UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 
20549  FORM 10-KSB  ý
  
  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934
  For the Fiscal Year Ended September 30, 2002  or  o
  
  TRANSITIONAL
  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No
  Fee Required)
 Commission File No. 000-24551  Composite Solutions, Inc. (Name
of Small Business Issuer in its Charter)  Florida
  
  65-0790758State
  or other jurisdiction of incorporation or organization
  
  I.R.S.
  Employer Identification Number
   3252 Holiday Court, Suite 206
  
  La Jolla, CA 92037Address
  of principal executive office
  
  Zip
  Code
  Issuers telephone number:  (858)
459-4843  SECURITIES REGISTERED PURSUANT TO SECTION
12(g) OF THE ACT  Common Stock, $0.0001 Par Value (Title
of Class)  Check
whether the issuer has (i) filed all reports required by Section 13 or 15(d) of
the Exchange Act during the past 12 months, and (ii) been subject to such
filing requirements for the past ninety (90) days.  YesýNoo  Check
if there is no disclosure of delinquent filers in response to Item 405 of
regulation S-B 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 the Form 10-KSB or any
amendment to this Form 10-KSB.o  The
Companys revenues for the fiscal year ended September 30, 2002 were $227,439.  As of September 30, 2002, 18,292,044 shares of Common Stock were
outstanding and the aggregate market value of the Common Stock (based on the
latest sale price on the Nasdaq OTC Bulletin Board on September 30, 2002) held
by non-affiliates ( 14,707,802 shares) was $1,764,936.  Transitional Small Business Disclosure Format (check one):       YesoNoý  
   Part I  Item
1.  Description of Business   General Overview Composite Solutions, Inc.
(CSI) is an development stage company licensing and distributing its
proprietary composite materials technology and engineering services for
applications in the civil engineering and civil construction market. CSIs
technology represents a revolutionary breakthrough for the construction
industry. This technology uses the same type of composite materials found in
the B-2 Bomber and other lightweight, high-strength military hardware. These
composite materials consist of advanced fiber reinforced polymers (FRPs).
Examples include ultra high-strength carbon or aramid fibers in a thermoset
(e.g., epoxy) matrix. Such fibers are 10-15 times stringer than construction
steel and 5 times lighter. When used in concert with traditional building
material systems, this marriage of new and conventional systems leads to a
dramatic enhancement of the latter, and to superior structural performance with
a minimization of cost.  CSIs new technology
material systems fall into two main categories: 1) Composite Overlays for
structural retrofits and 2) the Carbon Shell System (CSS) for new construction
and infrastructure renewal. In both cases, the materials consist of FRPs.  The Composite Overlay is
a structural skin which is created by saturating fabric woven out of carbon,
aramid (e.g., kevlar) or other aerospace-quality fiber with an epoxy-type
resin. This product is marketed under the CSI trade name RetroShield. The
specific composition, architecture and application of the fabric plus resin
overlay is engineered by CSI to specific strength, stiffness, and ductility
specifications based on the characteristics of the subject structure and use
loads. The specified composite solution is then wallpapered to a structural
surface to provide significantly increased ductility and/or strength. The
overlay can be applied to columns, walls, floors, beams and girders,
connections, and other such structural elements. The composite overlay
technique has been found to be extremely effective for seismic retrofits, blast
hardening, structural upgrades, and structural repairs. Typically only a few
layers of a 1mm thick overlay are needed for such applications.  The CSS is a lightweight,
high-strength plant-manufactured advanced carbon fiber-reinforced polymer
(CFRP) shell (tube) of circular or non-circular cross-section. In new
construction of buildings, bridges and other structures, the shell is typically
filled with concrete; in this application it serves both as a stay-in-place
form and reinforcement. As a result, this system substantially reduces the need
for reinforcing steel and the use of heavy lifting equipment, which constitutes
a significant part of system building costs. The CSS can be used for structural
elements such as columns, beams and girders for buildings and bridges and for
pilings for harbors and docks.  In new construction of
infrastructure systems, the CSS can be used for oil, gas, and water pipelines. Advantages
over conventional material in such applications include durability (no
corrosion) and thermal stability (no thermal expansion).  For infrastructure
renewal, the CSS is employed as a structural liner for pipelines that have
deteriorated due to age or environmental conditions. An example application is
the repair of large diameter (2-4m), prestressed concrete cylindrical pipes
(PCCPs) that carry high pressure, high flow water from its source to urban
areas.  The effectiveness and
integrity of the Companys composite overlay technology and the CSS has been
extensively validated by full-scale laboratory tests at The Charles Lee Powell
Structural Research Laboratories (Powell Laboratories) located at The
University of California, San Diego (UCSD). These tests included both
reinforced and un-reinforced wall specimens that ranged from single-story walls
to a full-scale five-story building as well as columns ranging from single
columns to full-scale bridge bents.  The Powell Laboratories are one of
