-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PaIK3BQxTnNa1pwmuIaUwHT17IUqQPUWShTZ7z05cfVYMrlu4VziUk2lE1UxzYsO Ze4MCMRdGKMw9x7vscXWYA== 0001014897-06-000103.txt : 20070313 0001014897-06-000103.hdr.sgml : 20070313 20061205154320 ACCESSION NUMBER: 0001014897-06-000103 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20061205 DATE AS OF CHANGE: 20070123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Creative Beauty Supply of New Jersey CORP CENTRAL INDEX KEY: 0001290658 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 000000000 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-50773 FILM NUMBER: 061257335 BUSINESS ADDRESS: STREET 1: 380 TOTOWA ROAD CITY: TOTOWA STATE: NJ ZIP: 07512 BUSINESS PHONE: 973-904-0004 MAIL ADDRESS: STREET 1: 380 TOTOWA ROAD CITY: TOTOWA STATE: NJ ZIP: 07512 10KSB/A 1 creativenj123105am1.txt AMENDMENT 1 TO FORM 10KSB AMENDMENT 1 to FORM 10-KSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [x] 15,ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2005 OR [ ]15,TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-50773 Creative Beauty Supply of New Jersey Corporation (Exact name of Small Business Issuer in its charter) New Jersey 56-2415252 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification number) 380 Totowa Road Totowa, NJ 07512 (Address of principal executive offices) (Zip Code) Registrant's Telephone number, including area code: (973) 904-0004 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value Check whether the Corporation (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or such shorter period that the Corporation was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes __x__ No _____ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of Corporation'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. [ x ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ____ No __x___ 2 The Corporation's revenues for the year ended December 31, 2005 were $136,104. As of March 15, 2006, the market value of the Corporation's voting $.00l par value common stock held by non-affiliates of the Corporation was $0.00. The number of shares outstanding of Corporation's only class of common stock, as of December 31, 2005 was 10,532,150 shares of its $.001 par value common stock. No documents are incorporated into the text by reference. Transitional Small Business Disclosure Format (check one) Yes No x -------- -------- 3 PART I ITEM 1. BUSINESS Creative Beauty Supply of New Jersey Corporation was incorporated in the State of New Jersey on October 1, 2003. It was formed pursuant to a resolution of the board of directors of Creative Beauty Supply Inc. (CBS), as a wholly owned subsidiary of that company, a publicly traded New Jersey corporation. On January 1, 2004, the assets and liabilities of CBS were contributed at book value to Creative NJ, and CBS approved a spin-off of this subsidiary to its shareholders. The spin-off was approved in contemplation of a merger which occurred on March 19, 2004 between CBS and Global Digital Solutions, Inc., a Delaware corporation, upon approval by vote of the stockholders of CBS and Global Digital whereby the former shareholders of CBS became the owners of 100 percent of the common stock of Creative NJ. The common shares were transferred upon completion of the Form 10SB. CBS is the predecessor of Creative NJ. Pursuant to the requirements of Staff Legal Bulletin #4, the spin-off was completed in September 2005 with the satisfactory resolution of all SEC comments to the Form 10SB. Pursuant to the terms of the spin-off arrangement, Global Digital provided its shareholders as of January 1, 2004, the record date, one share of Creative NJ for every share of Global Digital owned as of that date. There is not expected to be any material changes in Creative NJ's operations as a result of the spin-off. Creative NJ filed its Form 10SB voluntarily. Creative NJ will voluntarily file periodic reports in the event its obligation to file such reports is suspended under the Exchange Act. Corporate Operations. Creative NJ operates as a cosmetic and beauty supply distributor at both the retail and wholesale levels. Creative NJ's various beauty and cosmetic products are purchased by it from a number of unaffiliated suppliers and manufacturers and thereafter sold on its premises to retail walk-in customers or directly to beauty salons. Products. Creative NJ's beauty and cosmetic products primarily consist of the following items: Shampoos, conditioners, mousse, setting/styling and spray gels, lotions, lipstick and nail products and hair sprays as well as such beauty and cosmetic related appliances as blow dryers, curling irons, mirrors, air diffusers and hair trimmers. Many of the aforesaid products (at least 80%) may be considered to be national brands bearing consumer recognition with respect to their respective names. Such consumer recognition of such brand names is considered by Creative NJ to be of assistance to it with respect to sale of such products since consumer recognition is advanced by national brand media advertising (at no cost to Creative NJ but to Creative NJ's benefit) when potential customers are already familiar with the product as a result of media advertising. 4 Suppliers. The above indicated products are purchased by Creative NJ from a number of unaffiliated suppliers and management of Creative NJ does not contemplate or anticipate any significant difficulties with its ability to purchase such products from its current suppliers and/or from replacement and/or additional suppliers if and when necessary or advisable. Creative NJ does not have any written or oral agreements with any of its suppliers. Creative NJ purchases approximately 50% to 60% of its products from New York City Beauty Supply. Management believes that other suppliers could provide similar products on comparable terms. A change in suppliers, however, could cause a delay in obtaining merchandise and possible loss of sales that could affect operating results. Distribution. Creative NJ is currently distributing its products to approximately 200 nail and beauty salons. Its territory is principally and almost exclusively located within the northern and central portion of the State of New Jersey, in the counties of Essex, Hudson, Bergen, Passaic, Morris and Union. Creative NJ sells cosmetic and beauty supplies, both on the retail and wholesale levels to beauty salons and to the general public. No customer contributes more than 10% of revenues. Creative NJ operates in a single segment. Wholesale sales consist of sales to beauty salons of merchandise for resale. Sales of merchandise to these customers for consumption in the course of providing hair care services, and not for the resale are considered retail sales. All sales to the general public are also considered retail sales. Net sales are summarized as follows: Year ended December 31, 2005 2004 ---------- ---------- Retail $ 84,882 $ 83,593 Wholesale 51,222 71,973 ---------- ---------- $ 136,104 $ 155,566 ========== ========== Competition. Competition is based on price. Creative NJ's price ranges of its various products are within the manufacturer-suggested prices, services and product lines. Creative NJ is competing with established companies and other entities (many of which may possess substantially greater resources than Creative