UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended JULY 31, 2002.
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________ to ________
COMMISSION FILE NUMBER: 0-31229
GSI TECHNOLOGIES USA INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 65-0902449
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2001 McGill College Avenue, Suite 1310, Montreal, Quebec H3A 1G1 Canada
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(Address of principal executive offices)
(514) 940-5262
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(Issuer's Telephone Number, including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. [X]
Yes[ ] No[ ]
As of March 15th, 2002, there were 25,802,134 shares of the issuer's $.001
par value common stock issued and outstanding
Transitional Business Disclosure Format (Check one): Yes [ ] No[X]
INDEX TO FORM 10-QSB
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For the Quarter Ended July 31, 2002
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet as of July 31st, 2002 3
Statement of Operations for the Three
Months ended July 31, 2002 and 2001 4
Statements of Cash Flows for Three Months
Ended July 31st, 2002 and 2001 5
Notes to Financial Statements for the 6 - 7
three Months Ended July 31, 2002.
Item 2. Management's Discussion and Analysis 8-14
PART II. OTHER INFORMATION 17
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
2
PART I - FINANCIAL INFORMATION
Item 1. Financial statements
-----------------------------
GSI TECHNOLOGIES USA, INC.
BALANCE SHEET
AT JULY 31, 2002
(UNAUDITED)
ASSETS
------
Current Assets
Receivables, net (principally related party) 1 624 163
------------
Total current assets 1 624 163
Property and equipment, net 33 008
Intangible assets, net 212 350
Other assets 19 908
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TOTAL ASSETS 1 889 428
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable 863 390
Notes Payable 80 452
Other current liabilities 116 821
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Total current liabilities 1 060 664
Stockholder's Equity
Common Stock, class A, $1.00 par value; authorized -
5,000,000 shares; issued and outstanding none
Common Stock, class B, $.001 par value; authorized 25 802
55,000,000 shares; issued and outstanding - 25,802,134
Paid in Capital 5 243 740
Deficit accumulated during the development stage (4 441 165)
Accumulated other comprehensive income 388
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Total Shareholder's Equity 828 765
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 1 889 428
============
Read the accompanying summary of significant accounting notes to
Financial statements, which are an integral part of this financial statement
3
GSI TECHNOLOGIES USA, INC.
STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 2002 AND 2001
(UNAUDITED)
Three months Nine months
ended July 31, ended July 31,
-------------------------- --------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenues $ - $ 48 750 $ 23 750 $ 181 043
Cost of Sales - 27 977 10 634 92 070
------------ ------------ ------------ ------------
Gross Profit - 20 773 13 116 88 973
Operating Expenses:
Marketing - 12 024 24 412 81 862
Management and administrative fees - 127 809 1 534 600 031
Salaries and related costs - 6 159 38 996 114 952
Rent - 129 866 51 426 154 503
Financing expense - - - 10 000
Professional fees - 117 061 9 029 138 812
Consulting - 40 246 - 40 246
Depreciation 973 3 847 2 920 7 747
Amortization 23 845 24 070 71 537 71 758
Travel - 4 256 - 42 017
Other selling, general and administrative 1 556 70 733 47 396 163 718
------------ ------------ ------------ ------------
Total operating expenses 26 374 536 071 247 249 1 425 646
Loss before other income (expense) (26 374) (515 298) (234 133) (1 336 673)
Other income (expense):
Interest income (principally related party) 90 114 284 576
Interest expense (principally related party) (8 863) 238 470 (17 622) 45 121
Foreign exchange gain/(loss) - - (15 960) -
Equity in net earnings (loss) of affiliates - 197 006 - 416 414
------------ ------------ ------------ ------------
Total other income (expense) (8 863) 525 590 (33 582) 746 111
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Net Loss (35 237) 10 292 (267 715) (590 562)
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Basic weighted average common shares outstanding 25 802 134 21 076 636 22 869 528 20 689 767
============ ============ ============ ============
Basic Loss per common share $ (0,00) $ 0,00 $ (0,01) $ (0,03)
============ ============ ============ ============
Read the accompanying summary of significant accounting notes to
Financial statements, which are an integral part of this financial statement
4
GSI TECHNOLOGIES USA, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 2002 AND 2001
(UNAUDITED)
