Donald Byers 300,000
Donald Byers 300,000
Kevin McMullin 900,000
Cert. No. 2504 Oct. 26, 1995
Bevin McMullin 900,000
Melba R. McMullin 900,000
Cert. No. 2503 Dec. 9, 1999
Patricia Taverner 10,000
Joanne Gialleonardo 10,000
Maria T. Myatovic 10,000
John J. Paolucci 20,000
Ed & Marylin Harder JTTEN 50,000
Greg Rolufs 50,000
Murdoch M. Ross 50,000
Jesse Sabbarwal 10,000
Kewal Singh Bagri 10,000
Harmail Bagri 10,000
Robin Bagri 10,000
Leslie K. Fallowfield 10,000
Angelino & Lorena Spoletini JTTEN 10,000
Silvana Spoletini 20,000
Daniel A. &Joanne Gialleonardo JTTEN 10,000
Antonio & Ellena Gialleonardo JTTEN 10,000
Michael J. Romano 10,000
Maria L. Romano 10,000
John & Reno Romano JTTEN 10,000
James T. & James C. Gibb JTTEN 10,000
Luigi P. Brunello 10,000
Joagum M. & Lydia Santos JTTEN 50,000
Robert M. & Gayle Wannop JTTEN 100,000
Scotia McCleod in trust for Eric P. Wilson 75,000
James H. Walske 15,000
Robert J. Robinson 20,000
Northern Business Ltd. 290,000
Linda G. Swales 900,000
Cert. No. 2506 Sept. 9, 1998
Andrew J. Chamberlin in trust 700,000
FRL Syndicate 200,000
Murray L. Swales
900,000
Cert. No. 2505 March 13, 2000
FRL Syndicate 700,000
Donald Byers 200,000
_____________________________________________________
Each Vendor depicted paid $.01 (U.S.) to the Company for his or her shares.
These Certificates were canceled on March 16, 2000, with the underlying
shares being distributed to 38 purchasers. However, there were other
transfers on this date, not involving any of the shareholders depicted
on this schedule and the Transfer Agent's records do not depict to whom
each seller's shares were distributed
<PAGE>
Page No.: 14
IV. Changes in Control.
There are no arrangements which may result in a change in control
of the issuer.
Item 5. Directors, Executive Officers, Promoters and Control
Persons
Directors and Executive Officers
Helge Freudentheil, President and Director (Age 50)
Mr. Helge Freudentheil is a Director at Global Innovative Systems, Inc,
and has been with the Company since the consummation of the transaction
among the Company and Niew on January 31, 2000. Neither Mr. Freudentheil
nor any affiliate of his holds any of the Company's securities. He has
no agreements in place to acquire any such securities. For 10 years prior
to joining the team at Global Innovative Systems, Inc., and continuing to
the present, Mr. Freudentheil has been the Owner-Manager of P.G. Machine
Works, a general machinery, welding, fabricating and manufacturing business
in Prince George, British Columbia. The Company has no business dealings
or transactions with P.G. Machine Works or any affiliate thereof. While
at P.G. Machine Works, Mr. Freudentheil: built specialty parts for Rolls
Royce turbines; Nuvo Pinione pumps for Westcoast Energy, Inc.; and
built special and intricate parts for BC Hydro transformer equipment.
Mr. Freudentheil has spent his career involved in the machinery industry.
Mr. Freudentheil expends approximately 90% of his work week efforts to
P.G. Machine Works and the remaining 10% to the Company. He has served as
the Lecturer in Charge for Harare Polytechic in Harare, Zimbabwe, lecturing
in applied workshop technology, production of machine tools and processes.
He received a Zimbabwe National Diploma in Mechanical Engineering. Mr.
Freudentheil holds a Provincial Trade Certificate; Machinist, and an
Inter-provincial Trade Certificate; Machinist.
Mr. Ken Bergestad, Vice-President and Director (Age 47)
Mr. Ken Bergestad is the Vice President of Global Innovative Systems, Inc.
and has held that since the consummation of the transaction among the Company
and Niew on January 31, 2000. From 1997 until 1999, Mr. Bergestad was
Secretary of Niew Industries, Inc. Mr. Bergestad was instrumental in raising
the start-up capital for Niew Industries, Inc. and took on the job as
bookkeeper as well as day-to-day administrative duties of the company.
Mr. Bergestad has also been involved in the paving industry for over
twenty years. He worked as a grade foreman for Pittman Asphalt from
1994-1997. Mr. Bergestad has been a member of the Operating Engineers
Union since 1979, and is a classified Grade Foreman, and Equipment
Operator. Mr. Bergestad attained a Bachelor of Arts degree in Psychology
from the University of Victoria. Mr. Bergestad provides approximately
100% of his work week to his duties for the Company.
Walter R. Niemi, Secretary, Treasurer and Director (Age 55)
Mr. Walter R. Niemi is the Secretary Treasurer of Global Innovative
Systems, Inc. and has held that position since the consummation of the
transaction among the Company and Niew on January 31, 2000. Mr. Niemi
is also the President of Niew Industries, Inc. and has been there since
January 1997. Mr. Niemi has extensive experience in the paving industry
and applies virtually 100% of his time to the Company and Niew Industries
Inc. For the five year prior to joining Niew Industries, Mr. Niemi
worked as a mechanic and plant operator for Quesnel Paving. He joined the
Operating Engineers Union in 1970 and is classified as a heavy duty
mechanic, welder, and asphalt plant operator. At Quesnel Paving,
Mr. Niemi's duties consisted of operating, maintaining, repairing, moving
and overseeing the operation of Asphalt Equipment. As an inventor by
nature, Mr. Niemi began designing a different method of mixing asphalt
in the mid 1980's. The drawings of the double tapered mixing drum system
were completed by the beginning of 1997.
Mr. Robert W. Stark, Vice President and Director (Age 49)
Mr. Stark is currently a Director of Global Innovative Systems, Inc. Mr.
Stark came to Global Innovative Systems, Inc. upon the consummation of the
transaction among the Company and Niew on January 31, 2000. Before his
arrival at Global Innovative Systems, Inc. and since 1988, Mr. Stark has
been self-employed with Krats Drilling. He applies approximately 90% of his
work time to Krats Drilling and the remaining 10% to the Company. Mr. Stark
has been employed for over thirty years as a driller, blaster and driver in
British Columbia and the Yukon. Mr. Stark comes to Global Innovative
Systems, Inc. with many years of experience and a lengthy list of training and
certification in areas including but not limited to: BC Ministry of Energy
Mines and Petroleum Services blasting certification, Mine Rescue
Certification, Transportation of Dangerous Goods Certification, and WCB
Occupational First-Aid Level 1.
