<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended September 30, 1999
Commission File Number 0-26493
CORE SYSTEMS, INC.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 88-0390251
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12618 BIRCHBROOK COURT
POWAY, CA 92064
- --------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(619)699-1750
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(ISSUER'S TELEPHONE NUMBER)
SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT:
Common Stock - .001 Par Value
(TITLE OF CLASS)
Check whether the registrant (1) 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.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10 KSB
or any amendment to this Form 10-KSB.
Yes [X] No [ ]
The corporation had no revenues for the year ended September 30, 1999.
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of September 30, 1999, based on the average
selling price of one share of the Common Stock of the Company, was $240,900.
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<PAGE> 2
PART I
ITEM 1
DESCRIPTION OF THE BUSINESS
Business Development
Core Systems, Inc. was incorporated in Nevada on February 19, 1997 for the
purpose of developing cost efficient methods of pipe restoration in commercial
and residential buildings. Management participated in advanced methods of pipe
restoration projects through twenty commercial construction jobs in Southern
California in 1997 and 1998. After consideration of competitive methods, the
board of directors voted in March 1999 to seek capital and began development of
the Company's business plan. During March and April 1999, the Company raised
capital through the sale of common stock to investors.
There have been no bankruptcy, receivership or similar proceedings.
In the ordinary course of business there have been no material
reclassifications, mergers, consolidations, or purchase or sale of a significant
amount of assets.
Business of the Issuer
The Company currently is in a development stage, and although it has formed its
business plan, it has conducted no operating activities and will not proceed
with its business plan until such time as it receives additional funding through
the sale of securities pursuant to a private placement. The Company intends to
implement its business plan to offer its pipe restoration services to commercial
and residential building owners in California in the first quarter or second
quarter of 2000. Management has identified older buildings and residences in
large cities such as Los Angeles and San Francisco which are areas with a large
number of multi-unit residential and commercial buildings which were constructed
prior to 1980. After the first two years, the Company intends to market its pipe
restoration services in the states of Oregon in year three and Washington in
year four. Its services specifically involve a process of cleaning aged pipes in
buildings that carry fresh and waste water, and then applying commercially
available epoxy coatings under high pressure to coat and seal the pipes in order
to double or triple the life of these pipes compared to the normal thirty to
forty year life of replacement pipe. Management has determined this type of pipe
restoration is between forty and fifty percent less costly than traditional
construction processes of removing existing pipes and installing new pipes in
older building frames and foundations. According to pipe coating suppliers such
as Armour Coat Corporation, epoxy coatings for pipe restoration have been used
for over twelve years in Europe, in commercial vessel repair, and by the U.S.
Navy. This process has only found applications in commercial and residential
construction in the United States during the last two years. Because of the
relative newness of this process, Management has only found two plumbing
contractors in the State of California who are currently offering this type of
pipe repair. Building owners have used traditional pipe replacement methods
because they are not aware of the advantages of using pipe relining, or there
are no plumbing contractors offering this service in their area.
While Management has not conducted national or state-wide pipe restoration
industry studies, and is unaware of any such studies, Management's experience in
securing pipe restoration contracts throughout Southern California indicates
there are currently approximately 10,000 buildings suitable
2
<PAGE> 3
for pipe restoration work in California. Management has observed the growth
patterns and it is Managements opinion that the market is growing at a rate of
1,000 to 2,000 buildings per year for this type of work as buildings continue to
age.
Over the next twelve months the Company intends to take the following steps in
order to make its pipe restoration services available in California: during the
first six months raise capital of $800,000 to $1,000,000 through the sale of
securities pursuant to a private placement, during the second six months open
one office in Los Angeles with a budget of $500,000. Management will use its
knowledge and experience to hire six plumbers and one manager, train all
employees, and provide all required equipment, office furnishings, and
marketing.
The Company has no new product or service planned or announced to the public.
The pipe restoration business competition consists primarily of small plumbing
contractors who advertise directly through construction trade newspapers and
trade journals. In addition, these plumbing contractors examine county and city
property tax records to identify owners of older buildings for direct mailing
campaigns. Management estimates there are approximately two hundred fifty
general plumbing contractors in the San Diego area, of which, approximately
twenty five offer traditional pipe removal and replacement services, and one, S.