For the nine months
ended July 31,
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(267 715) $ (590 562)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 74 457 79 506
Issuance of stock for contract settlement 38 996 5 000
Accrued Interest Expense 12 179 (45 121)
Accrued Interest Income - (284 576)
Equity in net earnings (loss) of affiliates - (416 414)
Changes in Operating assets and liabilities:
Receivables and other assets (4 871) (69 084)
Accounts Payable and Accrued Liabilities 140 937 163 452
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Net cash provided by/(used in) operating activities (6 019) (1 157 799)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by/(used in) investing activities
Loan Receivable, principally related parties - 928 421
Purchase of property and equipment - (28 376)
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Net cash provided by/(used in) investing activities - 900 045
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Notes payable, principally related parties - 50 000
Sales of common stock - 225 000
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Net cash provided by/(used in) financing activities - 275 000
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Effect of exchange rate changes on cash and cash equivalents - -
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Net increase (decrease) in cash and cash equivalents (6 019) 17 246
Cash and cash equivalents, beginning of period 6 019 4 404
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Cash and cash equivalents, end of period $ 0 $ 21 650
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SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
None
5
GSI TECHNOLOGIES USA, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 2002
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of GSI
Technologies USA, Inc. have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. The financial
statements reflect all adjustments consisting of normal recurring adjustments,
which in the opinion of management, are necessary for a fair presentation of the
results for the periods shown. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
These financial statements should be read in conjunction with the audited
financial statements and footnotes thereto included in GSI Technologies USA,
Inc.'s 10K-SB as filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and that effect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The accompanying financial statements reflect GSI Technologies USA, Inc. is
no longer considered to be in the development stage. From inception (July 06,
1998) through October 31, 2001, The Company was considered to be in the
development stage.
NOTE 2 - REVENUE RECOGNITION
Revenue from sales of display units are recorded at the time the units are
delivered. Revenues from sub-licensing the master licensing agreement are
recognized over the term of the sub-licensing agreement.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provide guidance for disclosures
related to revenue recognition policies. Management believes that GSI
Technologies USA, Inc.'s revenue recognition practices are in conformity with
the guidelines of SAB 101.
6
NOTE 3 - NET EARNINGS (LOSS) PER SHARE
Earnings (Loss) per common share are calculated under the provisions of
SFAS No. 128, "Earnings per Share," which establishes standards for computing
and presenting earnings per share. SFAS No. 128 requires the Company to report
both basic earnings (loss) per share, which is based on the weighted-average
number of common shares outstanding during the period, and diluted earnings
(loss) per share, which is based on the weighted-average number of common shares
outstanding plus all potential dilutive common shares outstanding. Options and
warrants are not considered in calculating diluted earnings (loss) per share
since considering such items would have an anti-dilutive effect.
NOTE 4 - GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company reported a net loss of
$267,715 for the nine months ended July 31, 2002 (unaudited). Continuation of
the Company as a going concern is dependent upon obtaining sufficient working
capital for its planned activity. Management of the Company has developed a
strategy, which it believes will accomplish this objective through financing,
which will enable the Company to operate for the coming year.
NOTE 5 - STOCKHOLDER'S EQUITY
During the nine-month period ending January 31, 2002, the Company issued
900,000 shares of common stock class B to settle liabilities in the amount of
$87,625. The Company also issued 400,000 shares to the President of the Company
to settle unpaid salaries for the period.
7
Item 2. Management's discussion and analysis
---------------------------------------------
Forward looking statements.