Mr. John Ian Lloyd Olson, Treasurer Niew Industries, Inc. (Age 38)
Lloyd Olson has been a part of Niew Industries, Inc. since 1997 and has
held the position of treasurer of Niew Industries, Inc. since inception.
Mr. Olson was an electrical apprentice for Service Electric, Quesnel,
B.C. from 1986-1990. His apprenticeship was served mainly in an
industrial environment, sawmills, and pulpmills. During this period
he developed a P.L.C. program for the logging industry to automatically
measure and cut logs to length in the bush. From 1991 to 1998 he worked
as a serviceman for Service Electric in Quesnel. His Duties ranged
from residential to commercial work as well as Industrial instrumentation
and P.L.C. programming. During this period he developed a program to
monitor and run the city of Quesnel's water system via computer over
the telephone line. Mr. Olson received a high school diploma from
Correlieu Senior Secondary School in Quesnel, B.C. Mr. Olson wired the
plant (TRAMS Trailer) and wrote the computer program as well.
II. Family Relationships.
There are no family relationships among the directors, executive
officers or persons nominated or chosen by the Company to become
officers or executive officers.
III. Involvement in Certain Legal Proceedings.
The Company is not aware of any material legal proceedings involving
any director, director nominee, promoter or control person including
criminal convictions, pending criminal matters, pending or concluded
administrative or civil proceedings limiting one's participation in the
securities or banking industries or findings of securities or commodities
law violations.
Item 6. Executive Compensation
The following information is dated as of December 31, 1999,
the end of Global Innovative Systems, Inc. last fiscal year.
<PAGE>
Page No.: 15
I. SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Name
and Other Restrict- Sec. LTIP All Other
Princi- Annual ed Underly- Payouts Compansa-
pal Salary Bonus Compen- Stock ing ($) tion
Position Year (US$)(*) ($) sation Award Options/ ($)
US($) SARs (#)
------- ---- ------ --- ------ ------ --------- ------- ---------
Helge 99 0 0 0 0 0 0 0
Freudentheil
president
Robert 99 0 0 0 0 0 0 0
Stark
(vice
president)
Ken 99 19,959 0 0 0 0 0 0
Bergestad
(vice
president)
Walter 99 39,918 0 0 0 0 0 0
Niemi
(secretary
/treasurer)
1 The Compensation depicted was paid by Niew Industries Inc. and is
depicted in U.S. Dollars. The actual compensation paid to Messrs. Bergestad
and Niemi was in Canadian Dollars. The Canadian equivalents are $30,000
and $60,000 respectively.
* The compensation depicted is in U.S. dollars. The compensation was paid
in Canadian dollars.
<PAGE>
Page No.: 16
II. OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
A. Rule 701 Stock Plan.
On July 1, 1996, Legacy Minerals Inc. adopted the Legacy Minerals Inc.
1996 Consultant and Employee Stock Compensation Plan pursuant to Rule
701 promulgated under the Securities Act of 1933 (the "Plan"). Shares
designated to the Plan: 1,000,000. Transfer Company: Pacific Stock Transfer
Company; 2690 S. Eastern Rd., Suite 218; Las Vegas, Nevada 89109.
The Company has no grants to report in the past fiscal year pursuant to its
Plan. The Plan authorizes the distribution of up to 1,000,000 shares to
be acquired at $.50 per share for an aggregate capital infusion to the
Company of $500,000. To date no options have been granted. The criteria
for distributing options is within management's discretion.
III. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
The Company has no Options, Exercises or Values to report for its
last fiscal year pursuant to its Plan. The Plan authorizes the distribution
of up to 1,000,000 shares to be acquired at $.50 per share, but no options
have been granted. The criteria for distributing options is within
management's discretion.
IV. LONG-TERM INCENTIVE PLANS -
AWARDS IN LAST FISCAL YEAR
The Company has no plans or awards to report for last fiscal year
pursuant to its Plan. The Plan authorizes the distribution of up to
1,000,000 shares to be acquired at $.50 per share, but no options have
been granted. The criteria for distributing options is within management's
discretion.
V. COMPENSATION OF DIRECTORS
Standard Arrangements.
Each member of the Company's Board of Directors is to be paid $6,000
(U.S.) annually commencing in 2000 as compensation for their positions.
The members of the Company's Board of Directors also are reimbursed for
actual expenses incurred in attending Board meetings.
B. Other Arrangements.
There are no other arrangements for compensation to the Board of
Directors' members.
VI. EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT, AND CHANGE-IN-CONTROL ARRANGEMENTS
No member of management, nor any employee, is covered by any
employment contract, termination of employment agreement or change
in control arrangement.
<PAGE>
Page No.: 17
Item 7. Certain Relationships and Related Transactions
During the year ended September 30, 1999, the Niew Industries
borrowed $34,074 from director Ken Bergestad's father and paid him interest
of $1,331 during the year. The loan is unsecured and is without specific
terms of repayment. Interest is payable at the rate of eight
percent to the bank that provided the funds to the related party. The
lender has indicated that he does not expect to request repayment during
the next fiscal year. As of March 31, 2000, the Company had repaid
$1,302 of the outstanding principal balance.
Niew Industries had previously received loans of $467,357
to NII. Of this sum, $450,457 did not bear interest. The balance of
$16,900 was repaid during the six month period ending March 31, 2000.
These loans are unsecured and have no specific terms of repayment. In
connection with the share exchange agreement, loans totaling $420,864
were acquired by the Company and eliminate on consolidation. Subsequent
to September 30, 1999, the directors advanced a further $104,574 to
the Company on an unsecured, non-interest bearing basis with no terms
of repayment.
At March 31, 2000, the balance of loans payable to the Company's stockholders
was as follows:
Ken Bergestad $ 57,012
Walter Niemi 28,978
Lloyd Olson 48,177
--------------
$ 134,167
==============
During 1998, NII loaned $27,827 to its directors. During 1999
arrangements were made by which these advances were repaid by the
directors.
Niew Industries Inc. advanced as a non-refundable payment in contemplation
of acquisition, a sum of money to Remote Security Ltd. a company in
which Robert Stark, a director of the Company, also serves as a
director. Management of NII had investigated a proposed acquisition of
Remote Security Ltd. a Canadian business involved in the
development of a secure locking system for explosives magazines.
Primarily, the secure locking system is designed for use by the mining
industry to prevent theft of explosives while stored. NII advanced $46,145
in anticipation of acquisition. NII performed its due diligence in
connection with the acquisition. Thereafter, NII's management re-evaluated
the proposal and decided not to pursue the acquisition. As a result, the
initial advances were written off. At the time of the related party
transaction, Mr. Stark was a controlling shareholder of Remote Security
Ltd. While he is a member of Global's Board of Directors, Mr. Stark
has never been a director of Niew Industries Inc. Thus, he did not
participate in Niew Industries Inc.'s decision to advance the funds, to
abandon the acquisition, or to forgive the indebtedness.