Mori Plumbing which offers pipe relining. Management estimates that San
Francisco has a comparable number of general plumbing contractors and pipe
removal and replacement plumbing contractors, while Los Angeles has over one
thousand five hundred general plumbing contractors and over one hundred and
fifty pipe removal and replacement plumbing contractors. Through discussions
with pipe coating suppliers such as Armour Coat Corporation, Management is aware
that there are no pipe relining plumbing contractors in the San Francisco area,
and there is one plumbing contractor in Los Angeles, Dempsey Construction, which
does offer pipe relining. As Core Systems, Inc. is a development stage company,
the size and financial strengths of the Company's competitors are substantially
greater than those of the Company. Although Management has limited access to
in-depth information regarding the operations of the Company's competitors,
Management believes that the Company can effectively compete because of
Management's extensive knowledge of plumbing and pipe restoration services and
the cost efficiency of its technology.
The Company's President has been responsible for commercial and residential pipe
restoration projects for nine years in Southern California, seven years in
traditional renovation through removal and replacement of pipes as part of his
plumbing business, and two years in pipe relining methods. His experience in
twenty pipe relining jobs included: responsible as a subcontractor under the
control of another plumbing contractor on five commercial jobs with an average
bid price of $100,000, responsible as the plumbing contractor on twelve
commercial jobs with an average bid price of $75,000 and three residential jobs
with an average bid price of $10,000. All contracts involved conditions of
supervising from one to five employees, fixed completion dates and competitive
bid prices. This is the basis of Management's extensive knowledge and experience
in these plumbing areas. Management is not aware of any significant barriers to
the Company's entry into the pipe restoration market, however, the Company at
this time has no market share of this market.
Pipe restoration systems are available through a limited number of pipe coating
suppliers such as Armour Coat Corporation. While Management has already had
several meetings with suppliers, the Company currently has no contracts with
suppliers and will not complete contracts with potential suppliers until such
time as the Company has sufficient funding of $800,000 to $1,000,000. At this
time the Company has no formal contracts with any suppliers or
developers/manufacturers and will not initiate negotiations with any potential
suppliers until such time as the Company has sufficient funding solely from the
sale of its securities.
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The Company intends to sell its services to a broad base of multi-unit and
commercial property owners and will not depend on any one or a few major
customers. When the Company has secured sufficient funding of $800,000 to
$1,000,000 solely from the sale of securities through a private placement, it
will begin marketing after the first six months of its business plan to these
potential customers through trade publications, newspapers, focused mailings and
the Internet on its own proposed Web site. Management anticipates starting a Web
site during the second year of its business plan. The Company intends to use the
Web site to advertise its pipe relining process and educate potential building
owners about the features and advantages of pipe relining.
The Company has no current or future business plans involving patents,
trademarks, franchises, concessions, royalty agreements, or labor contracts. The
Company will only use coating products in its contracts that are certified by
the manufacturer to be in full compliance with federal, state, and local
government clean water and health mandates.
The Company's business is not subject to material regulation by federal
governmental agencies. The Company will be required to meet all state and local
governmental building codes and standards. Management personnel are familiar
with all California state and local building codes, plumbing and health
department regulations, and contractor licensing requirements.
The Company has incurred no research and development costs since inception and
has no research and development expenditure plans for the next year.
The Company's only employees are its two officers who will devote as much time
as the board of directors determines is necessary to manage the affairs of the
Company, however, both officers currently work full time in their own businesses
and have performed no other services for the Company other than forming the
business plan for the Company, for which they were compensated in restricted
shares of stock of the Company. The officers intend to work on a full time basis
when the Company is able to provide proper remuneration.
While Management believes its estimates of projected occurrences and events are
within the timetable of its business plan, there can be no guarantees or
assurances that the results anticipated will occur. Investors in the Company
should be particularly aware of the inherent risks associated with the Company's
planned pipe relining services. These risks include a lack of a proven market
for the Company's services, lack of assured acceptance by the public of the
relatively new pipe relining process offered by the Company, lack of equity
funding, and the size of the Company compared to the size of its competitors.