the few such facilities in the world with the capability to execute full-scale
tests and have performed extensive tests relating to the retrofit, and
upgrading of structural elements such as walls, columns and floor slabs.  For blast retrofits, the
composite overlay technology has been validated in U.S. Government field tests.
These tests range from structural components to a full-scale building.    2 
    Business Areas CSI is marketing its new
material systems and technologies in four primary areas. These are: 1) Homeland
Security; 2) Seismic retrofits and Structural Upgrades; 3) Infrastructural
Renewal; and 4) New Construction.  The CSI technologies and
product lines for the Homeland Security area includes: 1) Carbon Fiber
Reinforced Polymer (CFRP) and Aramid Fiber Reinforced Polymer (AFRP)- based
blast retrofit methodologies, material systems, and data for civil, marine and
aircraft structures; 2) CFRP- based Carbon Shell System for blast hardening of
new structures; 3) Window Catcher Systems for occupant protection against blast
generated glass fragments; and 4) AFRP- based Composite Ballistic Systems for
the mitigation of projectiles from firearms and debris from blast loads.  The CSI technologies and
product lines for the Seismic Retrofits and Structural Upgrades include CFRP
material systems, data bases, design methodologies, and design software for
civil structures such as buildings and bridges.  CSIs efforts in the area
of Infrastructure Renewal are currently focused on the rehabilitation of water
transmission lines in the form of large diameter prestressed concrete
cylindrical pipes (PCCPs). The technologies and product lines here include
CFRP- based structural liner designs and material systems, cost metrics and
installation methodologies. The associated product lines include design
methodologies, data bases, and distribution of CFRP forms.   Marketing and Sales  CSI has been active in
all four areas during 2002. A summary of events follows:  Infrastructure Renewal -The Company has signed an agreement with
a large international construction company for providing engineering and design
services, as well as technology, for large civil infrastructure projects.
According to the terms of this agreement, the Company will receive royalties
for products designed by the Company. A subsequent agreement defines the scope
and conditions under which said construction company will provide financial
support for validation testing of CSI products. As part of this agreement,
funds have been received by CSI and the associated product testing is in
progress.  Homeland Security The Company is developing strategic
alliance and technology licensing agreements with a large international company
in the area of Homeland Security. This includes the Companys new FRP
technologies for the protection of structures and occupants against both blast
and ballistic threats. Testing of these FRP technologies continues under
government support. Sales of the ballistic  protection products have commenced
in the private sector.  Seismic Retrofits Sales in this area have now commenced.
The customer base ranges from hospitals to telecommunication facilities to city
facilities to private/commercial owners. As an example, the Company is
currently working with a hospital group in an effort to define the scope and
conditions for the seismic retrofit of a number of hospital campuses in
California based on the application of CSIs CFRP overlay technology. A
contract for the first seismic retrofit project from this group has been
obtained and work has begun. As another example, the Company is currently
working with a large telecommunication company in an effort to define the scope
and conditions for the seismic retrofit of key installations based, again, on
the application of CSIs CFRP overlay technology.  Here the first seismic retrofit has recently been completed.
Other example projects include a Church in So. California which is in progress,
a home in No. California which has been completed, and a large parking
structure in So. California which is in the contract negotiation stage. In
addition to the above, the Company is developing a strategic alliance agreement
with a large national construction company. When completed, this  3 
   agreement will allow CSI to dramatically expand its
marketing operations, and to engage in large design-build projects.  New Construction Discussions are in progress with a
potential customer in No. California concerning the construction of two short 
span bridges using CSIs Carbon Shell System (CSS).    Item 2.  Description
of Property  The Company offices are located at 3252 Holiday
Court, Suite 206, La Jolla, CA 92037. The leased office space of approximately
1572 sq. ft. is within walking distance to UCSD. The lease obligation is for
three years with monthly payments of approximately $4,005, subject to periodic
adjustments for inflation.   Item 3.  Legal
Proceedings  Neither the Company nor its
subsidiary is the subject of any pending legal proceeding  Item 4.  Submission of
Matters to a Vote of Security Holders  None.    4 
   Part II   Item 5.  Market for Companys Common Equity and
Related Stockholders Matters  The shares of the
Companys Common Stock are traded on the OTC Bulletin Board (Symbol KIPS).
The following table sets forth, for the periods indicated, the high and low
closing bid prices for the Companys Common Stock, as reported by the National
Quotation Bureau, for the quarters presented. 
Bid prices represent inter-dealer quotations without adjustments for
markups, markdowns, and commissions.  Quarterly Common
Stock Price Range (High Low)  Fiscal year ended September 30, 2001:1st
  Quarter
  