Item 8. Legal Proceedings
The issuer is not a party to any pending legal action, suit, or proceeding
nor is its property the subject of any legal proceeding.
Item 9. Market for Registrant's Common Equity and Other Shareholder
Matters
The Company is authorized to issue 200,000,000 common shares with
par value of $.001 (USD). There is no public trading market for the common
equity shares of the Company. If the Company successfully obtains a
listing, as is presently intended by management, the common equity shares
will be listed upon the OTC Electronic Bulletin Board Service upon approval
by the NASD of the Company's application on Form 211. There are
approximately 75 equity holders of record of the Company's Common stock.
The number of shares eligible for trading will be all of the Common stock
except that which are owned by management. There have been no cash
dividends declared since inception of the Company. At this time the
Company does not anticipate paying dividends.
Item 10. Recent Sales of Unregistered Securities
During the period from incorporation to the present, the Company sold
securities which were not registered under the Securities Act of 1933 in
reliance presumptively upon exemptions from the securities registration
provisions in transactions as set forth below.
<PAGE>
Page No.: 18
A. Three individuals, comprising all of the shareholders of NII, a British
Columbia corporation, sold one hundred percent of the outstanding shares and
amounts owing to them by NII to Global Innovative Systems Inc. in exchange
for 12,000,000 Common voting shares of the Company. This transaction
closed on January 31, 2000.
NII Shares Shares issued on exchange
------------------------------------------------------------
Walter Niemi: 1,290 60.0(% of NII) 7,200,000
Ken Bergestad: 430 20.0 2,400,000
Lloyd Olson: 430 20.0 2,400,000
----------- ---------------- ----------------
Totals: 2,150 100.0% 12,000,000
=========== ================ ================
September 3, 1995 Rule 504 Private Placement.
On or about September 3, 1995, the Company accepted subscription agreements
from twelve prospective purchasers to purchase the Company's Class A
Voting Common Stock for $.01 (U.S.) per share. The Company executed and
filed on Form D that it relied upon Rule 504 in selling the 10 million shares
subscribed for. Subsequently, many of these shares have been sold or
otherwise distributed by these shareholders to other persons, many of whom
remain shareholders of the Company on this date. Additionally, 300,000
shares were redeemed and canceled on August 27, 1997, leaving 9,700,000
shares issued and outstanding at the date of the acquisition of NII. The
original twelve investors and the amounts of their initial investments
appear below.
Name & Address(1) No./Shares Price Total (U.S.$) U.S. Resident
----------------- ----------------- --------------- --------------
Brenna Baumgartner 900,000 $.01 $ 9,000.00 No.
Andrew Beers 500,000 5,000.00 No.
Jan Beers 500,000 5,000.00 No.
Kerry J. Garvin 900,000 9,000.00 No.
Arthur G. Lang 900,000 9,000.00 No.
Mary L. Lang 900,000 9,000.00 No.
Barbara J. McMullin 900,000 9,000.00 No.
Brent M. McMullin 900,000 9,000.00 No.
Kevin McMullin 900,000 9,000.00 No.
Melba R. McMullin 900,000 9,000.00 No.
Linda G. Swales 900,000 9,000.00 No.
Murray L. Swales 900,000 9,000.00 No.
(1) All Purchasers subscribed for the shares purchased under the
address P.O. Box 4287-1000; San Jose, Costa Rica.
The Company has not undertaken to distribute or offer any of its shares other
than in the two transactions described above.
<PAGE>
Page No.: 19
Item 11. Description of Securities
The securities to be registered pursuant to this Form 10-SB are all of the
authorized voting Common stock of Global Innovative Systems Inc. There
are no preemptive rights associated with the securities and no cumulative
voting is authorized by the By-laws. The amount of shares authorized is
200,000,000. There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any shares of the Company's
common stock.
Item 12. Indemnification of Directors and Officers
Article 11 of the Company's By-laws provides that every person who was
or is a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil criminal, administrative or
investigative, by reason of the fact that he or a person for whom he is
the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for
its benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless to the fullest extent legally
permissible under the General Corporation Law of the State of Nevada
against all expenses, liability and loss (including attorney's fee,
judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. The expenses of
officers and directors incurred in defending a civil or criminal action,
suit or proceeding must be paid by the corporation as they are incurred
and in advance of the final disposition of the action, suit or proceeding
upon receipt of an undertaking by or on behalf of the director or officer
to repay the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the corporation.
Such right of indemnification shall be a contract right which may be
enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective
rights of indemnification under any bylaw, agreement, vote of
stockholders, provisions of law or otherwise, as well as rights under
Article 11.
Nevada Revised Statutes Section 78.7502 provides for discretionary and
mandatory indemnification of officers, directors, employees and agents
as follows:
A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed legal
proceeding, except by or in the right of the corporation, by reason of the
fact that the person is or was a director, officer, employee or agent of
the corporation, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
the person in connection with the action, suit or proceeding if the person
acted in good faith and in a manner which was reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had not reasonable cause
to believe the conduct was unlawful.
A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, against expenses, including amounts
paid in settlement and attorneys' fees actually and reasonably incurred
by the person in connection with the defense or settlement of the action
or suit if the person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which
such a person has been judged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such expenses as the court deems proper.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections 1 and 2, or in defense of any
claim, issue or matters therein, the corporation shall indemnify the person
against expenses, including attorneys' fees, actually and reasonably incurred
in connection with the defense.
Nevada Revised Statutes Section 78.751 requires authorization for
discretionary indemnification; advancement of expenses and limitation
on indemnification and advancement of expenses as follows:
Any discretionary indemnification under NRS 78.7502 unless ordered
by a court or advanced pursuant to subsection 2, may be made by
the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances. The determination must be made:
By the stockholders;
By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
If a quorum consisting of directors who were not parties to the action,
suit or proceeding cannot be obtained, by independent legal counsel in
a written opinion.
<PAGE>
Page No.: 20
Item. 13. Financial Statements.
The Financial Statements filed as part of this Registration
Statement are:
Global Innovative Systems Inc.:
Unaudited Pro-forma Consolidated Financial Information.