Although Management intends to implement its business plan through the
foreseeable future and will do its best to mitigate the risks associated with
its business plan, there can be no assurance that such efforts will be
successful. Currently, Management is concentrating on positioning itself to
advance its business plan. Management has no liquidation plans should the
Company be unable to receive funding. Should the Company be unable to implement
its business plan, Management would investigate all options available to retain
value for the shareholders. Among the options that would be considered are:
acquisition of another product or technology, or a merger or acquisition of
another business entity that has revenue and long-term growth potential. There
are no pending arrangements, understandings or agreements with outside parties
for acquisitions, mergers or any other material transactions.
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Year 2000 Disclosure
Computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruption of normal business activities.
The Company's Management has hands-on familiarity with all of the software that
will be utilized in its business plan and has confirmation from third party
suppliers that its current software is certified Year 2000 compatible for all of
its computing requirements. In addition, proposed suppliers of office equipment
for the Company's business plan have confirmed that embedded technology systems
such as micro processors in telephone systems and other non-computer devices
that will be purchased per the Company's business plan are already Year 2000
compatible. While the Company has made what it believes to be adequate inquiries
of the its software suppliers as to Year 2000 compliance, there can be no
guarantee that the software suppliers will be adequately prepared for every
possible contingent Year 2000 software problem, which could have, in
Management's opinion, immaterial adverse effects on the Company's results of
operations. In a reasonably likely worst case scenario, the Company may
experience immaterial adverse cash flow effects due to handling Company
accounting and scheduling needs on a manual basis instead of utilizing computer
systems. The Company currently anticipates purchasing new off-the-shelf Year
2000 compatible software in the first quarter of 2000, which is subsequent to
the primary period of real or imagined Year 2000 computer systems' malfunction.
The total cost of this new software is not anticipated to be a material expense
to the Company at this time.
ITEM 2
DESCRIPTION OF PROPERTY
The Company's principal executive office address is 12618 Birchbrook Court,
Poway, CA 92064. The principal executive office and telephone number are located
within the home of Mr. Vic Barger, President and Director of the Company, and
provided at no cost. As the Company currently is in a development stage and
conducts no operating activities, the total costs since inception associated
with the use of the telephone and mailing address were estimated by management
to be less than one dollar as the telephone and mailing address were almost
exclusively used by the officer for other business and personal purposes. There
is no formal lease agreement between Mr. Barger and the Company for the use of
the premises. Management considers the Company's current principal office space
arrangement adequate for current and short-term estimated growth during the
first six months of the Company's business plan.
ITEM 3
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings and is not aware
of any pending or potential legal actions.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered by
this report to a vote of the security holders, through the solicitation of
proxies or otherwise.
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PART II
ITEM 5
MARKET FOR COMMON EQUITY AND OTHER RELATED STOCKHOLDER MATTERS
The Company plans to file for trading on the OTC Electronic Bulletin Board which
is sponsored by the National Association of Securities Dealers (NASD). The OTC
Electronic Bulletin Board is a network of security dealers who buy and sell
stock. The dealers are connected by a computer network which provides
information on current "bids" and "asks" as well as volume information.
As of the date of this filing, there is no public market for the Company's
securities. As of September 30, 1999, the Company had 70 shareholders of record.
The Company has paid no cash dividends. The Company has no outstanding options.
The Company has no plans to register any of its securities under the Securities
Act for sale by security holders. There is no public offering of equity and
there is no proposed public offering of equity.
ITEM 6
MANAGEMENTS PLAN OF OPERATION
As of September 30, 1999, the Company had a cash balance of $1,633, which
Management believes is sufficient to sustain corporate operations until such
time as the Company can raise funding necessary to advance its business plan.
Sales of the Company's equity securities have allowed the Company to maintain a
positive cash flow balance.
During the next twelve months, Management's business plan is for the Company to
take the following steps to offer its pipe restoration services in California:
raise capital of $800,000 to $1,000,000 through the sale of securities pursuant
to a private placement during the first six months, open one office in Los
Angeles County during the second six months with a budget of $120,000 in
equipment, $30,000 in office equipment, $20,000 in furniture & fixtures, $5,000
in supplies, $150,000 in direct labor for plumbers, $40,000 in management
salary, $20,000 in office salaries, $24,000 in rent, $50,000 in advertising,
$10,000 in insurance, and $25,000 in other operating expenses. The Company will
begin bidding pipe restoration jobs in month seven, with anticipated job starts
in months nine through twelve. The Company will utilize its own employees for
all job contracts. Management anticipates cash flow from job completions to
begin near the end of month twelve.