  $
  0.58
  
  $
  0.152nd
  Quarter
  
  $
  0.24
  
  $
  0.073rd
  Quarter
  
  $
  0.45
  
  $
  0.074th
  Quarter
  
  $
  0.18
  
  $
  0.07  Fiscal year ended September 30, 2002:1st
  Quarter
  
  $
  0.18
  
  $
  0.152nd
  Quarter
  
  $
  0.39
  
  $
  0.273rd
  Quarter
  
  $
  0.20
  
  $
  0.114th
  Quarter
  
  $
  0.12
  
  $
  0.09  As
of September 30, 2002, there were 18,292,044 shares of Common Stock
outstanding, and there were approximately 79 shareholders of the Companys
Common Stock.  The Company has
not paid any dividends since its inception and has no current plans to pay
dividends on the Common Stock in the foreseeable future. The Company intends to
reinvest future earnings in the development and expansion of its business. Any
future determination to pay dividends will depend upon the Companys results of
operations, financial condition and capital requirements and such other factors
deemed relevant by the Companys Board of Directors.  Item 6. Managements Discussion and Analysis   Results
of Operations  The following is a
discussion of the financial condition and results of operations for the year
ended September 30, 2002 and 2001.  This discussion should be read in
conjunction with our consolidated financial statements and the notes related
thereto.  Net Loss:For the fiscal year ended September 30,
2002, the Company recorded a net operating loss of $1,166,742 ($0.07 per share)
from continuing operations, compared to a net loss of $1,367,322 ($0.10 per
share) during the fiscal year ended September 30, 2001.   5 
   Revenue: 
The revenues and cost of sales for the fiscal year ended September 30, 2002
were $227,439 and $339,228 respectively; as compared to revenues of $79,207 and
cost of sales of $41,048 for the fiscal year ended September 30, 2001.  Liquidity and Capital
Resources:The Company is operating with insufficient capital
since January 2001.  It has not met all of its financial obligations, and
has relied heavily on the sale of its Common Stock to generate additional
capital. During the year ended September 30, 2002, the Company issued 2,339,047
shares of common stock for cash and paid subscription, and 1,744,533 shares of
Common Stock for compensation, interest due, and in exchange for services.  The Company had total
assets of $952,921 as of September 30, 2002, including intangible assets of
$888,510, as compared to the total assets of $1,036,168 and intangible assets
of $1,006,147 as of September 30, 2001.  The Companys current
liabilities as of September 30, 2002 were $1,592,590, as compared to current
liabilities of $1,040,405 as of September 30, 2001.  In year 2002, the Company
intends to devote a substantial part of its financial resources towards the
marketing of its products and services to the construction industry.  In
order to facilitate such marketing efforts, the Company expects to seek
additional capital through the sale of equity securities.  Also, the
Company intends to pursue licensing technologies as a financing alternative.   Cautionary Statement RegardingForward-Looking
Statements  This report
contains forward-looking statements. 
The Company is including this statement for the express purpose of
availing itself of protections of the safe harbor provided by the Private
Securities Litigation Act of 1995 with respect to all such forward-looking
statements.  Examples of forward-looking
statements include, but are not limited to: (a) projections of revenues,
capital expenditures, growth, prospects, dividends, capital structure and other
financial matters; (b) statements of plans objectives of the Company or its
management or Board of Directors; (c) statements of future economic
performance; (d) statements of assumptions underlying other statements and
statements about the Company and its business relating to the future; and (e)
any statements using the words expects, intends, anticipates, may,
plans, projects and estimates, and analogous or similar expressions.  The
Companys ability to predict projected results or the effect of certain events
on the Companys operating results is inherently uncertain.  Therefore, the Company wishes to caution
each reader of this report to carefully consider the following factors, any or
all of which have in the past and could in the future affect the ability of the
Company to achieve its anticipated results and could cause actual results to
differ materially than those discussed herein: (1) ability to attract and
retain customers to purchase its products and services, (2) ability to
commercialize and market products,   
(3)results of research and development, (4) technological advances by
third parties and competition, (5) future capital needs of the Company, (6)
history of operating losses, (7) dependence upon key personnel, and (8) general
economic and business conditions.  The
Company expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forwardlooking statement contained
herein to reflect any change in the Companys expectations with regard thereto
or any change in events, conditions or circumstances on which any such
statement is based   Item 7.  Financial
Statements  See the Consolidated Financial
Statements and related Report of Independent Certified Public Accountants
included herewith as pages F-1 through F-19.  Item 8.  Change in and
Disagreement with Accountants on Accounting and Financial Disclosure  None   6 
    Part III   Item 9.  Directors,
Executive Officers, Promoters and Control Persons   The Directors and Executive Officers of
the Company during the fiscal year ended September 30, 2002 were as follows:  Dr.
Gilbert A. Hegemier, Chairman of the Board of Directors since June 1999; Dr. Michael Perlman, Director, President
and Chief Executive Officer from July 3, 2001 to November 30, 2001 when he
resigned; Edward H. Davis, Director, Executive Vice
President, Chief Financial Officer, General Counsel and Secretary from July 3,
2001 to November 30, 2001 when he resigned;  Gilbert A. Hegemier, Ph.D.  Dr. Hegemier is one of the developers of the
composite overlay technology and has served as the Companys Chairman since
June 1999.  Dr. Hegemier also served as
President of CSI Nevada from December 1998 through June 1999.  Dr. Hegemier has served as a professor at
the University of California, San Diego since 1968, where he currently serves
as a Professor of Structural Engineering and also serves as Co-Director of The
Powell Structural Systems Laboratory. 
Since 1980, Dr. Hegemier has also served as President and CEO of
Trans-Science Corporation where he directed research and development work in
shock wave simulation programs and advanced material models for the Department
of Defense in a wide range of technical areas.   Item 10. 
Executive Compensation  The following
table sets forth information concerning compensation of the former Chief Executive Officers of the
Company and other Directors and Executive Officers who received total annual
compensation in excess of $100,000 for the fiscal years ended September 30,
2002, 2001 and 2000:  ( * indicates
accrued amounts not yet paid)  Name
  
  Position
  
  Fiscal 
  Year
  
  Salary ($)
  
  Consulting
  Fee ($)Dr.Gilbert A
  Hegemier
  
  Chairman & Consultant
  
  2002
  
  
  
  296,413
  *2001
  
  
  
  199,000
  *2000
  
  
  
  130,000Dr. Michael
  Perlman
  
  Former CEO, President, Director & Consultant
  
  2001
  
  
  
  30,000
  *Mark Olson
  
  Former COO, President, Director & Consultant
  
  2001
  
  
  
  34,8002000
  
  
  
  48,385Donald Nicholson
  
  Former CEO & Director
  
  2000
  
  
  