Unaudited Pro-Forma Consolidated Financial Information
which gives effect to the acquisition of all the outstanding common
shares of Niew Industries Inc. and amounts due to its stockholders
totaling $420,864 in exchange for 12 million shares of common stock
of the Company has not been presented. The acquisition of Niew Industries
was accounted for as a reverse acquisition as the former stockholders of
Niew Industries controlled approximately 55% of the voting common
shares of the Company immediately after the acquisition. The consolidated
balance sheet at March 31, 2000, consolidates the accounts of the
Company and Niew Industries. The Company was inactive at he
date of acquisition and there are no pro forma adjustments. Accordingly,
the pro forma statements of operations for the six months ended March 31,
2000, and for the year ended September 30, 1999 have not been included
since they are identical to those presented elsewhere in the Registrant
Statement. Readers are referred to the consolidated financial statement
for the six months ended March 31, 2000 and the financial statements of
Niew Industries for the year ended September 30, 1999.
Unaudited Consolidated interim Financial Statements for the six months
ended March 31, 2000.
Balance Sheets
Statements of Operations
Statements of Changes in Stockholders' Deficit
Statements of Cash Flows
Notes to the Financial Statements
Niew Industries Inc.:
Audited Financial Statements for the years ended
September 30, 1999 and 1998
Report of Independent Accountants
Balance Sheets
Statements of Operations
Statement of Changes in Stockholders' Deficit
Statements of Cash Flows
Notes to the Financial Statements.
Item 14. Changes in and Disagreements with Accountants
None.
Item 15. Index to Exhibits Page Range
3. (i) Corporate Charter...........................previously submitted
(ii) Articles of Incorporation...................previously submitted
(iii) Bylaws......................................previously submitted
10. Material Contracts
(i) Share Purchase Agreement.....................previously submitted
(ii) Ian Westwood Agreement.......................previously submitted
21.
(i) Subsidiaries of the Registrant...............previously submitted
27. (i) Financial Data Schedule......................................EX-1
99. (i) Letter of Counsel............................................EX-2
<PAGE>
Page No.: 21
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Expressed in US Dollars)
March 31,
2000 1999
ASSETS ------------- ------------
Current assets
Cash $ 19,987 $ 522
Receivables 5,864 6,863
Investment tax credits refundable 53,150 50,528
Prepaid expenses 1,572 341
--------------- -----------
75,295 98,254
Fixed assets 8,123 9,782
Licence (Note 5) 46,561 -
--------------- -----------
$ 129,979 $ 108,036
=============== ===========
LIABILITIES
Current liabilities
Accounts payable $ 49,330 $ 7,183
Accrued liabilities 690 -
Loan payable to related party 32,772 6,656
Advances from stockholders (Note 6) 134,167 404,193
------------ ----------
216,959 418,032
------------ ----------
STOCKHOLDERS' DEFICIT
Common stock
Authorized:
200,000,000 common shares,
par value $0.001
Issued:
21,700,000 (1999 - 12,000,000)
common shares 21,700 12,000
Additional paid-in capital 410,632 -
Accumulated other comprehensive
income Foreign currency translation
(loss) gain (12,099) 2,997
Deficit accumulated in the
development stage (507,213) (324,993)
----------- ----------
( 86,980) (309,996)
----------- ----------
$ 129,979 $ 108,036
=========== ==========
The accompanying notes are an integral part of these consolidated
financial statements
<PAGE>
Page No.: 22
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Expressed in US Dollars)
January 15, 1997
(Incorporation) Three Months Six Months
To March 31, 2000 Ended March 31, Ended March 31,
Cumulative 2000 1999 2000 1999
------------------ -------- ------- ------ -------
EXPENSES
Accounting,
audit and legal $ 34,462 $ 10,628 $ 3,356 $ 17,079 $ 4,045
Automotive 16,779 1,054 2,674 1,669 4,670
Bank charges and
interest 3,485 55 5 1,781 72
Consulting 4,000 4,000 - 4,000 -
Depreciation 4,068 518 814 1,028 1,243
Directors' fees 6,000 6,000 - 6,000 -
Insurance 13,973 2,442 1,018 4,101 2,153
Office and supplies 3,864 51 1,652 778 1,798
Rent 12,087 550 - 618 2,756
Research and develop-
ment costs (Note 7) 340,462 773 13,173 17,711 29,626
Telephone 8,982 1,013 1,010 2,149 2,447
Travel 16,386 1,016 6,609 1,236 7,099
---------- --------- -------- -------- --------
LOSS BEFORE OTHER
ITEMS (464,548) (28,100) (30,311) (58,150) (55,907)
---------- --------- -------- -------- --------
OTHER ITEMS
Interest income 3,480 - - 2,675 25
Loss on terminated
proposed business
acquisition (Note 8) (46,145) (12,728) - (46,145) -
---------- --------- -------- --------- -------
(42,665) (12,728) - (43,470) 25
========== ========== ========= ========== ========
NET LOSS FOR THE
PERIOD (507,213) (40,828) (30,311) (101,620) (55,884)
=========== =========== ========= ========= =========
Loss per share -
basic and diluted $ 0.00 $ 0.00 $ 0.01 $ 0.00
Weighted average
common shares 18,466,667 12,000,000 15,233,333 12,000,000
=========== =========== ========== ======== ==========
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
Page No.: 23
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
Deficit Accumulated
Accumulated Other Total
Common Additional in the Comprehensive Stock-
Shares Paid-in Development Income Holders'
Number Amount Capital Stage Deficit
-------- ------- --------- --------- ----------- ----------
Balance,
October 1,
1999 - Niew
Industries
Inc 5,000 $ 3,265 $ - $ (405,593) $ (5,751) $ (408,079)
Common
stock
redeemed
at $1 Cdn
on October
31, 1999
2,850 1,861 - - - (1,861)
-------- ------- --------- --------- ----------- ----------
2,150 1,404 - (405,593) (5,751) (409,940)
Adjustment
for the
issuance
of common
stock on
reverse
acquisition
11,997,850 10,596 - (10,596) - -
-------- ------- --------- --------- ----------- ----------
12,000,000 12,000 - (416,189) (5,751) (409,940)
Adjustment
for the
stockholders'
equity of
the
Company
at the
acquisition
date
9,700,000 9,700 410,632 10,596 - 430,928
-------- ------- --------- --------- ----------- ----------
21,700,000 21,700 410,632 (405,593) (5,751) 20,988
-------- ------- --------- --------- ----------- ----------
Net loss
for the
period - - - (101,620) - (101,620)
Foreign
currency
translation
gain (loss)
- - - - (6,348) (6,348)
-------- ------- --------- --------- ----------- ----------
Total
comprehensive
income
- - - (101,620) (6,348) (107,968)
-------- ------- --------- --------- ----------- ----------
Balance,
March 31,
2000
21,700,000 $ 21,700 $ 410,632 $(507,213) $(12,099) $(86,980)
-------- ------- --------- --------- ----------- ----------
The accompanying notes are an integral part of these financial statements
<PAGE>
Page No.: 24
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Expressed in US Dollars)
January 15, 1997
(incorporation) to
March 31, 2000 Six months ended March 31,
Cumulative 2000 1999
------------------ ----------- -----------
CASH PROVIDED BY (USED IN)
Operating
Net loss for the period $ (507,213) $ (101,620) $ (54,784)
Non cash item
Depreciation 4,068 1,028 1,243
(Increase) decrease in assets
Receivables (586) 514 (13,408)
Investment tax credits
refundable (53,150) 43,986 (7,749)
Prepaid expenses (1,572) 3,562 2,267
Increase (decrease) in
liabilities
Accounts payable 49,330 34,881 (1,397)
Accrued liabilities 690 (4,740) (3,000)