The Company intends to use the capital raised from the private placement to fund
the Company's business plan as cash flow from sales is estimated to begin near
the end of the twelve month period. Management has experience with bank loans
for new corporations in Southern California and has found banks and similar
lending institutions require the borrowing company to have two years of
successful financial results before any lending is feasible. Management believes
raising capital through equity sales for a new company requiring substantive
capital needs is more expedient and less costly than utilizing non-traditional
lenders or venture capitalist funding.
Management believes it has determined the best method of pipe renovation for its
business plan and desires to implement its business plan at this time due to the
overall good construction economy in Southern California and the number of aging
buildings in Southern California that require the use of the Company's services.
The primary determining factor for the Company to implement its business plan
now instead of two years ago was the experience Management needed and gained
through working with different pipe restoration methods in order to choose the
best pipe restoration method for the Company. Other than that experience and the
continued
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<PAGE> 7
overall good construction economy in Southern California during the last two
years, there have been no other material developments or acquisitions that have
encouraged Management to implement its business plan now.
The Company will face considerable risk in each of its business plan steps, such
as difficulty of renting adequate office facilities within its budget,
difficulty of hiring competent personnel within its budget, difficulty in
completing necessary personnel training within time limits, and a shortfall of
funding due to the Company's inability to raise capital in the equity securities
market. If no funding is received during the next twelve months, the Company may
be forced to reduce its business plan activities to focus on one or a few local
construction contracts, seek jobs that pay advance deposits and make progress
payments, reduce its planned employee hiring, and delay cash expenditures for
goods and services. If the Company could not resolve a possible lack of funding
through these steps, it would be forced to rely on its existing cash in the bank
and funds loaned by the directors and officers. The Company's officers and
directors have no formal commitments or arrangements to advance or loan funds to
the Company and no restrictions, limits, or interest rates have been discussed
or considered.
In such a restricted cash flow scenario, the Company would be unable to complete
its business plan steps, and would, instead, suspend all cash intensive
activities. Without necessary cash flow, the Company would have to reduce its
activities until such time as necessary funds could be raised in the equity
securities market or seek a merger or acquisition (as a parent or target) of
another business entity that has revenue and/or long-term growth potential.
There are no current plans for additional product research and development.
There are no current plans to purchase or sell any significant amount of fixed
assets. The Company's business plan provides for an increase of seven employees
during the next twelve months.
ITEM 7
FINANCIAL STATEMENTS
The audited financial statements of the Company and related notes which are
included in this offering have been examined by Barry L. Friedman, PC, and have
been so included in reliance upon the opinion of such accountants given upon
their authority as an expert in auditing and accounting.
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CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
SEPTEMBER 30, 1998
SEPTEMBER 30, 1997
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE #
------
<S> <C>
INDEPENDENT AUDITORS REPORT F1
ASSETS F2
LIABILITIES AND STOCKHOLDERS' EQUITY F3
STATEMENT OF OPERATIONS F4
STATEMENT OF STOCKHOLDERS' EQUITY F5
STATEMENT OF CASH FLOWS F6
NOTES TO FINANCIAL STATEMENTS F7-F11
</TABLE>
<PAGE> 10
[BARRY L. FRIEDMAN, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors December 15, 1999
Core Systems, Inc.