  97,489  Item 11.  Security
Ownership of Certain Beneficial Owners and Management  Currently, Dr. Gilbert A.
Hegemier is the sole Director of the Company. He holds 3,584,242 shares of the
Companys Common Stock, which represents approximately 19.6% beneficial
ownership of the Company.   7 
   Item 12.  Certain
Relationships and Related Transactions  Transactions with Dr. Gilbert A. Hegemier and Affiliates  Dr.
Hegemier is a full-time professor and staff member with the University of
California, San Diego, Department of Engineering, as well as Co-Director of The
Powell Structural Systems Laboratory, which is the Universitys testing
laboratory for materials and technologies similar to the Companys
products.  In that position, he is
responsible to the University and all entities dealing with it to be open, fair
and even handed in his research, testing and public information.  He cannot provide preference to the Company
or its clientele, even though he is the largest single stockholder and principal
of the Company.  In
January 1999, the Company acquired certain intangible assets from Trans-Science
Corporation (TSC), a company under common control through July 7, 2000.  Also in January 1999, TSC sold, assigned and
transferred all of its rights, title and interest in the Earthquake Retrofit
Design Software to the Company.  On February 24, 2000 the
Company issued an unsecured promissory note to borrow up to $75,000 from Dr.
Hegemier.  The note bears an interest
rate of 7% per annum.  During the period
July 20,2000 to November 21, 2000, Dr. Hegemier advanced the Company $31,996,
which was repaid.  On January 8, 2001 the
Company entered into a promissory note with Dr. Hegemier in the amount of
$159,439 with an interest rate of 12% per annum.  As of September 30, 2002 and 2001, there was a principal balance
of $21,830 and $10,696, respectively.  Item 13.  Exhibits and
Reports on Form 8-K  (a)           Exhibits  ExhibitNumber
  
  Description3.1
  
  Articles of Incorporation of the Company, as
  amended(1)3.2
  
  Bylaws of the Company, as amended(1)10.1
  
  License Agreement with UCSD (Case No. SD96-103)(2)10.2
  
  License Agreement with UCSD (Case No. SD96-040)(2)10.3
  
  Share Exchange Agreement(3)10.4
  
  Share Exchange Agreement with and Acquisition of
  TSC(4)10.5
  
  Acquisition of Penultimo, Inc.(5)10.6
  
  Global Strategic Alliance Agreement with Prime (6)23.1
  
  Consent of Independent Accountants99.1
  
  Sarbanes-Oxley Selection 906 Certification ______________  (1)           Incorporated by
reference to the referenced document filed as an exhibit to the Companys
Registration Statement on Form 10SB12G/A, Commission File No. 000-24551,
filed on October 20, 1998.  (2)Incorporated by reference to the
referenced document filed as an exhibit to the Companys Annual Report on Form
10-KSB, Commission File No. 000-24551, filed on January 13, 2000.  (3)Incorporated by reference to the
referenced document filed as an exhibit to the Companys Current Report on Form
8-K, Commission File No. 000-24551, filed on July 14, 2000 and August 31, 2000.   8 
   (4)Incorporated by reference to the
referenced documents related to the Acquisition of TSC and filed on Form 8-K,
Commission File No. 000-24551, on June 26, 2000 and July 25, 2000.  (5)Incorporated by reference to the
referenced document related to the Acquisition of Penultimo, Inc. and filed on
Form 8-K, Commission File No. 000-24551, on September 15, 2000 and amended on
September 18, 2000.  (6)Incorporated by reference to the
referenced document filed as an exhibit to the Companys Annual Report on Form
10-KSB, Commission File No. 000-24551, filed on January 13, 2001.  (b).Reports on Form 8-K.  None.    Signatures  In accordance with
Section 13 or 15(d) of the Securities Exchange Act the Company has caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.  Date: January 13, 2003  Composite Solutions, Inc.By:
  /s/ Gilbert A. HegemierGilbert A. Hegemier, Chairman  Pursuant to the
requirements of the Securities Exchange Act, of 1934 this report has been
signed below by the following person on behalf of the Company and in the
capacity and on the date indicated.   Signature
  
  Capacity
  
  Date/s/ Gilbert A. Hegemier
  
  Chairman of the Board
  
  January 13, 2003Gilbert A. Hegemier    9 
  SECTION
302 CERTIFICATION  I, Dr. Gil Hegemier, certify that: 1. I have reviewed this annual report on Form 10-KSB
of Composite Solutions, Inc.; 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 annual 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
annual report; 4. I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and I have: a) designed such disclosure controls and procedures
to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me 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) presented in this annual report my conclusions
about the effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date; 5. I have disclosed, based on my most recent
evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function): a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in internal
controls; 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; and 6. I have indicated in this annual report whether or
not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of my
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.  Date: January 13, 2003
  
  
  /s/ Dr. Gil HegemierDr. Gil Hegemier, Chairman   10 
   INDEPENDENT AUDITORS
REPORT  To the Board of Directors and Stockholders Composite Solutions Inc. and Subsidiaries  We have audited the
accompanying consolidated balance sheets of Composite Solutions Inc. (a
development stage company) and Subsidiaries as ofSeptember
30, 2002 and 2001, and the related
consolidated statements of operations, shareholders equity and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Companys management. 
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. 
The consolidated financial statements of Composite Solutions, Inc. and
Subsidiaries as of September 30, 1999 and 1998, and for the period October 20,
1997 (inception) to September 30, 1999 were audited by other auditors whose
report dated December 17, 1999, expressed an unqualified opinion on those
statements.  We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America.  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.  In our opinion the
financial statements referred to in the first paragraph present fairly, in all
material respects, the financial position of Composite Solutions Inc. and
Subsidiaries as ofSeptember 30, 2002 and 2001, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.  The accompanying
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 14 to the consolidated
financial statements, the Company has experienced losses since inception and
has a net capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Managements plans in regard to these matters are
also described in Note 14. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.   Peterson &
Co.  San Diego, California December 27, 2002   F-1 
   COMPOSITE
SOLUTIONS, INC AND SUBSIDIARIES (A Development Stage
Company) Consolidated
Balance Sheets  September 30,2002
  