---------------- ------------ ----------
(508,433) (22,389) (76,828)
---------------- ------------ ----------
Financing
Loan payable to related party 32,772 (1,302) 6,656
Issuance of common stock 1,404 - -
Advances from stockholders 555,031 87,674 76,094
---------------- ------------ ----------
589,207 86,372 82,750
---------------- ------------ ----------
Investing
Cash acquired on reverse
acquisition 10,064 10,064 -
Purchase of license (46,561) (46,561) -
Purchase of fixed assets (12,090) - (3,628)
---------------- ------------ ----------
(48,587) (36,497) (3,628)
---------------- ------------ ----------
INCREASE IN CASH 32,187 27,486 2,294
EFFECT OF FOREIGN EXCHANGE
ON CASH (12,200) (8,310) (6,600)
CASH AT BEGINNING OF PERIOD - 811 4,828
---------------- ------------ ----------
CASH AT END OF PERIOD $ 19,987 $ 19,987 $ 522
================ ============ ==========
Supplemental Information
Non cash investing and financing activities
Shares of Niew Industries Inc. and loans payable to
stockholders of Niew Industries Inc. acquired for
consideration totaling 12 million shares of common
stock
$ 420,864 $ -
License acquired by issuance of accounts payable $ 31,037 $ -
The accompanying notes are an integral part of these consolidated
financial statements
<PAGE>
Page No.:25
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Expressed in US Dollars)
March 31, 2000 and 1999
1. UNAUDITED FINANCIAL STATEMENTS
The interim financial statements for the six month periods ended March
31, 2000 and 1999 included herein have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments consisting of normal recurring
adjustments, which, in the opinion of management, are necessary for fair
presentation of the information, contained therein. It is suggested that
these interim financial statements be read in conjunction with the financial
statements of Niew Industries Inc. (Note 3) for the years ended September
30, 1999 and 1998 and the notes thereto included elsewhere in the Company's
registration on Form 10-SB. The Company follows the same accounting
policies in preparation of interim reports.
Results of operations for the interim periods are not indicative of
annual results.
2. NATURE OF BUSINESS AND CONTINUING OPERATIONS
The Company was incorporated in the State of Nevada on September 14, 1995
and was inactive until January 31, 2000 when it closed a share exchange
agreement with the stockholders of Niew Industries Inc. ("NIEW"). The
transaction resulted in NIEW becoming a wholly owned subsidiary of
the Company.
NIEW was incorporated on January 15, 1997 under the British Columbia
Company Act. The Company was inactive until March 23, 1998 when it began
the development of a twin rotating asphalt mixing system. To date, this
has been Niew's only activity. These financial statements are expressed in
US dollars and have been prepared in accordance with accounting principles
generally accepted in the United States.
The Company has made an application to the United States Securities
and Exchange Commission to register its common stock.
These accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. As at March 31, 2000, the Company has accumulated operating
losses of $507,213 since its inception. The continuation of the Company
is dependent upon the continuing financial support of creditors, directors
and stockholders and obtaining long term financing as well as achieving
a profitable level of operations through the successful development of
the twin rotating asphalt mixing system. It is the intention of the
Company to raise a new equity financing of approximately $1,500,000 within
the upcoming year. Amounts raised will be used to complete the development
of the twin rotating asphalt mixing system and then proceed into a stage
of commercial production.
<PAGE>
Page No.:26
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Expressed in US Dollars)
March 31, 2000 and 1999
2. NATURE OF BUSINESS AND CONTINUING OPERATIONS - CONTINUED
While the Company is expending its best efforts to achieve the above
plans, there is no assurance that any such activity will generate funds
that will be available for operations.
These conditions raise substantial doubt about the Company's ability
to continue as a going concern. These financial statements do no include
any adjustments that might arise from this uncertainty.
3. ACQUISITION OF NIEW INDUSTRIES INC.
By agreement dated December 11, 1999, the Company agreed to acquire 100%
of the issued and outstanding shares, and $420,864 owing to the stockholders,
of Niew Industries Inc. The acquisition closed on January 31, 2000.
Effective as of the closing date, the transaction was accounted for using
the purchase method of accounting as applicable for a reverse acquisition.
Following reverse acquisition accounting, consolidated financial statements
subsequent to closing of the acquisition are presented as a continuation of
NIEW. The operations of the Company are consolidated with those of NIEW
from the date of the acquisition.
The net assets of the Company at the date of acquisition consisted of
$10,064 of cash remaining on its initial capitalization.
The company intends to retain September 30 as its fiscal year end.
Since the Company was inactive until the acquisition of NIEW, pro-
forma information reflecting the acquisition had it occurred at the
beginning of the earliest period presented would not yield results
different from the net loss and loss per share presented on the
Consolidated Statement of Operations.
<PAGE>
Page No.: 27
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Expressed in US Dollars)
March 31, 2000 and 1999
4. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 133 requires companies to recognize all derivatives contracts as either
assets or liabilities on the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of
gain or loss recognition on the hedging derivative with the recognition of
(i) the changes in the fair value of the hedged assets or liability that
are attributable to the hedged risk or (ii) the earnings effect of the
hedged forecaster transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period
of change. SFAS No. 133 is effective for all quarters of fiscal years
beginning after June 15, 2000. Historically, the Company has not entered
into derivative contracts either to hedge existing risks or for speculative
purposes. Accordingly, the Company does not expect adoption of the new
standards on October 1, 2000 to affect its financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities", ("SOP 98-5") which provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as incurred.
SOP 98-5 is effective for fiscal years beginning after December 15, 1998
with initial adoption reported as the cumulative effect of a change in
accounting principle. Adoption of this standard did not have a material
effect on the financial statements.
5. COMMITMENT
By agreement dated November 8, 1999, the Company agreed to purchase a
license entitling it to manufacture a component known as a "Portable
Overhead Bin". This component will be part of the twin rotating asphalt
mixing system that is currently being developed by the Company. To acquire
the license, the Company is required to pay a one time payment of $75,000
in Canadian dollars, $30,000 which has been paid with the balance to be
paid by August 31, 2000. In addition, the company will be required to pay
a royalty based on the number of units manufactured in a calendar year.