San Diego, California
I have audited the accompanying Balance Sheets of Core Systems, Inc.,
(formerly Creative Systems, Inc.), (A Development Stage Company), as of
September 30, 1999, September 30, 1998, and September 30, 1997, and the related
statements of operations, stockholders' equity and cash flows for the two years
ended September 30, 1999 and September 30, 1998, and the period February 19,
1997 (inception) to September 30, 1997. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Core Systems, Inc.,
(formerly Creative Systems, Inc.), (A Development Stage Company), as of
September 30, 1999, September 30, 1998, and September 30, 1997, and the results
of its operations and cash flows for the two years ended September 30, 1999 and
September 30, 1998, and the period February 19, 1997 (inception) to September
30, 1997, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #5 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 plan in regard to these
matters is described in Note #5. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ BARRY L. FRIEDMAN
- ---------------------------
Barry L. Friedman
Certified Public Accountant
1582 Tulita Drive
Las Vegas, NV 89123
(702) 361-8414
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<PAGE> 11
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER SEPTEMBER
30, 1999 30, 1998 30, 1997
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS $ 1,633 $ 0 $ 0
-------- -------- --------
TOTAL CURRENT ASSETS $ 1,633 $ 0 $ 0
-------- -------- --------
OTHER ASSETS $ 0 $ 0 $ 0
-------- -------- --------
TOTAL OTHER ASSETS $ 0 $ 0 $ 0
-------- -------- --------
TOTAL ASSETS $ 1,633 $ 0 $ 0
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- F2 -
<PAGE> 12
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER SEPTEMBER
30, 1999 30, 1998 30, 1997
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES $ 0 $ 0 $ 0
-------- -------- --------
TOTAL CURRENT LIABILITIES $ 0 $ 0 $ 0
-------- -------- --------
STOCKHOLDERS' EQUITY (Note #4)
Common stock
NO PAR VALUE
Authorized 25,000 shares
Issued and outstanding at
September 30, 1997 -
None $ 0
September 30, 1998 -
None $ 0
Common stock
Par value $0.001
Authorized 50,000,000 shares
Issued and outstanding at
September 30, 1999 -
3,069,000 shares $ 3,069
Additional Paid-In Capital +6,231 0 0
Deficit accumulated during
Development stage -7,667 0 0
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY $ 1,633 $ 0 $ 0
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,633 $ 0 $ 0
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- F3 -
<PAGE> 13
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Year Feb 19 Feb 19,1997
Ended Ended 1997 to (Inception)
Sep. 30, Sep. 30, Sep. 30, to Sep. 30,
1999 1998 1997 1999
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INCOME
Revenue $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ----------
EXPENSES
General, Selling and
Administrative $ 7,667 $ 0 $ 0 $ 7,667
---------- ---------- ---------- ----------
TOTAL EXPENSES $ 7,667 $ 0 $ 0 $ 7,667
---------- ---------- ---------- ----------
NET PROFIT/LOSS (-) $ -7,667 $ 0 $ 0 $ -7,667
---------- ---------- ---------- ----------
Net Profit/Loss(-)
per weighted share
(Note #1) $ -.0025 $ NIL $ NIL $ -.0025
---------- ---------- ---------- ----------
Weighted average
Number of common
shares outstanding 3,069,000 3,069,000 3,069,000 3,069,000
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- F4 -
<PAGE> 14
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Accumu-
Common Stock paid-in lated
Shares Amount Capital Deficit
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Balance,
September 30, 1997 0 $ 0 $ 0 $ 0
Net loss year ended
September 30, 1997 0
--------- --------- --------- ---------
Balance,
September 30, 1998 0 $ 0 $ 0 $ 0
March 11, 1999
Stock issued for
Services 20,000 20 1,980
March 25, 1999
Changed Par Value
From no par value to
$0.001 0 0
April 30, 1999
Issued for Cash 73,000 73 7,227
April 30, 1998
Forward Stock Split
32 for 1 2,976,000 +2,976 -2,976
Net Loss Year Ended
September 30, 1999 -7,667
--------- --------- --------- ---------
Balance,
September 30, 1999 3,069,000 $ 3,069 $ +6,231 $ -7,667
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- F5 -
<PAGE> 15
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Year Feb. 19 Feb.19,1997
Ended Ended 1997 to (Inception)
Sep. 30, Sep. 30, Sep. 30, to Sep. 30,
1999 1998 1997 1999
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Loss $ -7,667 $ 0 $ 0 $ -7,667
Adjustment to
Reconcile net loss
To net cash provided
by operating
Activities:
Issue Common Stock
For Services +2,000 0 0 +2,000
Changes in assets and
Liabilities: 0 0 0 0
-------- -------- -------- --------
NET CASH USED IN
OPERATING ACTIVITIES $ -5,667 $ 0 $ 0 $ -5,667
CASH FLOWS FROM
INVESTING ACTIVITIES 0 0 0 0
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of Common
Stock for Cash 7,300 0 0 +7,300
-------- -------- -------- --------
Net Increase (decrease) $ +1,633 $ 0 $ 0 $ +1,633
Cash,
Beginning of period 0 0 0 0
-------- -------- -------- --------
Cash, End of Period $ 1,633 $ 0 $ 0 $ 1,633
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- F6 -
<PAGE> 16
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, SEPTEMBER 30, 1998, and SEPTEMBER 30, 1997
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized FEBRUARY 19, 1997, under the laws of the State
of Nevada as Creative Systems, Inc. The Company currently has no
operations and in accordance with SFAS #7, is considered a development
company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company records income and expenses on the accrual method.