NJ). Almost all of the companies with which Creative NJ competes are substantially larger, have more substantial histories, backgrounds, experience and 5 records of successful operations, greater financial, technical, marketing and other resources, more employees and more extensive facilities than Creative NJ now has, or will have in the foreseeable future. It is also likely that other competitors will emerge in the near future. There is no assurance that Creative NJ's products will compete successfully with other established and/or well-regarded products. Inability to compete successfully might result in increased costs, reduced yields and additional risks to the investors herein. Marketing. Creative NJ has no formal marketing plan and no sales representatives. Creative NJ's products are marketed through catalog advertising to the salon industry and special promotions. The salons order and receive their products weekly. No customer accounts for more than 10% of sales and there are no existing sales contracts. Backlog. Creative NJ services its wholesale accounts on two days notice. There is no backlog. If Creative NJ does not have a specific item, it is back ordered until the next delivery. Employees. Creative NJ currently has one full-time employee and one part-time employee. Creative NJ does not plan to hire additional employees in the next twelve months. Creative NJ's operations do not depend nor are they expected to depend upon patents, copyrights, trade secrets, know-how or other proprietary information. No amounts have been expended by Creative NJ for research and development of any products nor does Creative NJ expect to expend any amounts this year or in the near future. Creative NJ's business, products and properties are not subject to material regulation (including environmental regulation) by federal, state, or local governmental agencies. Seasonal Nature of Business Activities. Creative NJ's business activities are not seasonal. ITEM 2. PROPERTIES. The Company was obligated as assignee under an operating lease agreement with an unrelated party for the space occupied by its executive offices, store and warehouse facilities in Totowa, New Jersey. This lease which was the obligation of CGS was assigned to the Company on January 1, 2004. The lease expired on April 30, 2004, with a monthly rent of $1,300. This lease was renewed in April 2004 for a 35-month term expiring on April 30, 2007 requiring a monthly rent of $1,350. Rent expense for the year ended December 31, 2005 and 2004 was $16,200 and $15,950, respectively. 6 The future lease payments at December 31, 2005 are as follows: Year ended December 31, ----------------------- 2006 $ 16,200 2007 5,400 ---------- Total $ 21,600 ========== ITEM 3. LEGAL PROCEEDINGS. The Company is not involved in any legal proceedings at this date. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the last quarter of the fiscal year ended December 31, 2005, no matters were submitted to a vote of Creative Beauty Supply of New Jersey Corporation security holders, through the solicitation of proxies. 7 PART II ITEM 5. MARKET FOR CORPORATION'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information. Creative NJ's common stock is not included in the pink sheets or in the OTC Bulletin Board maintained by the NASD. Creative NJ plans to apply to the OTC Bulletin Board. There is no public trading market for Creative NJ common stock and there is no guarantee any trading market will develop. Holders. As of December 31, 2005, the approximate number of record holders of Creative NJ were 113. Dividends. Holders of Creative NJ's common stock are entitled to receive such dividends as may be declared by its board of directors after the spin-off has been completed. Creative NJ does not anticipate that it will declare any dividends. All profit will be used for continuing operations. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Trends and Uncertainties. Demand for Creative NJ's products will be dependent on, among other things, market acceptance of Creative NJ's concept and general economic conditions, which are cyclical in nature. Inasmuch as all of Creative NJ's activities are the receipt of revenues from the sales of its products, Creative NJ's business operations may be adversely affected by Creative NJ's competitors. Our sales have been decreasing due to increased competition from other beauty supply stores and changes in customer preferences. These decreases may continue even if we identify and obtain other product lines. To date, no types of product lines have been identified and no timeframes established or cash needs defined. Capital and Source of Liquidity. For the year ended December 31, 2005, Creative NJ had cash and cash equivalents of $358,420, an increase of $145,079 from the cash and cash equivalents balances of $213,341 at December 31, 2004. Cash used in operating activities totaled $136,403. The primary reason for the decrease was to fund the loss for the year. Investments in Available For Sale Securities consist of the following: Subscriptions for 100,000 shares of common stock of Proguard Acquisitions, Corp. (Proguard), a non-public company with a cost of $5,000. An investment in 200,000 common shares of Ram Venture Holdings Corp. (RAM), a publicly trading company listed on NASD Bulletin Board, at an original cost of $200,000. No relationship or affiliation has ever 8 existed between Creative NJ and Ram or CBS and Ram. At June 30, 2005, management determined that the Company's investment was worthless. A loss of $200,000 was recorded. On November 12, 2005, the Board of Directors authorized the issuance of 4,887,500 shares of common stock at $.04 per share to the brother of Creative NJ's President in exchange for 8,500 shares of common stock of Arena Resources, Inc., a publicly traded company on the American Stock Exchange, with a fair value of $23 per share ($195,500). The Company sold the shares and received, net of commissions on sale, $195,482. For the year ended December 31, 2004, Creative NJ acquired the subscriptions for 100,000 shares of common stock of Proguard at a cost of $5,000. In December 2005, Creative NJ issued 2,150,000 shares of common stock to its President for $86,000. Results of Operations. Creative NJ sells approximately 1,000 different products at varying mark ups ranging from 20 to 40 percent. For the year ended December 31, 2005, Creative NJ had net sales of $136,104 and cost of sales of $98,563 resulting in gross profit of $37,541. Comparatively, for the year ended December 31, 2004, Creative NJ had net sales of $155,566 and cost of sales of $122,119 resulting in gross profit of $33,447. Sales have been declining due to the increased competition from other beauty supply stores and changes in customer preference in products. For the year ended December 31, 2005, Creative NJ had operating expenses of $143,028. A majority of these expenses consisted of those necessary to conduct our business that have not materially decreased or increased from prior periods. We paid $52,284 for professional fees necessary to become and continue as a reporting company. For the year ended December 31, 2004 Creative NJ had operating expenses of $118,915. A majority of these expenses consisted of those necessary to conduct our business that have not materially decreased or increased