The minimum royalty is Cdn. $10,000 for 2000 and Cdn. $20,000 for 2001
and thereafter.
<PAGE>
Page No.: 28
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Expressed in US Dollars)
March 31, 2000 and 1999
6. ADVANCES FROM STOCKHOLDERS
In connection with the acquisition of Niew Industries Inc., the purchase
price included the settlement of outstanding debts to directors totaling
$420,864.
The remaining advances are unsecured, do not bear interest and have
no specific terms of repayment. The advances are summarized as follows:
2000 1999
------------ -----------
Cash advances to the company $ 125,694 $ 404,193
Reimbursable expenses 8,473 -
134,167 404,193
----------- -----------
Average balance for the period $ 163,972 $ 373,245
============ ===========
7. RESEARCH AND DEVELOPMENT COSTS
The company is in the process of developing a twin rotating asphalt mixing
system. Costs incurred to date consist of the following:
January 15, 1997
(Incorporation) Three Months Six Months
To March 31, 2000 Ended March 31, Ended March 31,
Cumulative 2000 1999 2000 1999
------------------ -------- ------- ------ -------
Materials and supplies $ 274,979 $ 451 $ 8,921 $ 6,269 $ 21,982
Salaries and benefits 138,758 322 1,026 3,404 4,410
Patent application 22,211 - 6,316 8,038 10,166
Investment tax credits
recovery (95,486) - (3,090) - (6,932)
------------------ -------- ------- ------ -------
$ 340,462 $ 17,711 $ 29,626 $ 773 $ 13,173
============ ========== ========= ========= =========
Upon conclusion of the share exchange agreement, the company is no
longer eligible for recoverable investment tax credits.
<PAGE>
Page No.: 29
GLOBAL INNOVATIVE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Expressed in US Dollars)
March 31, 2000 and 1999
8. LOSS ON TERMINATED PROPOSED BUSINESS ACQUISITION
During the period, the Company advanced funds in anticipation of the
acquisition of a business. The directors have reassessed the proposed
acquisition and have chosen to abandon it. As a result, the advances
have been written off.
The company to which the funds were advanced and the Company have one common
director.
<PAGE>
Page No.: 30
NIEW INDUSTRIES INC.
(A Development Stage Company)
SEPTEMBER 30, 1999
Page
REPORT OF INDEPENDENT ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statements of Operations 3
Statements of Changes in Stockholders' Deficit 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 12
<PAGE>
Page No.: 31
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders of
Niew Industries Inc.
(A Development Stage Company)
We have audited the Balance Sheet of Niew Industries Inc. (a development
stage company) as at September 30, 1999, the Statements of Operations,
Changes in Stockholders' Deficit and Cash Flows for the years ended
September 30, 1999 and 1998 and for the period from January 15, 1997
(incorporation) to September 30, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan
and perform an audit to obtain reasonable assurance 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 audit provides a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Niew Industries Inc. (a development
stage company) as at September 30, 1999 and the related statements of
Operations, Changes in Stockholders' Deficit and Cash Flows for the
years ended September 30, 1999 and 1998 and for the period from January 15,
1997 (incorporation) to September 30, 1999 in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has suffered recurring losses from
operations and has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 1.
These financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Hedden Chong
Burnaby, Canada Chartered Accountants
December 7, 1999
<PAGE>
Page No.: 32
NIEW INDUSTRIES INC.
(A Development Stage Company)
BALANCE SHEETS
(Expressed in US Dollars)
September 30,
1999 1998
------------ ------------
ASSETS
Current assets
Cash $ 811 $ 4,828
Receivables (Note 9) 1,100 33,455
Investment tax credits refundable (Note 2) 97,136 42,779
Prepaid expenses 5,134 2,608
104,181 83,670
Fixed assets (Note 3) 9,050 7,488
------------ ------------
$ 113,231 $ 91,158
============ =============
LIABILITIES
Current liabilities
Accounts payable $ 14,449 $ 8,580
Accrued liabilities 5,430 3,000
Loan payable to related party (Note 4) 34,074 -
Advances from stockholders (Note 5) 467,357 328,099
------------- --------------
521,310 339,679
------------ ------------
STOCKHOLDERS' DEFICIT
Common stock (Note 6) 3,265 3,265
Accumulated other comprehensive income
Foreign currency translation (loss) gain (5,751) 8,588
Deficit accumulated in the development stage (405,593) (260,374)
------------- --------------
(408,079) (248,521)
------------- --------------
$113,231 $91,158
============= ==============
The accompanying notes are an integral part of these financial statements
<PAGE>
Page No.: 33
NIEW INDUSTRIES INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Expressed in US Dollars)
January 15, 1997
(incorporation) to
September 30, 2000 Year ended September 30,
Cumulative 2000 1999
------------------ ----------- -----------
EXPENSES
Accounting, audit and legal $ 17,383 $ 11,539 $ 5,844
Automotive 15,110 11,113 3,997
Bank charges and interest 1,704 1,528 176
Depreciation 3,040 2,203 837
Insurance 9,872 5,018 4,854
Licenses, dues and subscriptions 165 97 68
Office and supplies 2,921 1,962 959
Rent 11,469 3,027 8,442
Research and development (Note 7) 322,751 88,602 234,149
Telephone 6,833 5,563 1,270
Travel 15,150 14,643 507
------------------ ------------ ----------
LOSS BEFORE OTHER ITEM (406,398) (145,295) (261,103)
OTHER ITEM
Interest income 805 76 729
------------------ ----------- -----------
NET LOSS FOR THE PERIOD $ (405,593) $ (145,219) $ (260,374)
================== ============ ==========
The accompanying notes are an integral part of these financial statements
<PAGE>
Page No.: 34
NIEW INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(EXPRESSED IN US DOLLARS)
Deficit
Foreign Accumulated
Currency in the Total
Translation Development Stockholders'
Shares Amount Adjustments Stage Deficit
-------- ------- ------------ ----------- -------------
Initial capitaliza-
tion of the
company of
January 15, 1997
100 $ 67 $ - $ - $ 67
Common stock
issued at $1 Can.