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
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and equivalents
The Company maintains a cash balance in a non-interest-bearing
bank that currently does not exceed federally insured limits. For
the purpose of the statements of cash flows, all highly liquid
investments with the maturity of three months or less are
considered to be cash equivalents. There are no cash equivalents
as of September 30, 1999.
- F7 -
<PAGE> 17
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999, SEPTEMBER 30, 1998, and SEPTEMBER 30, 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Income taxes are provided for using the liability method of
accounting in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS #109) "Accounting for Income Taxes". A
deferred tax asset or liability is recorded for all temporary
difference between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Loss Per Share
Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS #128) "Earnings Per
Share". Basic loss per share is computed by dividing losses
available to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted loss per
share reflects per share amounts that would have resulted if
dilative common stock equivalents had been converted to common
stock. As of September 30th, 1999, the Company had no dilative
common stock equivalents such as stock options.
Year End
The Company has selected September 30th as its year-end.
Policy in Regards to Issuance of Common Stock in a Non-Cash Transaction
The Company's accounting policy for issuing shares in a non-cash
transaction is to issue the equivalent amount of stock equal to
the fair market value of the assets or services received.
- F8 -
<PAGE> 18
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999, SEPTEMBER 30, 1998, and SEPTEMBER 30, 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Year 2000 Disclosure
Computer programs that have time sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing
disruption of normal business activities.
The company's potential software suppliers have verified that
they will provide only certified "Year 2000" compatible software
for all of the company's computing requirements. Because the
company's products and services are sold to the general public
with no major customers, the company believes that the "Year
2000" issue will not pose significant operational problems and
will not materially affect future financial results.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended September
30, 1999, due to the net loss and no state income tax in Nevada, the
state of the Company's domicile and operations. The Company's total
deferred tax asset as of September 30, 1998 is as follows:
<TABLE>
<S> <C>
Net operation loss carry forward $7,667
Valuation allowance $7,667
Net deferred tax asset $ 0
</TABLE>
- F9 -
<PAGE> 19
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999, SEPTEMBER 30, 1998, and SEPTEMBER 30, 1997
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
The authorized common stock of the corporation consists of 50,000,000
shares with a par value $.001 per share.
Preferred Stock
Core Systems, Inc. has no preferred stock.
On March 11, 1999, the Company issued 20,000 shares of its $0.001 par
value common stock in consideration of $2000.00 to its two directors,
10,000 common shares to each.
On March 25, 1999, the State of Nevada approved the Company's restated
Articles of Incorporation, which changed the par value from no par value
to $0.001, and increased its Authorized Common Stock from 25,000 shares
to 50,000,000 shares.
On April 30, 1999, the Company issued 73,000 shares of its $0.001 par
value common stock for cash of $7,300.00.
On April 30, 1999, the Company approved a forward stock split on the
basis of 32:1, thus increasing the common stock from 93,000 Common
Shares to 3,069,000 Common shares.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. However, the Company does not have significant cash
or other material assets, nor does it have an established source of
revenues sufficient to cover its operating costs and to allow it to
continue as a going concern. The stockholders/officers and or directors
have committed to advancing the operating costs of the Company interest
free.
- F10 -
<PAGE> 20
CORE SYSTEMS, INC.
(Formerly Creative Systems, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999, SEPTEMBER 30, 1998, and SEPTEMBER 30, 1997
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An
officer of the corporation provides the Company use of a telephone and
mailing address without charge as the telephone and mailing address are
used almost exclusively by a different corporation owned by the officer.