from prior periods. We paid $37,950 for professional fees necessary to become a reporting company. Plan of Operation. During the next twelve months, Creative NJ may obtain new product lines by negotiating with various manufacturers. Creative NJ does not intend to hire any additional employees. To date, no types of product lines have been identified and no timeframes established or cash needs defined. Creative NJ has not - made any contacts, - had any discussions, - made any arrangements, nor - have any understanding 9 with any third parties regarding obtaining new product lines. Creative NJ is not delinquent on any of its obligations even though Creative NJ has had limited operating revenues. Creative NJ intends to market its products utilizing cash made available from the sale of its products. Creative NJ is of the opinion that revenues from the sales of its products will be sufficient to pay its expenses. Creative NJ does not have nor does it intend to have pension and/or other post-retirement benefits in the future. Creative NJ does not have any or intends to have any derivative instruments or hedging activities. Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in Creative NJ's financial statements and the accompanying notes. The amounts of assets and liabilities reported in our balance sheets and the amounts of revenues and expenses reported for each of our fiscal periods are affected by estimates and assumptions which are used for, but not limited to, the accounting for allowance for doubtful accounts, fair market values of marketable securities, asset impairments, inventory and income taxes. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of the financial statements. Revenue is recognized when earned in accordance with applicable accounting standards. Net sales are recognized at the time products are shipped to customers. Over-the-counter sales are recorded at point of sale. The allowance for doubtful accounts is based on Creative NJ's assessment of the collectability of specific customer accounts, credit worthiness and economic as well as the aging of the accounts receivable balances. If there is a deterioration of a major customer's credit 10 worthiness or actual defaults are higher than Creative NJ's historical experience, Creative NJ's estimates of recoverability of amounts due Creative NJ could be adversely affected. Creative NJ classifies its investments in equity securities as available-for-sale and reports them at fair value. Realized gains and losses are recorded in earnings (loss) and changes in the unrealized gain or loss is excluded from earnings (loss) and reported as a component of other comprehensive income (loss). Creative NJ's inventory consists of finished goods and is valued at lower of cost or market with cost being determined on the first-in, first-out (FIFO) method. Creative NJ also considers obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value. Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123 (R), "Share-based Payment," which replaced SFAB No.123, Accounting for Stock-based Compensation" ("SFAS No. 123"), and supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). SFAS 123 (R) requires companies to recognize in their statement of income the grant-date fair value of stock options and other equity-based compensation issued to employees. This SFAS is effective for Creative NJ beginning January 1, 2006. Grant-date fair value will be determined using one of two acceptable valuation models. This Standard requires that compensation expense for most equity-based awards be recognized over the requisite service period, usually the vesting period; while compensation expense for liability-based awards (those usually settled in cash rather than stock) be re-measured to fair-value at each balance sheet date until the award is settled. The Standard also provides guidance as to the accounting treatment for income taxes related to such compensation cost, as well as transition issues related to adopting the new Standard. The adoption of SFAS No. 123 (R) had no impact on the Company's results of operations for the year ended December 31, 2005. In May 2005, the FASB issued FASB Statement No. 154, "Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements" (SFAS 154). SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. 11 The provisions of SFAS 154 are effective for accounting changes and corrections of errors made in fiscal periods beginning after December 15, 2005. The adoption of the provisions of SFAS 154 is not expected to have a material impact on the Company's financial position or results of operations. In March 2005, the Securities and Exchange Commission announced that the compliance date for non-accelerated filers pursuant to Section 404 of the Sarbanes-Oxley Act have been extended. Under the latest extension, a company that is not required to file its annual and quarterly reports on an accelerated basis must begin to comply with the internal control over financial reporting requirements for its first fiscal year ending on or after July 15, 2006. The Commission similarly has extended the compliance date for these companies relating to requirements regarding evaluation of internal control over financial reporting and management certification requirements. The Company will be required to comply with Section 404 of the Sarbanes-Oxley Act beginning on January 1, 2007. Forward-Looking Statements This Form 10-KSB contains forward-looking statements within the meaning of the federal securities laws. These statements include those concerning the following: Our intentions, beliefs and expectations regarding the fair value of all assets and liabilities recorded; our strategies; growth opportunities; product development and introduction relating to new and existing products; the enterprise market and related opportunities; competition and competitive advantages and disadvantages; industry standards and compatibility of our products; relationships with our employees; our facilities, operating lease and our ability to secure additional space; cash dividends; excess inventory, our expenses; interest and other income; our beliefs and expectations about our future success and results; our operating results; our belief that our cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements; our expectations regarding our revenues and customers; investments and interest rates. These statements are subject to risk and uncertainties that could cause actual results and events to differ materially. Creative NJ undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-KSB. ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements The response to this item is being submitted as a separate section of this report beginning on page 16. 