April 15, 1998
4,900 3,198 - - 3,198
-------- ------- ------------ ----------- -------------
5,000 3,265 - - 3,265
Net loss for
the year - (260,374) (260,374)
Foreign currency
translation adjustments 8,588 - 8,588
-------- ------- ------------ ----------- -------------
Comprehensive loss 8,588 (260,374) (251,786)
-------- ------- ------------ ----------- -------------
Balance September
30, 1998 5,000 3,265 8,588 (260,374) (248,521)
-------- ------- ------------ ----------- -------------
Net loss for
the year - (145,219) (145,219)
Foreign currency
translation adjust-
ments (14,339) - (14,339)
-------- ------- ------------ ----------- -------------
Total comprehensive
loss (14,339) (145,219) (159,558)
-------- ------- ------------ ----------- -------------
Balance,
September 30,
1999 5,000 $ 3,265 $ (5,751) $ (405,593) $ (408,079)
======== ======== ========== =========== ==========
The accompanying notes are an integral part of these financial statements
<PAGE>
Page No.: 35
NIEW INDUSTRIES INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Expressed in US Dollars)
January 15, 1997
(incorporation) to
September 30, 2000 Year ended September 30,
Cumulative 2000 1999
------------------ ----------- -----------
CASH PROVIDED BY
(USED IN)
Operating Net loss
for the period $ (405,593) $ (145,219) $ (260,374)
Non cash item
Depreciation 3,040 2,203 837
(Increase) decrease
in assets
Receivables (1,100) 32,355 (33,455)
Investment tax credits
refundable (97,136) (54,357) (42,779)
Prepaid expenses (5,134) (2,526) (2,608)
Increase (decrease)
in liabilities
Accounts payable 14,449 5,869 8,580
Accrued liabilities 5,430 2,430 3,000
------------ ---------- ---------
(486,044) (159,245) (326,799)
Financing
------------ ---------- ---------
Loan payable to
related party 34,074 34,074 -
Advances from
stockholders 467,357 139,258 328,099
Issuance of common
stock 3,265 - 3,198
------------ ---------- ---------
504,696 173,332 331,297
------------ ---------- ---------
Investing
Purchase of fixed assets (12,090) (3,765) (8,325)
------------ ---------- ---------
INCREASE (DECREASE) IN CASH 6,562 10,322 (3,827)
EFFECT OF FOREIGN EXCHANGE
ON CASH (5,751) (14,339) 8,588
CASH AT BEGINNING OF PERIOD - 4,828 67
------------ ---------- ---------
CASH AT END OF PERIOD $ 811 $ 811 $ 4,828
============ ========== =========
The accompanying notes are an integral part of these financial statements
<PAGE>
Page No.: 36
NIEW INDUSTRIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
September 30, 1999 and 1998
1. NATURE OF BUSINESS AND CONTINUING OPERATIONS
Niew Industries Inc. was incorporated on January 15, 1997 under the British
Columbia Company Act. The company was inactive until March 23, 1998 when
it began the development of a twin rotating asphalt mixing system. To
date this has been the Company's only activity. These financial statements
are expressed in US dollars and have been prepared in accordance with
accounting principles generally accepted in the United States.
These accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business. As at
September 30, 1999, the Company has accumulated operating losses of $405,593
since its inception. The continuation of the Company is dependent upon
the continuing financial support of creditors and stockholders and obtaining
long term financing as well as achieving a profitable level of operations
through the successful development of the twin rotating asphalt mixing
system. As disclosed in Note 10, the Company has been acquired by Global
Innovative Systems Inc., a Nevada company in the process of obtaining an
over-the-counter listing in the United States. It is the intention of the
management of Global to raise new equity financing of approximately
$1,500,000 within the upcoming year. Amounts raised will be used to
complete the development of the twin rotating asphalt mixing system and
then proceed into a stage of commercial production. While the Company is
expending its best efforts to achieve the above plans, there is no assurance
that any such activity will generate funds that will be available for
operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include
any adjustments that might arise from this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Tax Credit: The Company has made application to the Canada
Customs and Revenue Agency ("CCRA") to claim for refundable investment tax
credits ("ITCS") related to their research and development activities.
The ITCS are earned by incurring expenditures that qualify for this credit
under the Income Tax Act of Canada. The Company's estimate of the amount
recoverable is shown in the financial statements as investment tax
credits refundable and is stated at the estimated realizable value, net of
any reasonably possible adjustments by CCRA. The estimate is based on the
CCRA's current assessing practices and the accrual for 1999 has not yet
been subject to audit by the CCRA. Once the application is audited by the
CCRA, it is reasonably possible the estimate could change materially.
Depreciation: Fixed assets are recorded at cost and are depreciated over
their estimated useful lives as follows:
Rate per annum
----------------------------
Office equipment 20% declining balance basis
Machinery and equipment 20% declining balance basis
Automotive equipment 30% declining balance basis
<PAGE>
Page No.: 37
NIEW INDUSTRIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
(Expressed in US Dollars)
September 30, 1999 and 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Foreign Currency Translation: As a Canadian company operating solely in
Canada, its functional currency is the Canadian dollar. These financial
statements have been translated into United States dollars for consistency
with other registrants of the Securities and Exchange Commission ("SEC")
in the United States. As a result, the assets and liabilities have been
translated at the exchange rate in effect at the balance sheet date, and
revenues and expenses have been translated at the average exchange rate
for the year. Gains or losses on translation are deferred as a separate
component of stockholders' deficit.
Research and Development Costs: Expenditures on research and development
are charged to expense when incurred. Research and development costs
consist of the cost of materials and services consumed, salaries and wages
of personnel directly engaged in research and development and the costs
of patent applications. The cost of the research and development is reduced
by any investment tax credits accrued in respect of those costs.
Use of 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 and disclosure of contingent assets and liabilities at
the date of the financial statements and the recognized amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Income Taxes: The Company follows the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes", which requires the Company to recognize deferred tax liabilities
and assets for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns using
the liability method. Under this method, deferred tax liabilities and
assets are determined based on the temporary differences between the
financial statement carrying amounts and tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse.
Comprehensive Income: The company has adopted SFAS No. 130. "Reporting
Comprehensive Income", which establishes standards for reporting and display
of comprehensive income, its components and accumulated balances. The
Company is disclosing this information on its Statement of Changes in
Stockholders' Deficit. Comprehensive income is comprised of net income
(loss) and all changes to stockholders' deficit except those resulting from
investments by owners and distributions to owners.
New Accounting Pronouncements: In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 133 requires companies to recognize all
derivative contracts as either assets or liabilities on the balance sheet
and to measure them at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge, the objective of
which is to match the timing of gain or loss recognition on the hedging
derivative with the recognition of (i) the changes in the fair value of
the hedged assets or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. SFAS No. 133 is effective
for all quarters of fiscal years beginning after June 15, 2000.
<PAGE>
Page No.: 38
NIEW INDUSTRIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
(Expressed in US Dollars)
September 30, 1999 and 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Historically, the Company has not entered into derivative contracts either
to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standards on October 1, 2000
to affect its financial statements.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities",
(SOP 98-5") which provides guidance on the financial reporting of start-up
activities and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. SOP 989-5 is effective
for fiscal years beginning after December 15, 1998 with initial adoption
reported as the cumulative effect of a change in accounting principle.