The Company estimates such costs are less than one dollar since
inception, and are immaterial to the financial statements and
accordingly, have not been reflected therein. The officers and directors
of the Company are involved in other business activities and may in the
future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict
in selecting between the Company and their other business interests. The
Company has not formulated a policy for the resolution of such
conflicts.
NOTE 7 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
share of common stock.
- F11 -
<PAGE> 21
ITEM 8
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
CONTROL AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Officers of the Company, all of those whose terms will expire
at the 2000 shareholder meeting, or at such a time as their successors shall be
elected and qualified, are as follows:
<TABLE>
<CAPTION>
Name & Address Age Position Date First Elected
- -------------- --- -------- ------------------
<S> <C> <C> <C>
Vic Barger 41 President, 3/11/99
12618 Birchbrook Court Secretary,
Poway, CA 92064 Director
A. Tasso Tsalamandris 34 Treasurer, 4/3/98
1906 King Edward Avenue Director
Vancouver BC V6J 2W6
</TABLE>
Each of the foregoing persons may be deemed a "promoter" of the Company, as that
term is defined in the rules and regulations promulgated under the securities
and Exchange Act of 1933.
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers are appointed
to serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
No Executive Officer or Director of the Corporation has been the subject of any
Order, Judgement, or Decree of any Court of competent jurisdiction, of any
regulatory agency enjoining him from acting as an investment advisor,
underwriter, broker or dealer in the securities industry, or as an affiliated
person, director or employee of an investment company, bank, savings and loan
association, or insurance company or from engaging in or continuing any conduct
or practice in connection with any such activity or in connection with the
purchase or sale of any securities nor has any such person been the subject of
any Order of a State authority barring or suspending for more than sixty (60)
days, the right of such a person to be engaged in such activities or to be
associated with such activities.
No Executive Officer or Director of the Corporation has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
No Executive Officer or Director of the Corporation is the subject of any
pending legal proceedings.
8
<PAGE> 22
Resumes
Vic Barger, President, Secretary & Director
1990 - Current President, CVB Plumbing, Heating & Air, Inc. Company
provides services and repair, replacement and new
installation. Developer of new services and technology
for plumbing, heating and air conditioning trades.
Serves all of San Diego County.
A. Tasso Tsalamandris, Treasurer & Director
1996 - Current Independent Consultant providing business process
design and integrated systems implementation to
mechanical & plumbing business clients.
1989 - 1996 Senior Regulatory Analyst for BC Gas Utility. Conducted
specialized financial analysis for various gas industry
projects.
ITEM 10
EXECUTIVE COMPENSATION
The company's current officers receive no compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other Restricted
Name & annual stock LTIP All other
principle Salary Bonus compen- awards Options Payouts compen-
position Year ($) ($) sation ($) ($) SARs ($) sation ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
V Barger 1997 -0- -0- -0- -0- -0- -0- -0-
President 1998 -0- -0- -0- -0- -0- -0- -0-
1999 -0- -0- -0- 1,000 -0- -0- -0-
Tsalamandris 1997 -0- -0- -0- -0- -0- -0- 0-
Director 1998 -0- -0- -0- -0- -0- -0- -0-
1999 -0- -0- -0- 1,000 -0- -0- -0-
</TABLE>
Restricted stock awards to Mr. Barger consisted of 10,000 shares of common stock
with a value of $1,000 in consideration for his services developing the
Company's business plan as approved by a Board of Directors meeting of March 11,
1999. Restricted stock awards to Mr. Tsalamandris consisted of 10,000 shares of
common stock with a value of $1,000 in consideration for his services developing
the Company's business plan as approved by a Board of Directors meeting of March
11, 1999.
When the Board of Directors met to determine the value of the officer's
services, there was a
9
<PAGE> 23
meeting of the minds based upon individual judgement rather than quantifiable
methods that 10,000 shares of restricted common stock for each officer were fair
consideration for the development of the Company's business plan for a
development stage company with no guaranteed customer market. The stock was
valued at $.10 per share, which was the price that non-affiliated private
investors paid for shares sold by the Company in April 1999.