  2001ASSETSCurrent
  assetsCash
  
  $
  50,521
  
  $
  4,204Prepaid expenses
  
  182
  
  761Prepaid income
  taxes
  
  
  
  37Total current
  assets
  
  50,703
  
  5,002Property,
  plant and equipment, net
  
  3,637
  
  11,555Other
  assetsEmployee
  advances
  
  
  
  271Intangible
  assets, net
  
  888,510
  
  1,006,147Deposits
  
  10,071
  
  13,193Total assets
  
  $
  952,921
  
  $
  1,036,168LIABILITIES AND SHAREHOLDERS
  EQUITYCurrent
  liabilitiesAccounts payable
  
  $
  909,747
  
  $
  346,520Billings in
  excess of costs
  
  44,431
  
  Employee payable
  
  126,438
  
  205,878Related party
  payable
  
  50,000
  
  50,000Line of credit
  
  51,534
  
  51,396Related party
  notes payable
  
  145,943
  
  242,581Accrued expenses
  
  258,897
  
  140,830Income taxes
  payable
  
  5,600
  
  3,200Total current
  liabilities
  
  1,592,590
  
  1,040,405Shareholders
  equityPreferred stock;
  $0.0001 par value; 10,000,000shares
  authorized; 0 shares issued and outstanding
  
  
  
  Common stock;
  $0.0001 par value; 50,000,000shares
  authorized; 18,292,044 and 14,208,464shares issued
  and outstanding at September 30, 2002and 2001,
  respectively
  
  1,829
  
  1,421Additional paid
  in capital
  
  3,570,324
  
  3,039,422Accumulated
  deficit
  
  (4,211,822
  )
  (3,045,080
  )Total
  shareholders equity
  
  (639,669
  )
  (4,237
  )Total
  liabilities and shareholders equity
  
  $
  952,921
  
  $
  1,036,168  The accompanying notes
are an integral part of these financial statements.   F-2 
   COMPOSITE
SOLUTIONS, INC AND SUBSIDIARIES (A Development Stage
Company) Consolidated
Statements of Operations   Year Ended
  September 30,
  
  October 20, 1997
  (Inception) to
  September 30,2002
  
  2001
  
  2002Revenues
  
  $
  227,439
  
  $
  79,207
  
  $
  309,534Cost of sales
  
  339,228
  
  41,048
  
  385,915Gross profit (loss)
  
  (111,789
  )
  38,159
  
  (76,381
  )ExpensesConsulting fees
  
  299,903
  
  386,978
  
  1,042,966Depreciation and amortization
  
  59,097
  
  216,253
  
  327,327General and administrative expenses
  
  241,742
  
  232,674
  
  901,067Organizational expenses
  
  
  
  
  
  514Professional fees  other
  
  3,282
  
  89,237
  
  344,906Professional fees  related party
  
  
  
  34,955
  
  60,839Salaries
  
  322,892
  
  327,538
  
  1,225,029Impairment loss
  
  92,476
  
  144,772
  
  237,248Total expenses
  
  1,019,392
  
  1,432,407
  
  4,139,896Loss from operations
  
  (1,131,181
  )
  (1,394,248
  )
  (4,216,277
  )Other income (expense)Interest income
  
  
  
  2
  
  8,363Interest income  forgiveness of debt
  
  
  
  
  
  17,825Other income
  
  10,800
  
  10,800Gain on forgiveness of debt
  
  
  
  3,400
  
  8,261Other expenses
  
  (576
  )
  (7,205
  )
  (7,781
  )Loss on disposal of assets
  
  
  
  (190
  )
  (190
  )Interest expense
  
  (42,785
  )
  (45,841
  )
  (113,969
  )Loss on forgiveness of debt
  
  
  
  
  
  (11,021
  )Total other income (expense)
  
  (32,561
  )
  (49,834
  )
  (87,712
  )Loss before provision for income taxes
  
  (1,163,742
  )
  (1,444,082
  )
  (4,303,989
  )Provision for income taxes
  
  3,000
  
  7,728
  
  13,128Net loss from continuting operations
  
  (1,166,742
  )
  (1,451,810
  )
  (4,317,117
  )Discontinued operation(Loss) income from discontinued operations
  
  
  
  (93,267
  )
  (72,460
  )Gain on sale of subsidiary
  
  
  
  177,755
  
  177,755
  
  84,488
  
  105,295Net loss
  
  $
  (1,166,742
  )
  $
  (1,367,322
  )
  $
  (4,211,822
  )Loss per common share, basic and dilutedNet loss from continuing operations
  
  $
  (0.07
  )
  $
  (0.10
  )
  $
  (0.26
  )(Loss)income from discontinued operation
  
  $
  
  
  $
  (0.01
  )
  $
  (0.01
  )Gain on sale of subsidiary
  
  $
  
  
  $
  0.01
  
  $
  0.01Net loss
  
  $
  (0.07
  )
  $
  (0.10
  )
  $
  (0.26
  )Weighted average number of shares, basic and diluted
  
  17,549,692
  
  13,582,193
  
  16,326,140   The accompanying notes
are an integral part of these financial statements.  F-3 
   COMPOSITE
SOLUTIONS, INC AND SUBSIDIARIES (A Development Stage
Company) Consolidated
Statements of Shareholders Equity  DeficitAccumulatedDuring the
  
  TotalCommon Stock
  
  Additional
  
  Development
  
  ShareholdersShares
  
  Amount
  
  Paid in Capital
  
  Stage
  
  EquityBalance, October 20, 1997 (inception)
  
  
  