This report contains forward-looking statements that are based on the
Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe,"
"expect," "anticipate," "estimate," and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions, including without limitation, the overall
strength of the national securities markets, the Company's present financial
condition and the risks and uncertainties concerning the availability of
additional capital as and when required, technological changes, increased
competition, and general economic conditions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, or
projected. The Company cautions potential investors not to place undue reliance
on any such forward-looking statements, all of which speak only as of the date
made.
Overview
GSI Technologies USA (GSI USA) specializes in offering broadcasting
solutions principally for out home advertising, such as electronic billboards,
interactive advertising kiosks and any type of animated electronic screens with
full video capabilities. GSI USA's software enable user to transmit pin point
animated information contact as well as receive full motion video, graphics and
audio files. GSI's software and concept allows advertisers to reach more
consumer on a daily bases and permits to measure impact of their ads by
interacting with consumer.
CSI USA is holder of a worldwide license on technologies. GSI has accomplished
all market tests indoor and outdoor and has proved to offer worlds best
technologies for advertising applications.
Results from operations
9 months ending July 31, 2002 and 2001
During GSI's nine months from November 1, 2001 to July 31 2002, GSI USA incurred
a loss of $267,715 or $.01 per share versus a loss of $590,562 or .03 per share
in the same period in 2001.
Revenues
$23,750 in revenue was recognized during the nine-month period, versus
$181,043 for the same period in the prior year. This is related to sub-licensing
agreements realized over the respective terms.
Cost of revenues and direct operating costs
According to the master license agreement with GSI Canada, GSI USA owns 60%
of the price of any sub-license it sells to a new licensee. This amount is
payable to GSI Canada by the end of the calendar quarter in which the
sub-license is granted its sub-license. GSI USA has incurred $10,634 in direct
operating cost for this nine-month period, versus 92,070 for the same period in
the prior year.
8
Operating expenses
During the nine months ended July 31, 2002, GSI USA has incurred $247,249
in operating expenses versus $1,425,646 for the same period in 2001.
Other income
During the nine months ending July 31, 2002, zero in interest was earned
mainly on the outstanding loan to GSI Canada due to the fact that is has
protection from the bankruptcy courts, while $17,622 in interest was incurred.
This amount is principally for loans outstanding.
Liquidity and capital resources
At July 31, 2002 GSI USA had zero in cash. Cash used in operating
activities during the nine months ending July 31, 2002 was 6,019, which was
mainly attributable to the net cash loss from operations plus changes in net
operating assets and liabilities.
Cash used by investing activities during the period reflects additional
short-term loans to GSI Canada in the amount of $0.
Cash provided from financing activities during the period was zero.
The result of all activities during the nine-month period ending July 31,
2002 was a net decrease of $6,019 in our cash position.
MANAGEMENT DISCUSSION AND ANALYSIS
GSI USA
We have completed our restructuring program, concentrating on our core business
to serve, inform and communicate with the consumer in its daily environment,
offering information media content out of home as well as providing services to
citizens customized to their needs on a day-to-day basis.
After a 2 year beta testing, in real, in real market application, our affiliate
GSI CANADA through its R&D Center and team has learned a great deal of
experience, by managing a network of 32 City Columns through the Ivanoh
Shopping Malls' network in Canada.
After unfortunate September 11th events, we concentrated on trying to improve
our concept to allow our 2-way software multimedia pack to become a tool and
information center in the event of any public crisis. The defense department
has recently published a 2000 pages report on lack of communications on
September 11th events.
Our vision is to deploy a wide network of kiosks in public areas such as
airports, malls, offices building, postal offices, subways, government offices
etc.
Our R&D team enhances our software modular applications, allowing to install
cameras integrated in our units offering monitoring sources to serve authorities
and prompt reaction informational capabilities in the event of any security
problems.
9
On June the 5th and the 6th, 2002, we were exhibitors in the homeland defense
and security show in Wahsington D.C. featuring our new Servi Column product. We
have a great deal of interest for our product by many government department and
public authorities.