12 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE (a) On March 19, 2004, the board of directors of Creative NJ engaged the accounting firm of Samuel Klein and Company as principal accountants of Creative NJ for the period from inception through January 31, 2004. Creative NJ has not consulted Samuel Klein and Company during predecessor CBS's two most recent fiscal years and the interim period for the quarter ended December 31, 2003. On January 19, 2005, Samuel Klein and Company resigned as auditors of Creative NJ. The decision to resign was due to Samuel Klein and Company no longer pursuing any SEC auditing work. Samuel Klein and Company, on the financial statements of Creative NJ for the period from inception through January 31, 2004 neither contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope, or accounting principles. For the period from inception through January 31, 2004 and the interim period through the date of resignation, there were no disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure and there were no reportable events with Samuel Klein and Company as described in Items 304 (a) of Regulation S-K, respectively. (b) On March 19, 2005, the board of directors of Creative NJ engaged the accounting firm of Rotenberg, Meril, Solomon, Bertiger & Guttilla, P.C. as principal accountants of Creative NJ for the nine months ended December 31, 2004. ITEM 8A CONTROLS AND PROCEDURES Controls and Procedures. Carmine Catizone, the chief executive officer and Daniel Generelli, the chief financial officer of Creative NJ have made an evaluation of the disclosure controls and procedures relating to the financial statements of Creative NJ for the year ended December 31, 2005 and have judged such controls and procedures to be effective as of December 31, 2005 (the evaluation date). There have not been any significant changes in the internal controls of Creative NJ or other factors that could significantly affect internal controls relating to Creative NJ since the evaluation date. 13 PART III ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION Name Position Held Term of Office Carmine Catizone, age 55 President, Director October 1, 2003 to present Daniel Generelli, age 37 Secretary/Treasurer October 1, 2003 Vice-President/Director to present
Resumes: Carmine Catizone. Mr. Catizone has been President and a director of Creative NJ since its incorporation on October 1, 2003. From June 1988 to July 1994, Mr. Catizone was President and a Director of J&E Beauty Supply, Inc., a retail and wholesale beauty supply distributor. Mr. Catizone served as President and a director of C&C Investments, Inc., a blank check company (now known as T.O.P.S. Medical Corp., which provided chemicals for transportation of organs) from July 1977 to December 1984. From August 1995 to March 19, 2004, Mr. Catizone was President and a director of Creative Beauty Supply, Inc., now Global Digital Solutions, Inc., a SEC reporting company. Mr. Catizone is not currently involved with T.O.P.S. Medical Corp. From June 1980 to December 1985, Mr. Catizone had been district sales manager (engaged in sales of cosmetics) for Chattem Labs. Mr. Catizone received his Bachelor of Science degree from Fairleigh Dickerson University in 1972. Daniel Generelli. Mr. Generelli has been Secretary-Treasurer and a director of Creative NJ since its incorporation on October 1, 2003. From August 1995 to March 19, 2004, Mr. Generelli was Secretary- Treasurer and a director of Creative Beauty Supply, Inc., now Global Digital Solutions, Inc., a SEC reporting company. From December 1989 to July 1995, Mr. Generelli was Secretary/Treasurer and a director of J&E Beauty Supply, Inc., a retail and wholesale beauty supply distributor. From December 1984 to December 1989, Mr. Generelli was employed as a distribution supervisor with Tags Beauty Supply, a retail and wholesale beauty supply distributor in Fairfield, NJ. Mr. Generelli graduated from Ramapo College of New Jersey with a Bachelor of Science degree in June of 1984. Carmine Catizone, Daniel Generelli and Pasquale Catizone would be deemed to be promoters of Creative NJ. 14 ITEM 10. EXECUTIVE COMPENSATION To date, Creative NJ has not entered into employment agreements nor are any contemplated.
Annual Compensation Awards Payouts --------------------------- ---------------------- ---------- Other Restricted Securities Annual Stock Underlying LTIP All Other Name and Position Year Salary($) Bonus($) Compensation($) Awards(#) Options/SARs(#) Payouts($) Compensation($) Carmine Catizone 2005 $30,000 --- --- --- --- --- --- President 2004 $30,000 --- --- --- --- --- --- Daniel Generelli 2005 $2,260 --- --- --- --- --- --- Secretary/Treasurer 2004 $1,540 --- --- --- --- --- --- Director
Board of Directors Compensation. Members of the Board of Directors may receive an amount yet to be determined annually for their participation and will be required to attend a minimum of four meetings per fiscal year. To date, Creative NJ has not paid any directors' fees or expenses. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following tabulates holdings of shares of Creative NJ by each person who, adjusted for completion of the spin-off, will holders of record or is known by management to own beneficially more than 5.0% of the common shares and, in addition, by all directors and officers of Creative NJ individually and as a group. Each named beneficial owner has sole voting and investment power with respect to the shares set forth opposite his name. Shareholdings at February 28, 2006 Percentage of Number & Class(1) Outstanding Name and Address of Shares Common Shares Carmine Catizone(4) Common 3,458,000(direct) 32.83% 10 1/2 Walker Avenue 80,600(2)(indirect) .77% Morristown, NJ 07960 Daniel T. Generelli Common 40,000 .38% 24 Kansas Street Hackensack, NJ 07601 All Directors & Officers Common 3,498,000(direct) 33.21% as a group (2 persons) 80,600(indirect) .77% Pasquale Catizone(4) Common 5,387,500(direct) 51.15% 266 Cedar Street 10,000(3)(indirect) .09% Cedar Grove, NJ 07009 15 Ram Venture Holdings Corp.(5) Common 595,054 5.65% 3040 E. Commercial Blvd. Fort Lauderdale, FL 33308 Cede & Co. Common 607,446 5.77% P.O. Box 20 Bowling Green Station New York, NY 10274
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, beneficial ownership of a security consists of sole or shared voting power (including the power to vote or direct the voting) and/or sole or shared investment power (including the power to dispose or direct the disposition) with respect to a security whether through a contract, arrangement, understanding, relationship or otherwise. Unless otherwise indicated, each person indicated above has sole power to vote, or dispose or direct the disposition of all shares beneficially owned, subject to applicable unity property laws. (2)Carmine Catizone and Phyllis Catizone are husband and wife and are deemed to be the beneficial owners of each other's shares and custodial shares. (3)Pasquale Catizone and Barbara Catizone are husband and wife and are deemed to be the beneficial owners of each other's shares. (4) Carmine Catizone and Pasquale Catizone are brothers. (5) Ron Martini is the beneficial owner of the shares held by Ram Venture. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Spin-off from Predecessor. On January 1, 2004, the assets and liabilities of CBS were contributed at book value which represented fair value at January 1, 2004, to Creative NJ, and CBS approved a spin-off of this subsidiary to its shareholders. The spin-off was approved in contemplation of a merger which occurred on March 19, 2004 between CBS and Global Digital Solutions, Inc., a Delaware corporation, upon approval by vote of the stockholders of CBS and Global Digital whereby the former shareholders of CBS became the owners of 100 percent of the common stock of Creative NJ. CBS is the predecessor of Creative NJ. Pursuant to the requirements of Staff Legal Bulletin #4, the spin-off was completed in September 2005 with the satisfactory resolution of all SEC comments to the Form 10SB. 16 Pursuant to the Memorandum of Understanding between CBS and Global Digital, Creative NJ and Carmine Catizone, Pasquale Catizone and their families have agreed to indemnify Global from any claims arising from existing liabilities of CBS prior to the closing that occurred on March 19, 2004. Carmine Catizone was President and Chief Executive Officer of CBS through the closing date of the merger, and is currently President of Creative NJ and Pasquale Catizone was a stockholder of CBS through the closing date of the merger. There are no other agreements between Global Digital Solutions, Inc. and Creative NJ post spin-off. The spin-off includes all the operations, assets and liabilities of the Creative NJ subsidiary. Global Digital does not retain any liability once the spin-off is completed and Global Digital and Creative NJ will mutually release each other from any claims after the spin-off. On November 12, 2005, the board of directors authorized the issuance of 4,887,500 shares of common stock to Pasquale Catizone, the brother of the Corporation's president at $.04 per share in exchange for 8,500 shares of common stock of Arena Resources, Inc., with a fair value of $23 per share ($195,500). The Corporation sold the shares and received, net of commissions on sale, $195,482. On December 3, 2005, the board of directors authorized the sale and issuance of 1,250,000 shares of common stock to Carmine Catizone, the Corporation's president at $.04 per share ($50,000). On December 20, 2005, the board of directors authorized the sale and issuance of 900,000 shares of common stock to the Corporation's president at $.04 per share ($36,000). 17 ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) FINANCIAL STATEMENTS AND SCHEDULES CREATIVE BEAUTY SUPPLY OF NEW JERSEY CORPORATION INDEX TO FINANCIAL STATEMENTS Page REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM 18 FINANCIAL STATEMENTS: Balance Sheet 19 Statements of Operations and Comprehensive Loss 20 Statements of Stockholders' Equity 21 Statements of Cash Flows 23 Notes to Financial Statements 25 18 REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM To the Board of Directors and Stockholders of Creative Beauty Supply of New Jersey Corporation We have audited the accompanying balance sheet of Creative Beauty Supply of New Jersey Corporation as of December 31, 2005 and the related statements of operations and comprehensive loss, stockholders' equity and cash flows for the years ended December 31, 2005 and 2004. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2005 and the results of its operations and cash flows for the years ended December 31, 2005 and 2004, in conformity with accounting principles generally accepted in the United States of America. /s/ Rotenberg Meril Solomon Bertiger & Guttilla, P.C. ROTENBERG MERIL SOLOMON BERTIGER & GUTTILLA, P.C. Saddle Brook, New Jersey February 28, 2006 19 CREATIVE BEAUTY SUPPLY OF NEW JERSEY CORPORATION BALANCE SHEET DECEMBER 31, 2005 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 358,420 Marketable securities 5,000 Accounts receivable 1,090 Inventory 60,299 Prepaid expenses 570 ---------- TOTAL CURRENT ASSETS 425,379 PROPERTY AND EQUIPMENT, net of accumulated depreciation 3,899 ---------- TOTAL ASSETS $ 429,278 ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 12,671 Payroll taxes withheld and accrued 3,031 Accrued expenses 10,244 ---------- TOTAL CURRENT LIABILITIES 25,946 ---------- COMMITMENT STOCKHOLDERS' EQUITY Preferred stock, par value $.001, authorized 10,000,000 shares, issued and outstanding -0- shares - Common stock, par value $.001, authorized 100,000,000 shares, issued and outstanding 10,532,150 shares 10,532 Additional paid-in-capital 776,109 Accumulated deficit (383,309) Accumulated other comprehensive loss - ---------- TOTAL STOCKHOLDERS' EQUITY 403,332 ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 429,278 ========== The accompanying notes are an integral part of these financial statements 20 CREATIVE BEAUTY SUPPLY OF NEW JERSEY CORPORATION STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 2005 2004 ---------- ---------- Net sales $ 136,104 $ 155,566 Cost of Sales 98,563 122,119 ---------- ---------- Gross Profit 37,541 33,447 ---------- ---------- Operating Expenses Salaries - officers 32,260 31,900 Employee benefits 14,545 11,467 Professional fees 52,284 37,950 Rent 16,200 15,950 Other general and administrative 27,739 21,648 ---------- ---------- Total Operating Expenses 143,028 118,915 ---------- ---------- Loss from operations (105,487) (85,468) ---------- ---------- Other Income (Expense) Interest income 3,928 4,568 Loss on marketable securities (200,018) - ---------- ---------- Total Other Income (Expense) (196,090) 4,568 ---------- ---------- Net Loss (301,577) (80,900) Other Comprehensive Income (Loss), net of taxes: Reclassification adjustment for realized loss, net of income taxes of $-0- and $-0- 138,000 - Unrealized holding loss arising during the period, net of income taxes of $-0- and $-0- - (138,000) ---------- ---------- Total Comprehensive Loss $ (163,577) $ (218,900) ========== ========== Earning (loss) per share: Basic and diluted net loss per common share $ (0.07) $ (0.02) ========== ========== Basic and diluted weighted average common shares outstanding 4,273,794 3,494,650 ========== ========== The accompanying notes are an integral part of these financial statements 21 CREATIVE BEAUTY SUPPLY OF NEW JERSEY CORPORATION STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 Common Stock $.001 Par Value Additional Number Paid In of Shares Amount Capital ---------- ---------- ---------- Balance, December 31, 2003 3,494,650 $ 3,495 $ 248,505 Spin-off of net assets of parent company recorded as additional paid in capital - 249,046 - Additional paid in capital contributed - - 4,095 Unrealized loss on available for sale securities, net of $-0- income taxes - - - Net loss for the year - - - ---------- ---------- ---------- Balance, December 31, 2004 3,494,650 $ 3,495 $ 501,646 Issuance of common stock for cash 2,150,000 2,150 83,850 Issuance of common stock for marketable securities 4,887,500 4,887 190,613 Unrealized gain on available for sale securities, net of $-0- income taxes - - - Net loss for the year - - - ---------- ---------- ---------- Balance, December 31, 2005 10,532,150 $ 10,532 $ 776,109 ========== ========== ========== The accompanying notes are an integral part of these financial statements 22 CREATIVE BEAUTY SUPPLY OF NEW JERSEY CORPORATION (CONTINUED) STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 Accumulated Other Accumulated Comprehensive Deficit Loss Total ---------- ---------- ---------- Balance, December 31, 2003 $ (832) $ - $ 251,168 Spin-off of net assets of parent company recorded as additional paid in capital - - 249,046 Additional paid in capital contributed - - 4,095 Unrealized loss on available for sale securities, net of $-0- income taxes - (138,000) (138,000) Net loss for the year (80,900) - (80,900) ---------- ---------- ---------- Balance, December 31, 2004 $ (81,732) $ (138,000) $ 285,409 Issuance of common stock for cash - - 86,000 Issuance of common stock for marketable securities - - 195,500 Unrealized gain on available