  $
  
  
  $
  
  
  $
  
  
  $
  Common stock issued in exchange for services
  
  15,233,910
  
  1,521
  
  (2,120
  )
  
  
  (599
  )Common Stock issued for cash
  
  5,962,500
  
  599
  
  18,335
  
  
  
  18,934Net loss
  
  
  
  
  
  
  
  (12,193
  )
  (12,193
  )Balance, September 30, 1998
  
  21,196,410
  
  2,120
  
  16,215
  
  (12,193
  )
  6,142Common stock contributed
  
  (7,896,410
  )
  (790
  )
  790
  
  
  
  Pre-acquisition income
  
  
  
  
  
  
  
  47
  
  47Common stock issued in acquisition
  
  1,000,000
  
  100
  
  47
  
  (47
  )
  100Common stock issued for payment of note payable
  
  200,000
  
  20
  
  999,980
  
  
  
  1,000,000Net loss
  
  
  
  
  
  
  
  (574,850
  )
  (574,850
  )Balance, September 30, 1999
  
  14,500,000
  
  1,450
  
  1,017,032
  
  (587,043
  )
  431,439Common stock surrendered
  
  (4,300,000
  )
  (430
  )
  430
  
  
  
  Common Stock issued for cash
  
  668,333
  
  67
  
  759,933
  
  
  
  760,000Pre-acquisition income
  
  
  
  
  
  
  
  50,877
  
  50,877Common stock issued in acquisitions
  
  1,103,371
  
  110
  
  808,668
  
  (50,877
  )
  757,901Common stock issued in exchange for services
  
  300,000
  
  30
  
  173,970
  
  
  
  174,000Common stock issued for finders fee
  
  100,000
  
  10
  
  (10
  )
  
  
  Net loss
  
  
  
  
  
  
  
  (1,090,715
  )
  (1,090,715
  )Balance, September 30, 2000
  
  12,371,704
  
  1,237
  
  2,760,023
  
  (1,677,758
  )
  1,083,502Common stock surrendered
  
  (150,000
  )
  (15
  )
  (93,735
  )
  
  
  (93,750
  )Common Stock issued for cash
  
  725,000
  
  73
  
  244,927
  
  
  
  245,000Common stock issued in exchange for services
  
  1,061,760
  
  106
  
  128,227
  
  
  
  128,333Common stock issued for finders fee
  
  200,000
  
  20
  
  (20
  )
  
  
  Net loss
  
  
  
  
  
  
  
  (1,367,322
  )
  (1,367,322
  )Balance, September 30, 2001
  
  14,208,464
  
  1,421
  
  3,039,422
  
  (3,045,080
  )
  (4,237
  )Common stock issued for cash and paid subscription
  
  2,339,047
  
  234
  
  227,266
  
  
  
  227,500Common stock issued for compensation
  
  1,183,149
  
  118
  
  206,391
  
  
  
  206,509Common stock issued for interest due
  
  47,350
  
  5
  
  5,677
  
  
  
  5,682Common stock issued in exchange for services
  
  514,034
  
  51
  
  91,568
  
  
  
  91,619Net loss
  
  
  
  
  
  
  
  (1,166,742
  )
  (1,166,742
  )Balance, September 30, 2002
  
  18,292,044
  
  $
  1,829
  
  $
  3,570,324
  
  $
  (4,211,822
  )
  $
  (639,669
  )  The accompanying notes
are an integral part of these financial statements.  F-4 
   COMPOSITE
SOLUTIONS, INC AND SUBSIDIARIES (A Development Stage
Company) Consolidated
Statements of Cash Flow   October
  20, 1997Year Ended
  
  (Inception)
  toSeptember
  30,
  
  September
  30,2002
  
  2001
  
  2002Cash flows from operating activitiesNet loss
  
  $
  (1,166,742
  )
  $
  (1,367,322
  )
  $
  (4,211,822
  )Adjustments to reconcile net loss to
  net cash used in operating activities:Depreciation and amortization
  
  54,803
  
  216,253
  
  323,300Loss on disposal of assets
  
  
  
  190
  
  190Common stock issued in exchange for services
  
  91,619
  
  33,926
  
  302,180Common stock issued for interest due
  
  5,682
  
  5,682Common stock issued for compensation
  
  206,509
  
  94,407
  
  301,016Pre-acquisition income
  
  
  
  
  
  47Loss from discontinued operation
  
  
  
  93,267
  
  93,267Gain on disposal of subsidiary
  
  
  
  (177,755
  )
  (177,755
  )Impairment loss
  
  92,476
  
  144,772
  
  237,248(Increase) decrease in operating assetsAccounts receivable
  
  
  
  1,650
  
  17,493Related party receivable
  
  
  
  (22,021
  )
  (22,021
  )Inventory
  
  
  
  
  
  (2,055
  )Prepaid expenses
  
  616
  
  771
  
  18Employee advances
  
  271
  
  (271
  )
  Deposit
  
  3,122
  
  (5,820
  )
  (10,375
  )Increase (decrease) in operating liabilitiesAccounts payable
  
  483,787
  
  437,904
  
  1,062,640Billings in excess of costs
  
  44,431
  
  44,431Forgiveness of accounts payable
  
  
  
  (3,400
  )
  (3,400
  )Accrued expenses
  
  129,092
  
  151,999
  
  290,723Income taxes payable
  
  2,400
  
  800
  
  9,552Long term obligation for accounts payable
  
  
  
  
  
  Net cash used in operating activities
  
  (51,934
  )
  (400,650
  )
  (1,739,641
  )Cash flows from investing activitiesPurchase of property, plant and equipment
  