In our last 10Q, we disclosed our negotiations with Boston based corporation Bio
Defense integrating the mail defender product in our Servicolumn to be installed
in post offices' network.
We are currently pursuing presentations to postal communities worldwide.
Based on a Montreal agreement between GSI TECHNOLOGIES USA Inc and Bio Defense,
we have no longer exclusive licensing agreement to distribute the mail defender
units in our network. Our affiliate GSI Canada has not concluded manufacturing
assembly contract with Bio Defense. Both parties have mutually agreed to
suspend negotiations till further notice.
The Board of Directors of GSI TECHNOLOGIES USA Inc is considering negotiating
the potential acquisition of our affiliate after restructuring program is
completed.
The benefits of Government programs are tremendous and represent a leading edge
value for the benefit of GSI TECHNOLOGIES USA shareholders.
All operations research, broadcast and engineering are now operated by GSI
CANADA.
All sales and licensing are performed by GSI TECHNOLOGIES USA Inc.
Our Cash requirements for the next quarter represent approximately $150,000.00
in total. We are currently negotiating with financial institutions as well as
investment bankers and sophisticated investors to seek for more capitalization.
Our administrative officers were still trying to conclude final agreement with
Stellar Holdings, and are evaluating the potential of our mutual venture.
Investment in affiliates
As of March 2nd 2002, GSI TECHNOLOGIES USA had no longer any investments in
affiliate.
Product sales, distribution and provision of services
Our affiliate GSI Canada R&D's team have completed tremendous break through in
GSI's software of version 2.0 with modular applications of the managing and
scheduling module allowing to monitor on a day to day bases the sales and hits
per day. The engineers continue to enhance the capabilities of the software
integrating interactive capabilities for the consumer to respond to the content
messages and animated advertising.
It allows advertisers to measure impact of their marketing campaign through
network pinpoint consumer environment.
Our affiliate continues to benefit from tax credit program, and is completing an
anticipated demand of incomes from Canadian government for 2002's benefits.
The R&D's team has developed a large experience in managing networks of
interactive advertising modules and finished the development of specific units
such as:
10
- City column, indoor display unit 3 faces advertising screen, with
interactive touch screen unit and Internet access. These 32 units are
in operation and have given results over the past 2 years in the
shopping center environment.
- Transa Column, has 2 faces display unit with Internet kiosk and
integrating ATM bank terminal. The target market is directly oriented
to offer multi transactional capabilities for banking services as well
as E-com transactions supported by advertising broadcast content. The
consumer can use the units to pay bills, make a transaction, withdraw
cash and take E-Mails and Internet access. We have completed a market
study with banking institutions and identify the need for such product
in North America as well as Europe. We are currently negotiating with
Canada Post and some banks the implementation of a large network in
North America. We believe that we will conclude before the end of the
next quarter.
- Sky Column, full outdoors video LED screens for high traffic areas
bill board size. We have been managing this type of screens for over 5
years and a half.
- Digicolumn, display kiosk using plasma screen, technology integrated
in totem supports, vertical and horizontal applications.
- I Column, the latest technology, 15 inches LED screen integrating
computer to the back of the screen on a very robust industrial
application. We have made recent sales of 150 units in indoor and
outdoor market. The hype around this product allows us to fit units in
various position to generate instant impulses to buy in stores,
kiosks, restaurants, airports in a cash counter area.
Our objective is to ramp up revenues from sales of units as well as revenues
from broadcasting technical support maintenance, production of content and
consulting contracts.
In any of these sales the media operator must buy from GSI software license as
well as sub license for using the concept in each respective markets.
In April 2001, GSI USA sold a license to the More Group in United Kingdom
division of Clear Channel International. More Group has deployed its first
installations of Sky columns in city of Swindom and Bristol.