for sale securities, net of $-0- income taxes - 138,000 138,000 Net loss for the year (301,577) - (301,577) ---------- ---------- ---------- Balance, December 31, 2005 $ (383,309) $ - $ 403,332 ========== ========== ========== The accompanying notes are an integral part of these financial statements 23 CREATIVE BEAUTY SUPPLY OF NEW JERSEY CORPORATION STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 2005 2004 ---------- ---------- Cash Flows from Operating Activities: Cash received from customers $ 136,381 $ 155,655 Cash paid to suppliers and employees (276,712) (198,295) Interest paid - - Income taxes paid - - Interest received 3,928 4,568 ---------- ---------- Net cash used in operating activities (136,403) (38,072) ---------- ---------- Cash Flows from Investing Activities: Proceeds from sale of marketable securities 195,482 - Investment in marketable securities - (5,000) ---------- ---------- Net cash provided by (used in) investing activities 195,482 (5,000) ---------- ---------- Cash Flows from Financing Activities: Cash received from issuance of common stock 86,000 - Additional paid in capital contributions received - 4,095 Cash received in spin-off - 100 ---------- ---------- Net cash provided by financing activities 86,000 4,195 ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 145,079 (38,877) CASH AND CASH EQUIVALENTS-beginning of year 213,341 252,218 ---------- ---------- CASH AND CASH EQUIVALENTS-end of year $ 358,420 $ 213,341 ========== ========== SCHEDULE OF NONCASH ACTIVITIES: Issuance of common stock for marketable securities $ 195,500 $ 435,072 ========== ========== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATIONS: Net loss $ (301,577) $ (80,900) Adjustments to reconcile net income to net cash used in operating activities: Depreciation 1,299 1,299 Loss on marketable securities 200,018 - Decrease (increase) in accounts receivable 277 (1,367) Increase in inventory (2,240) (58,059) Decrease (increase) in prepaid expenses 169 (739) 24 (Decrease) increase in accounts payable and accrued expenses (34,349) 59,245 Net operating assets aquired in spin-off - 42,449 ---------- ---------- Net cash used in operating activities $ (136,403) $ (38,072) ========== ========== The accompanying notes are an integral part of these financial statements 25 CREATIVE BEAUTY SUPPLY OF NEW JERSEY CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 AND 2004 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Creative Beauty Supply of New Jersey Corporation (the Company) was incorporated in the State of New Jersey on October 1, 2003. It was formed pursuant to a resolution of the Board of Directors of Creative Beauty Supply, Inc., (CBS) as a wholly owned subsidiary of that company, a publicly traded New Jersey Corporation. On January 1, 2004, the assets and liabilities of CBS were contributed at book value to the company, and this subsidiary was then spun-off by CBS to its shareholders. This spin-off was done in contemplation of a merger, which occurred on March 19, 2004 between CBS and Global Digital Solutions, Inc. (Global), a Delaware corporation whereby the former shareholders of CBS became the owners of 100 percent of the common stock of the Company. On January 1, 2004, the Company commenced operations in the beauty supply industry at both the wholesale and retail levels. The Company sells cosmetic and beauty supplies to the general public and beauty salons in Northern and Central New Jersey. Accounting Estimates The preparation of financial statements in conformity with accounting principals generally accepted in the Unites States of America require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated. Revenue Recognition Net sales are recognized at the time products are shipped to customers. Over the counter sales are recorded at point of sale. Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be a cash equivalent. Cash equivalents consist of a money market account. Investments in Available-For-Sale Securities The Company considers its investments in equity securities as available-for-sale and has therefore reflected the investments at fair value in the accompanying financial statements. Realized gains and losses are recorded in income. Changes in unrealized gains or losses 26 are excluded from income and reported as a component of other comprehensive loss in the stockholders' equity section of the balance sheet. Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within thirty days from the invoice date or as specified by the invoice and are stated at the amount billed to the customer. Customer account balances with invoices dated over ninety days or ninety days past the due date are considered delinquent. Payments of accounts receivable are allocated to the specific invoices identified on the customer's remittance advice, or if unspecified, are applied to the earliest unpaid invoices. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management's best estimate of the amount that will not be collected. Management individually reviews all accounts receivable balances that are considered delinquent and based on an assessment of current credit worthiness, estimates the portion, if any, of the balance that will not be collected. In addition, management periodically evaluates the adequacy of the allowance based on the Company's past experience. Management considered accounts receivable at December 31, 2005 and 2004 to be fully collectible; accordingly, no allowance for doubtful accounts was provided for at December 31, 2005 and 2004. Inventory Inventory, consisting of finished goods, is valued at lower of cost or market with Cost being determined on the first-in, first-out (FIFO) method. The Company also considers obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value. Property and Equipment Property and equipment are recorded at cost. Depreciation of property and equipment is provided for over the estimated useful lives of the respective assets. The estimated useful life of the Company's delivery van is 5 years. Depreciation is recorded on the straight-line method. Maintenance, repairs and minor renewals are charged to earnings when they are incurred. When assets are retired or otherwise disposed of, the assets and related allowance for depreciation is eliminated from the account and any resulting gain or loss is reflected in income. Income Taxes Deferred income taxes are provided on the liability method whereby deferred income tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred income tax liabilities are recognized for taxable temporary differences. 27 Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax law and rates on the date of enactment. Earnings (Loss) Per Share The Company computes earnings (loss) per share in accordance with Statement of Financial Standards No. 128 ("SFAS 128"), which requires the presentation on the face of the income statement "basic" earnings per share and "diluted" earnings per share. Basic earnings per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of outstanding common shares. The calculation of dilutive earnings per share is similar to basic earnings per share except the denominator includes dilutive common stock equivalents such as stock options and convertible debentures. There were no dilutive common stock equivalents for all periods presented. Comprehensive Income (Loss) The Company reports components of comprehensive income (loss) under the requirements of SFAS 130, "Reporting Comprehensive Income". SFAS 130 establishes rules for the reporting of comprehensive income or loss and its components which require that certain items be presented as separate components of stockholders' equity. In 2004, the Company's other comprehensive income (loss) consisted of unrealized losses from available-for-sale marketable securities. In 2005, it consisted of the reclassification adjustment upon the realization of the loss on marketable securities. Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123 (R), "Share-based Payment," which replaced SFAB No.123, Accounting for Stock-based Compensation" ("SFAS No. 123"), and supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). SFAS 123 (R) requires companies to recognize in their statement of income the grant-date fair value of stock options and other equity-based compensation issued to employees. This SFAS is effective for the Company beginning January 1, 2006. Grant-date fair value will be determined using one of two acceptable valuation models. This Standard requires that compensation expense for most equity-based awards be recognized over the requisite service period, usually the vesting period; while compensation expense for liability-based awards (those usually settled in cash rather than stock) be re-measured to fair-value at each balance sheet date until the award is settled. The Standard also provides guidance as to the accounting treatment for income taxes related to such compensation cost, as well as transition 28 issues related to adopting the new Standard. The adoption of SFAS No. 123 (R) had no impact on the Company's results of operations for the year ended December 31, 2005. In May 2005, the FASB issued FASB Statement No. 154, "Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements" ("SFAS 154"). SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The provisions of SFAS 154 are effective for accounting changes and corrections of errors made in fiscal periods beginning after December 15, 2005. The adoption of the provisions of SFAS 154 is not expected to have a material impact on the Company's financial position or results of operations. In March 2005, the Securities and Exchange Commission announced that the compliance date for non-accelerated filers pursuant to Section 404 of the Sarbanes-Oxley Act have been extended. Under the latest extension, a company that is not required to file its annual and quarterly reports on an accelerated basis must begin to comply with the internal control over financial reporting requirements for its first fiscal year ending on or after July 15, 2006. The Commission similarly has extended the compliance date for these companies relating to requirements regarding evaluation of internal control over financial reporting and management certification requirements. The Company will be required to comply with Section 404 of the Sarbanes-Oxley Act beginning on January 1, 2007. Reclassifications Certain 2004 amounts have been reclassified to conform to the 2005 presentation. 2. CONCENTRATIONS OF CREDIT RISK The Company maintains its cash balances with a major bank. The balances are insured by the Federal Deposit Insurance Corporation up to $100,000 per depositor. At December 31, 2005, the Company's uninsured cash balances approximated $ 254,600. 29 3. SUPPLIER CONCENTRATION For the years ended December 31, 2005 and 2004, the Company purchased approximately 60% and 50%, respectively, of its products from one supplier. Management believes that other suppliers could provide similar products on comparable terms. A change in suppliers, however, could cause a delay in merchandise and possible loss of sales, which could affect operating results. 4. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company measures its financial assets and liabilities as required by SFAS No. 107 "Disclosures About Fair Value of Financial Instruments". Cash and cash equivalents, trade receivables, accounts payable and accrued expenses are carried at book value amounts which approximate fair value due to their short-term maturities. The investment in marketable equity securities is recorded at fair value. 5. MARKETABLE SECURITIES The cost and fair value of marketable equity securities that are available-for-sale at December 31, 2005 are as follows: Cost $ 5,000 Gross unrealized gain (loss) - ---------- Fair value $ 5,000 ========== The unrealized appreciation (depreciation) of marketable equity securities reported as accumulated other comprehensive income (loss) was $-0- at December 31, 2005 and ($138,000) at December 31, 2004. During 2005 and 2004, sales proceeds and realized gains and losses on securities classified as available-for-sale were: 2005 2004 ---------- ---------- Sales Proceeds $ 195,482 $ - ========== ========== Realized Losses $ 200,018 $ - ========== ========== At June 30, 2005, management determined that the Company's investment in RAM Venture Holding Corp. was worthless. A loss of $200,000 was recorded. The method used to determine the cost of securities sold was actual cost per share. 30 6. PROPERTY AND EQUIPMENT The components of property and equipment at December 31, 2005 are as follows: Delivery equipment $ 6,497 Less Accumulated depreciation 2,598 ---------- Net book value $ 3,899 ========== Depreciation expense amounted to $1,299 for each of the years ended December 31, 2005 and 2004, respectively. 7. INCOME TAXES The deferred income tax assets and liabilities at December 31, 2005 relate to temporary differences between the financial statement carrying amounts and their tax basis. Assets and liabilities that give rise to significant portions of the net deferred tax assets and liabilities relate to the following: Net operating loss carry forwards $ 69,000 Capital loss carry forwards 78,000 Inventory valuation 2,400 ---------- 149,400 Valuation allowance (149,400) ---------- Net income tax assets $ - ========== A valuation allowance has been established equal to the full amount of the deferred tax assets as the Company is not assured at December 31, 2005 that it is more likely than not that these benefits will be realized. The change in valuation allowance for the year ended December 31, 2005 was an increase of $79,135 due to increases in federal and state net operating loss carry forwards, capital loss carry forwards and inventory valuations net of decreases in unrealized holding losses. At December 31, 2005, the Company has unused federal net operating loss carry forwards of approximately $178,000 expiring between 2023 and 2025 and unused New Jersey net operating loss carry forwards of approximately $176,000 expiring between 2012 and 2014. 8. COMMON STOCK On November 12, 2005, the Board of Directors authorized the issuance of 4,887,500 shares of common stock to the brother of the Company's President at $.04 per share in exchange for 8,500 shares of common 31 stock of Arena Resources, Inc., with a fair value of $23 per share ($195,500). The Company sold the shares and received, net of commissions on sale, $195,482. On December 3, 2005, the Board of Directors authorized the sale and issuance of 1,250,000 shares of common stock to the Company's President at $.04 per share ($50,000). On December 20, 2005, the Board of Directors authorized the sale and issuance of 900,000 shares of common stock to the Company's President at $.04 per share ($36,000). 