There are no current employment agreements between the Company and its executive
officers.
The Directors, who are also the Principal Officers, developed a business plan
for the Company for which they each were paid 10,000 restricted shares of the
Company's stock valued at $1,000. The Company has conducted no operating
activities, and, as a consequence, the Directors and Principal Officers will
receive no further remuneration until such time as the Company receives
sufficient funding necessary to provide proper salaries to all Officers and
compensation for Directors' participation. The Officers and the Board of
Directors have the responsibility to determine the timing of remuneration for
key personnel based upon such factors as positive cash flow to include stock
sales, product sales, estimated cash expenditures, accounts receivable, accounts
payable, notes payable, and a cash balance of not less than $15,000 at each
month end. When positive cash flows result in a cash balance $15,000 at each
month end and appears sustainable the board of directors will readdress
compensation for key personnel and enact a plan at that time which will that
benefits the Company as a whole. At this time, management cannot accurately
estimate when sufficient cash flows will generate the required cash balances
necessary to implement this compensation, or the exact amount of compensation.
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees of the Corporation in the event of retirement
at normal retirement date pursuant to any presently existing plan provided or
contributed to by the Corporation or any of its subsidiaries, if any.
ITEM 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information on the ownership of the Company's
voting securities by Officers, Directors and major shareholders as well as those
who own beneficially more than five percent of the Company's common stock
through the most current date - Sept. 30,1999:
<TABLE>
<CAPTION>
Title Of Name & Amount & Percent
Class Address Nature of owner Owned
- ----- ------- --------------- -----
<S> <C> <C> <C>
Common Vic Barger 330,000 (a) 10.8%
12618 Birchbrook Court
Poway, CA 92064
Common A. Tasso Tsalamandris 330,000 (b) 10.8%
1906 West King Edward Avenue
Vancouver, BC V6J 2W6
Total Shares Owned by Officer &
Directors as a Group 660,000 21.6%
</TABLE>
10
<PAGE> 24
(a) Mr. Barger received 10,000 shares of the Company's common stock on March
11, 1999 for his services developing the Company's business plan.
320,000 shares of the Company's common stock were issued to him per a 32
for 1 stock split on April 30, 1999.
(b) Mr. Tsalamandris received 10,000 shares of the Company's common stock on
March 11, 1999 for his services developing the Company's business plan.
320,000 shares of the Company's common stock were issued to him per a 32
for 1 stock split on April 30, 1999.
ITEM 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's principal executive office address is 12618 Birchbrook Court,
Poway, CA 92064. The principal executive office and telephone number are located
within the home of Mr. Vic Barger, President and Director of the Company, and
provided at no cost.
ITEM 13
EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
Exhibit 11 Statement re: computation of per share earnings See Financial Stmt.
Exhibit 23 Consent of Barry L. Friedman, P.C. Included
Exhibit 27 Financial Data Schedule Included
</TABLE>
Reports filed on Form 8-K None
11
<PAGE> 25
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities and Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
Core Systems, Inc.
Date 12/20/99 By /s/ Vic Barger
------------------------ ---------------------------------
Vic Barger, President & Director
Date 12/20/99 By /s/ A. Tasso Tsalamandris
------------------------ ---------------------------------
A. Tasso Tsalamandris, Director
12
<PAGE> 1
EXHIBIT 23
[BARRY L. FRIEDMAN, P.C. LETTERHEAD]
To Whom It May Concern: December 15, 1999
The firm of Barry L. Friedman, P.C., Certified Public Accountant
consents to the inclusion of their report of December 15, 1999, on the Financial
Statements of CORE SYSTEMS, INC., as of September 30, 1999, in any filings that
are necessary now or in the near future with the U.S. Securities and Exchange
Commission.
Very truly yours,
/s/ BARRY L. FRIEDMAN
- ---------------------------
Barry L. Friedman
Certified Public Accountant
1582 Tulita Drive
Las Vegas, NV 89123
(702) 361-8414
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH CORE SYSTEMS, INC. 10-KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 1,633
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,633
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,633
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 3,069
<OTHER-SE> 6,231
<TOTAL-LIABILITY-AND-EQUITY> 1,633
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,667)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,667)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,667)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