The GSI's server system has been installed successfully in England. Our
software has been running the operations with great satisfaction from the More
Group.
In September 2001, the Dauphin Group in France division of Clear Channel
International acquired a technologies license for its territory.
On March 7th, GSI USA received a purchase order from Dauphin to install server
system in Paris and service contract for monitoring the broadcast network. Our
engineers have instaled the systems on the week of March 18th 2002.
Clear Channel is counting on the 2 pilots projects in UK and France to move the
concept worldwide. If these projects are successful, the advertising group will
deploy a worldwide network.
On August 15, 2002, Adshel Clear Channel, has given to GSI TECHNOLOGIES USA INC.
an R&D contract to develop specific modular applications to our software.
We are currently negotiating with Adhsel a 3-year contract for R&D to serve and
develop the Adshel business plan and deployment of their electronic advertising
contract.
GSI is very proud to serve the Clear Channel Group and very happy to be the
official supplier retained by this giant media group.
11
Our management team has reoriented their sales targets and strategies. We have
put together an aggressive sales plan for United States by putting together
partnerships ventures, including specific high profile corporation acting
respectively in their field of activities such as:
- Media Operator sales group
- Banking institution
- Information content, media broadcaster
- Property owner, governments, public institutions for locations
- GSI USA product & Systems
By joining these forces together based on our past experience, service units
driven by advertising revenues and services create multi revenue potential,
using the power of each respective partner.
Now, that we have completed our pilot projects and business sales strategies, we
have focused and trained our sales staff to penetrate the United States market.
In July 2002, GSI TECHNOLOGIES USA INC. has completed a licensing agreement with
Californian based corporation SN ENTERTAINMENT. The agreement is a 10-year
exclusive licensing agreement to allow SN ENTERTAINMENT to install electronic
advertising screen network in the adult business environment. SN ENTERTAINMENT
has concluded for the first phase a leasing agreement to install 250 plasma
screens in men's adult clubs. The potential of the adult market is very
impressive.
PART II - OTHER INFORMATION
Item 1. Legal proceedings
-------------------------
Legal proceeding
On December 15, 2000, we signed an agreement with the Quebec Securities
Commission to conform to filing requirements for any sales of shares to
residents of the Province. Our former President also agreed that the sale of any
shares directly by himself or shares owned by companies in which he has an
interest would be in conformity with the filing requirements in the jurisdiction
of Quebec.
On September 2001, we concluded a partial settlement with the Quebec
Securities for the release of promissory notes.
We remain party to one proceeding initiated by another party, Mr. Jacques
Biron, against GSI Canada, GSI, our President and others in the Superior Court
of the Province of Quebec, District of Montreal. An amount of $98,766 in
Canadian dollars has been claimed for our alleged failure to pay a commission
and consequent damages relating to negotiations with GSI Canada for an
acquisition. We have retained legal counsel in Montreal, Mr. Marc Cote of
Labelle, Boudrault, Cote & Associates, who advises that, in his opinion, Mr.
Biron's case against the company is without merit; that he has no right in law
to sue GSI Technologies USA Inc.
On September 2001, we received a law sue from Mr. Alex Zervakos a former
employee of GSI USA. Our lawyer in Quebec is negotiating with the adverse party
in order to resolve this matter.
12
During the last quarter, GSI USA received two law suits from former
employees. Although, an understanding was reached with the two employees, they
change their opinion later on, and filed in small claims courts. After review
from our lawyers a motion to set aside default judgments continue cases.
Consolidate cases and transfer to circuit court was deposited and accepted. We
are waiting date for trial on settlement.
Item 2. Changes to authorized shareholders' capital
----------------------------------------------------
None
Item 3. Defaults upon senior securities
----------------------------------------
None.
Item 4. Submission of matters to vote of security holders
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None.
Item 5. Other information
--------------------------
Late filing 10K
On February 4th, 2002, we became delinquent because we was late filing our
annual 10K report. Our ticker symbol changed then from GSITB to GSIBE.