Adoption of this standard would not have a material effect on the financial
statements.
3. FIXED ASSETS
Accumulated Net Book Value
Cost Depreciation 1999 1998
-------- ------------- ---------- ----------
Office equipment $ 270 $ 76 $ 194 $ 233
Machinery and equipment 8,406 1,983 6,423 5,590
Automotive equipment 3,476 1,043 2,433 1,665
-------- ------------- ---------- ----------
$ 12,152 $ 3,102 $ 9,050 $ 7,488
======== ============= ========== ==========
4. LOAN PAYABLE TO RELATED PARTY
During the year ended September 30, 1999, the Company borrowed $34,074
from a person related to one of the directors and paid him interest of
$1,331 during the year. The loan is unsecured and is without specific
terms of repayment. Interest is payable at the prime rate of 8%.
5. ADVANCES FROM STOCKHOLDERS
Of the advances outstanding at September 30, 1999 totaling $467,357,
$450,457 does not bear interest, the balance of $16,900, will receive a
10% bonus when repaid. The advances are unsecured and have no specific
terms of repayment. Subsequent to the year end the advances of $16,900
were repaid in full. In addition, $413,998 of the remaining advances
were acquired by Global Innovative Systems Inc. in connection with the
share exchange agreement (Note 10).
The advances are summarized as follows:
1999 1998
---------- ------------
Cash advances to the company $ 464,619 $ 324,908
Reimbursable expenses 2,338 -
----------- ------------
$ 467,357 $ 324,908
---------- ------------
Average balance for the year $ 403,645 $ 132,312
=========== ============
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Page No.:39
NIEW INDUSTRIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
(Expressed in US Dollars)
September 30, 1999 and 1998
6. COMMON STOCK
Authorized:
10,100 common shares without par value
Issued:
1999 1998
---------- ------------
5,000 common shares $ 3,265 $ 3,265
========== ============
During 1998, 4,900 shares were issued for cash consideration of $3,198.
Subsequent to September 30, 1999, 2,850 shares were redeemed for
cash consideration of $1,861.
7. RESEARCH AND DEVELOPMENT COSTS
The company is in the process of developing a twin rotating asphalt
mixing system. Costs incurred to date consist of the following:
January 15, 1997
(incorporation) to Year ended
September 30, 2000 September 30,
Cumulative 1999 1998
------------------ ----------- -----------
Materials and supplies $ 268,710 $ 44,627 $ 224,083
Salaries and benefits 135,354 85,782 49,572
Patent and applications 14,173 9,443 4,730
Investment tax credits
recovery (95,486) (51,250) (44,236)
------------------ ------------ ------------
$ 322,751 $ 88,602 $ 234,149
================== ============ ============
<PAGE>
Page No.: 40
NIEW INDUSTRIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
(Expressed in US Dollars)
September 30, 1999 and 1998
8. INCOME TAX INFORMATION
The Company has operating losses of $77,684 available to be carried forward
to reduce taxable income of future years expiring as follows:
2004 $ 22,578
2005 55,105
The Company has undeducted expenditures for tax purposes of $359,843 available
to be carried forward indefinitely to reduce taxable income of future years.
The tax effect of temporary differences that give rise to the Company's
deferred tax assets (liabilities) are as follows:
1999 1998
---------- ----------
Tax loss carry forwards $ 34,842 $ 10,300
Undeducted expenses 164,160 125,331
Fixed assets 1,387 382
Patents 6,466 2,158
Investment tax credits (23,380) (20,181)
Valuation allowance (183,475) (117,990)
----------- ----------
$ - $ -
=========== ==========
The provision for income taxes differs from the amount computed using
the federal statutory income tax rate as follows:
Year ended September 30,
1999 1998
--------- ----------
Benefit at Federal Canadian statutory rate $ (41,800) $ (75,315)
Benefit at Provincial statutory rate (23,685) (42,675)
Increase in valuation allowance 65,485 117,990
--------- -----------
$ - $ -
========= ===========
<PAGE>
Page No.: 41
NIEW INDUSTRIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
September 30, 1999 and 1998
8. INCOME TAX INFORMATION - Continued
The company evaluates its valuation allowance requirements based on
projected future operations. When circumstances change and this causes
a change in management's judgment about the recoverability of deferred
tax assets, the impact of the change on the valuation allowance is
reflected in current income.
9. RELATED PARTY TRANSACTIONS
As of the year ended September 30, 1998, the company had advanced $27,827
to directors of the Company. During the current year, these advances
were repaid by the Directors.
10. SUBSEQUENT EVENT
By agreement dated December 1, 1999, Global Innovative Systems Inc., a
Nevada corporation, agreed to acquire 100% of the issued and outstanding
shares of the Company. The acquisition is to be effective on January 31,
2000.
Terms of the share exchange agreement have Global acquiring the company's
stock and amounts owing to the company's stockholders of $420,864 in
exchange for 12 million shares of Global. Upon closing the acquisition,
the transaction will be accounted for using the purchase method of accounting
as a reverse acquisition. Following reverse acquisition accounting,
consolidated financial statements subsequent to closing of the
acquisition will be presented as a continuation of the Company. The
operations of Global will be consolidated with those of the company from
the date of acquisition.
Global Innovative Systems Inc. will be making an application to the
United States Securities and Exchange Commission to register its common
stock.
Global has been inactive since its incorporation on September 14, 1995.
The pro-forma capital structure of Global is as follows:
Authorized:
200,000,000 common shares, par value of $0.01
Issued:
21,700,000 common shares
Pro-forma loss per share had the acquisition occurred on October 1, 1997
would be $0.01 for each of the years ended September 30, 1999 and 1998.
<PAGE>
Page No.: 42
NIEW INDUSTRIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Expressed in US Dollars)
September 30, 1999 and 1998
11. FAIR VALUE OF FINANCIAL STATEMENTS
The carrying value of the Company's financial instruments, including
cash, receivables, accounts payable and accrued liabilities at September
30, 1999 approximate their fair values due to the short term nature of
these
financial assets and liabilities.
The fair value of loans payable to shareholders and related parties is
not practicable to determine.
<PAGE>
Page No.: 43
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the Company caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
Global Innovative Systems, Inc.
By:
/s/ Helge Freudentheil
Helge Freudentheil, President (Chief Executive Officer) and Director
June 30, 2000
/s/ Ken Bergestad
Ken Bergestad, Vice President and Director
June 30, 2000
/s/ Walter Niemi
Walter Niemi, Secretary, Treasurer (Chief Financial Officer) and Director
June 30, 2000
/s/ Robert Stark
Robert Stark, Vice President and Director
June 30, 2000
<PAGE>
Page No. 44