9. SALES Wholesale sales consist of sales to beauty salons of merchandise for resale. Sales of merchandise to beauty salons for their own consumption, not for resale, are considered retail sales. All sales to the general public are also considered retail sales. Net sales are summarized as follows: Year ended December 31, 2005 2004 ---------- ---------- Retail $ 84,882 $ 83,593 Wholesale 51,222 71,973 ---------- ---------- $ 136,104 $ 155,566 ========== ========== 10. COMMITMENT The Company was obligated as assignee under an operating lease agreement with an unrelated party for the space occupied by its executive offices, store and warehouse facilities in Totowa, New Jersey. This lease which was the obligation of CGS was assigned to the Company on January 1, 2004. The lease expired on April 30, 2004, with a monthly rent of $1,300. This lease was renewed in April 2004 for a 35-month term expiring on April 30, 2007 requiring a monthly rent of $1,350. Rent expense for the year ended December 31, 2005 and 2004 was $16,200 and $15,950, respectively. The future lease payments at December 31, 2005 are as follows: Year ended December 31, ----------------------- 2006 $ 16,200 2007 5,400 ---------- Total $ 21,600 ========== 32 (b) List of Exhibits (2.1) Articles of Incorporation(1) (2.2) Bylaws(1) (3) Form of Common Stock Certificate(1) (6) Renewed Lease Agreement(2) (6.1)Agreement and Plan of Reorganization between Global Digital Solutions and Creative Beauty Supply, Inc,(3) (1) Incorporated by reference to Form 10SB, file number 0-50773 filed on May 21, 2004. (2) Incorporated by reference to amendment 3 to Form 10SB, file number 0-50773 filed on June 15, 2005 (3) Incorporated by reference to Form 8-K filed March 8, 2004 by Creative Beauty Supply, Inc. The following exhibits are filed with this report: Exhibit 31 - 302 certification Exhibit 32 - 906 certification (B) REPORTS ON FORM 8-K None ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Audit Fees. The aggregate fees billed for the fiscal year ended December 31, 2004 for professional services rendered by Samuel Klein and Company (Klein) for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year, were $10,230. The aggregate fees billed for the fiscal year ended December 31, 2005 for professional services rendered by Rotenberg, Meril, Solomon, Bertiger & Guttilla, P.C. (RMSBG) for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year were $26,974. Audit related fees. The aggregate fees billed for the fiscal year ended December 31, 2004 for assurance and related services by Klein that are reasonably related to the performance of the audit or review of the registrant's financial statements for the fiscal year were $6,375. The aggregate fees billed for the fiscal year ended December 31, 2005 for assurance and related services by RMSBG that are reasonably related to the performance of the audit or review of the registrant's financial statements for that fiscal year were $0. 33 Tax Fees. We did not incur any aggregate tax fees and expenses from Klein or RMSBG for the 2005 and 2004 fiscal years for professional services rendered for tax compliance, tax advice, and tax planning. All Other Fees. We did not incur any other fees from Klein and RMSBG for the 2005 and 2004 fiscal years. The board of directors, acting as the Audit Committee considered whether, and determined that, the auditor's provision of non-audit services was compatible with maintaining the auditor's independence. All of the services described above for fiscal year 2005 were approved by the Board of Directors pursuant to its policies and procedures. We intend to continue using Rotenberg Meril Solomon Bertiger & Guttilla, P.C. solely for audit and audit-related services, tax consultation and tax compliance services, and, as needed, for due diligence in acquisitions. 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Corporation has duly caused this Report to be signed on its behalf by the undersigned duly authorized person. Date: December 5, 2006 Creative Beauty Supply of New Jersey Corporation /s/ Carmine Catizone - ------------------------------ By: Carmine Catizone, President Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. Creative Beauty Supply of New Jersey Corporation Date: December 5, 2006 /s/ Carmine Catizone --------------------- By: Carmine Catizone President, Chief Executive Officer December 5, 2006 /s/Daniel Generelli ---------------------- By: Daniel Generelli Chief Financial Officer and Controller
EX-31 2 creativenj10k123105am1ex31.txt 302 CERTIFICATIONS 302 CERTIFICATION I, Carmine Catizone, certify that: 1. I have reviewed amendment 1 to the annual report on Form 10-KSB of Creative Beauty Supply of New Jersey Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: December 5, 2006 /s/Carmine Catizone ---------------------------- Carmine Catizone President & Chief Executive Officer 302 CERTIFICATION I, Daniel Generelli, certify that: 1. I have reviewed amendment 1 to the annual report on Form 10-KSB of Creative Beauty Supply of New Jersey Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: December 5, 2006 /s/Daniel Generelli ---------------------------- Daniel Generelli, CFO EX-32 3 creativenj10ksb123105am1ex32.txt 906 CERTIFICATIONS CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with Amendment 1 to the Annual Report of Creative Beauty Supply of New Jersey Corporation (the "Company") on Form 10-KSB for the year end December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Carmine Catizone, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/Carmine Catizone - ----------------------------- Carmine Catizone Chief Executive Officer December 5, 2006 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with Amendment 1 to the Annual Report of Creative Beauty Supply of New Jersey Corporation (the "Company") on Form 10-KSB for the year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel Generelli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/Daniel Generelli - ----------------------------- Daniel Generelli Chief Financial Officer December 5, 2006 COVER 4 filename4.txt Jody M. Walker Attorney-At-Law 7841 South Garfield Way Centennial, CO 80122 Telephone: 303-850-7637 Facsimile: 303-220-9902 jmwalker85@earthlink.net December 5, 2006 Terence O'Brien Securities and Exchange Commission 450 5th St. N.W. Washington, D.C. 20549 202-551-3355 Re: Creative Beauty Supply of New Jersey Corp. File No. 0-50773 Amendment 1 to Annual Report on Form 10ksb for the year ended December 31, 2005 Ms. McGuirk: Based on the comment letter dated May 10, 2007, please note the following. Report of Independent Registered Accounting Firm, page 18 1. The opinion paragraph of the audit report refers to the balance sheet as of December 31, 2005, as well as the other financial statements for the years ending December 31, 2005 and 2004. The audit report has been revised in the amendment 1 to Form 10KSB to correct the typographical error. Thank you for your prompt attention to this matter. Please do not hesitate to contact me if you have any questions regarding the above. Very truly yours, /s/Jody M. Walker - ---------------------------- Jody M. Walker Attorney At Law -----END PRIVACY-ENHANCED MESSAGE-----