Since we have changed management of the corporation and reorganized the
financial structure of the corporation, we were late filing our annual report
10K.
On March 5th, 2002, we were temporarily delisted from the OTCBB.
On March 8th, 2002, we have filed our 10K report.
We have appointed a market maker to fill in a c-211 form and will are still
working directly with the NASD department to resolve that matter and anticipate
that we will be relisted soon.
We now file our quarterly report 10Q on time and will do so in the future.
Item 6. Exhibits and reports on Form 8-K
-----------------------------------------
The following exhibits are contained in this 10-QSB:
None.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: September 18, 2002 GSI TECHNOLOGIES USA INC.
By: /s/ Rene Arbic
-----------------------------------
Rene Arbic
Chief Executive Officer
14
September 18, 2002
To: Mark Cohen, C.P.A.
In connection with your review of the balance sheet and related statements of
income, retained earnings and cash flows of GSI Technologies USA, Inc. as of
July 31, 2002 and for the purpose of expressing limited assurance that there are
not material modifications that should be made to the statements in order for
them to be in conformity with generally accepted accounting principles (or other
comprehensive basis of accounting), we confirm, to the best of our knowledge
and belief, the representations made to you during your review.
1. The financial statements referred to above present the financial
position, results of operations, and cash flows of GSI Technologies USA,
Inc. in conformity with generally accepted accounting principles. In that
connection, we specifically confirm that -
a. The Company's accounting principles and the practices and methods
followed in applying them, are as directed in the financial
statements.
b. There have been no changes during the period from November 01,
2000 to July 31, 2002 in the Company's accounting principles and
practices.
c. We have no plans or intention that may materially affect the
carrying amounts or classifications of assets and liabilities.
d. There are no material transactions that may materially affect the
carrying amounts or classifications of assets and liabilities.
e. There are no material losses (such as from obsolete inventory or
purchase or sales commitments) that have not been properly
accrued or disclosed in the financial statements.
f. There are no violations or possible violations of laws or
regulations whose effects should be considered for disclosure in
the financial statements or as a basis for recording a loss
contingency, and there are no other material liabilities or gain
or loss contingencies that are required to be accrued or
disclosed. Also, we are not aware of any pending or threatened
litigation, claims or assessments or unasserted claims or
assessments that are required to be accrued or disclosed in the
financial statements in accordance with Financial Accounting
Standards Board Statement No. 5, Accounting for Contingencies,
and we have to consulted a lawyer concerning litigation claims,
or assessments.
g. The Company has satisfactory title to all owned assets, and there
are no liens or encumbrances on such assets nor has any asset
been pledged, except as disclosed in the financial statements.
h. There are no related party transactions including sales,
purchases, loans, transfers, leasing arrangements, guarantees,
and amounts receivable or the payable to related parties that
have not been properly disclosed in the financial statements.
i. We have compiled with all aspects of contractual agreements that
would have a material effect on the financial statements in the
event of noncompliance.
j. To the best of our knowledge and belief, no events have occurred
subsequent to the balance-sheet date and through the date of this
letter that would require adjustment to or disclosure in the
financial statements.
k. We have no knowledge of concentrations existing at the date of
the financial statements that make the entity vulnerable to the
risk of near-term severe impact that have not been properly
disclosed in the financial statements. We understand that
concentrations refer to volumes of business, revenues, available
sources of supply, or markets or geographic areas for which
events could occur that would significantly disrupt normal
finances within the next year.
l. Management has identified all significant estimates used in the
preparation of the financial statements.
2. We have advised you of all actions taken at meetings of stockholders,
board of directors, and committees of the board of directors, (or other
similar bodies, as applicable) that may affect the financial statements.
3. We have responded fully to all inquiries made to us by you doing your
review.
/s/ Rene Arbic
----------------------------------------------
Rene Arbic - President