  
  
  (1,956
  )
  (29,660
  )Acquisition of intangible assets
  
  (21,724
  )
  (59,574
  )
  (625,858
  )Loans made to related party
  
  
  
  
  
  (10,000
  )Repayments of loans to related party
  
  
  
  
  
  10,000Acquisition of subsidiary
  
  
  
  
  
  (500,000
  )Cash of discontinued operation
  
  
  
  (19,999
  )
  (19,999
  )Cash of acquired subsidiaries
  
  
  
  
  
  17,261Net cash used in investing activities
  
  (21,724
  )
  (81,529
  )
  (1,158,256
  )   The accompanying notes
are an integral part of these financial statements.   F-5 
    October
  20, 1997Year Ended
  
  (Inception)
  toSeptember
  30,
  
  September
  30,2002
  
  2001
  
  2002Cash flows from financing activitiesBank overdraft
  
  
  
  (1,214
  )
  Increase (decrease) in line of credit
  
  138
  
  (98
  )
  800Proceeds from note payable to officer/employee
  
  37,900
  
  217,765
  
  282,165Payments of note payable to officer
  
  (145,563
  )
  
  
  (147,247
  )Proceeds from convertible debenture
  
  
  
  
  
  500,000Proceeds from notes payable
  
  
  
  
  
  1,064,500Proceeds from issuance of common stock, net
  
  227,500
  
  245,000
  
  1,248,200Net cash provided by financing activities
  
  119,975
  
  461,453
  
  2,948,418Net (decrease) increase in cash
  
  46,317
  
  (20,726
  )
  50,521Cash, beginning of period
  
  4,204
  
  24,930
  
  Cash, end of period
  
  $
  50,521
  
  $
  4,204
  
  $
  50,521Supplementary disclosuresInterest paid
  
  $
  180
  
  $
  666
  
  $
  2,351Income taxes paid
  
  $
  600
  
  $
  7,728
  
  $
  8,328Non-cash financing and investing activitiesNote payable paid through issuance of common stock
  
  $
  
  
  $
  
  
  $
  1,000,000Investment in subsidiary
  
  $
  
  
  $
  
  
  $
  796,732Interest on note payable
  
  $
  
  
  $
  
  
  $
  17,825Forgiveness of interest on note payable
  
  $
  
  
  $
  
  
  $
  (17,825
  )Inter-company receivable released in sale of subsidiary
  
  $
  
  
  $
  22,021
  
  $
  22,021Common stock acquired in sale of subsidiary
  
  $
  
  
  $
  (93,750
  )
  $
  (93,750
  )8% debenture released in sale of subsidiary
  
  $
  
  
  $
  (500,000
  )
  $
  (500,000
  )Note payable released in sale of subsidiary
  
  $
  
  
  $
  (64,500
  )
  $
  (64,500
  )Accrued interest released in sale of subsidiary
  
  $
  
  
  $
  (28,867
  )
  $
  (28,867
  )   The accompanying notes
are an integral part of these financial statements.    F-6 
  COMPOSITE
SOLUTIONS, INC. (A Development Stage
Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS   Note 1- Summary of
Significant Accounting Policies  The Company  Composite Solutions Inc. (the Company), formerly JS
Business Works, Inc., was incorporated in the state of Florida on October 20,
1997.  The Company has two wholly owned
subsidiaries: Composite Solutions Inc., incorporated in the state of Nevada on
December 8, 1998, and Trans-Science Corporation, incorporated in the state of
California on September 15, 1980. During the period August 16, 2000 to March
31, 2001, the Company had another wholly owned subsidiary, Penultimo, Inc. dba
Anchor Reinforcements which was incorporated in the state of California on
January 13, 1992.   Composite Solutions
Inc. and subsidiaries were organized to develop, manufacture and market high
technology products and processes to be utilized in key areas of existing and
new construction.  The Company is in the development stage and its
efforts through September 30, 2002
have been principally devoted to raising additional capital and negotiating
with potential key personnel and leasing facilities.  There is no assurance that any benefit will result from such
activities.  The Company will continue
to incur expenses and losses as it pursues its development efforts.  Basis of Presentation  The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries.  All significant inter-company transactions
have been eliminated in consolidation.  Cash and
Cash Equivalents  For purposes of the statements of cash
flows, the Company considers cash instruments with original maturities of less
than three months to be cash equivalents.  Start-up Costs  Costs of start-up activities, including
organization costs, are expensed as incurred, in accordance with Statement of
Position (SOP) 98-5.  Advertising  Advertising costs are charged to
expense as incurred.   F-7 
   Note 1 - Summary of Significant Accounting Policies(Continued)  Property, Plant and Equipment  Property, plant and equipment are recorded at cost less
depreciation. Depreciation is accounted for on the straight-line and
accelerated methods based on the estimated useful lives of the related assets.Betterments and large renewals,
which extend the life of an asset, are capitalized whereas, repairs and
maintenance, which do not increase the useful lives of property and equipment
are charged to operations as incurred.  Intangible Assets  Other assets include intangibles such as licensed
technology, computer software and goodwill.  
In June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 142, Goodwill and Other Intangible
Assets.SFAS No. 142
establishes new guidelines for accounting for goodwill and other intangible
assets.  The Company implemented the
provisions of SFAS No. 142 on October 1, 2001. 
Since adoption, existing goodwill is no longer amortized but instead
will be assessed for impairment at least annually.  Other intangible assets are recorded at historical cost less
amortization on the straight line method based on estimated useful lives.  Revenue Recognition  Revenue from the sale of product is recognized when
materials are shipped from stock. 
Revenues derived from contracts are accounted for on the
percentage-of-completion method of accounting. 
Revenue is recognized based on a ratio of the actual cost of work
performed to a current estimate of the total cost to complete a respective
contract.  Expected profits realized on contracts are based on
the difference between estimates of total contract revenues and costs of completion.  These estimates are reviewed and revised
periodically throughout the contract term, and adjustments to profits resulting
from such revisions are recorded in the accounting period in which the
revisions are made.  Profits are
recognized as the contract phase of the work is completed.  Losses on contracts are recorded in full as
they are identified.  Income
Taxes  The Company accounts for
income taxes under SFAS 109, Accounting for Income Taxes. This
statement requires an asset and liability approach to account for income
taxes.  The Company provides deferred
income taxes for temporary differences that will result in taxable or
deductible amounts in future years based on the reporting of certain costs in
different periods for financial and income tax purposes.    F-8 
   Note 1 - Summary of Significant Accounting Policies(Continued)  Use of Estimates  The presentation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during
the periods presented.  Actual results
may differ significantly from those estimates.  Fair Values of Financial Instruments  Statement of
Financial Accounting Standards No. 107, Disclosures
about Fair Value of Financial Instruments,requires disclosure of
fair value information about financial instruments, whether or not recognized
in the balance sheet.  In cases where
quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.  In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instruments.
Statement No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. 
Accordingly, the aggregate fair amounts presented do not represent the
underlying value of the Company.  The following
methods and assumptions were used to estimate the fair value of each class of
financial instrument:  Cash
and cash equivalents: The carrying amounts reported in the balance sheet
for cash and cash equivalents approximates those assets fair value.  Accounts
receivable and accounts payable:  The carrying
amounts reported in the balance sheet for accounts receivable and accounts
payable approximates those assets and liabilities fair value.  Notes
receivable:  The carrying amount of the note receivable
approximates the assets fair value.  Short-term
and long-term obligations:  The carrying amounts of the
line of credit and short-term notes payable approximates those obligations
fair value.   The fair value of the
convertible debenture is estimated by discounting the future cash flows using
the current rates at which similar obligations would be made to borrowers with
similar credit ratings and for the same remaining maturities.  Accrued
interest receivable and accrued expenses:The carrying amounts of accrued interest and accrued
expenses approximate their fair values.    F-9 
   Note 1-Summary of Significant Accounting
Policies(Continued)  Stock-Based
Compensation  In accordance with the provisions of SFAS
123, the Company follows the intrinsic value based method of accounting as
prescribed by APB 25, Accounting for Stock Issued to Employees,
for its stock-based compensation.  NOTE 2-ACQUISITIONS  On June 23, 2000 the Company entered into a Share
Exchange Agreement with Trans-Science Corporation, a California corporation and
a company under common control.  On July
7, 2000 the Company completed its acquisition. 
The acquisition, recorded under the purchase method of accounting,
included the purchase of all of the outstanding shares of common stock of
Trans-Science Corporation in exchange for 953,371 shares of the Companys
common stock at $0.75 per share which resulted in a purchase price of $715,028.
The liabilities assumed were in excess of the historical cost of the assets
acquired at the date of acquisition and the total amount of the purchase price
was recorded as goodwill.  On August 16, 2000 the Company entered into a Share
Exchange Agreement with Penultimo, Inc. dba Anchor Reinforcements.  On August 31, 2000 the Company completed the
acquisition.  The acquisition, recorded
under the purchase method of accounting, included the purchase of all of the
outstanding shares of common stock of Penultimo, Inc. in exchange for 150,000
shares of the Companys common stock at $0.625 per share plus $500,000 in cash
which resulted in a total purchase price of $593,750.  A portion of the purchase price was allocated to assets acquired
and liabilities assumed based on estimated fair market value at the date of acquisition while the balance
of  $291,050 was recorded as goodwill.  NOTE 3-DISCONTINUED OPERATIONS  On March 31, 2001 the
Company entered into an Agreement to transfer all of the outstanding shares of
Pemultimo, Inc. to an individual in exchange for 150,000 shares of the
Companys common stock originally valued at $93,750, the release of certain
inter-company receivables in the amount of $22,021, an 8% convertible debenture
note in the amount of $500,000 plus accrued interest of $28,199, and notes
payable in the amount of $64,500, plus accrued interest of $4,441.    F-10 
  NOTE 4-PROPERTY, PLANT AND
EQUIPMENT  Property,
plant and equipment consist of the following at September 30, 2002 and 2001:  2002
  
  2001Leasehold
  improvements
  
  $
  1,407
  
  $
  1,407Office furniture
  and equipment
  
  181,311
  
  181,311Software
  
  13,983
  
  13,983196,701
  
  196,701Accumulated
  depreciation
  
  (193,064
  )
  (185,146
  )Property and
  equipment, net
  
  $
  3,637
  
  $
  11,555  Depreciation expense for the years ended September 30, 2002 and 2001 was $7,918
and $18,052, respectively.  Note 5-Intangible Assets  On April 20, 1999 the Company entered into a license
agreement with the Regents of the University of California San Diego (UCSD) for
a license under patent rights to make, use, sell, offer for sale, import
licensed products, practice licensed methods, and to use certain technology.
The agreement terminates on the later of the expiration date of the
longest-lived Patent Rights or the twenty-first anniversary of effective
date.  A license fee of $40,000 was paid
upon executionof the agreement.  The
Company also paid for one half of all past and future patent costs.  The Company does not expect any future cash
flow to be generated and intends to cancel this license agreement.  At September 30, 2002, Patent Rights were
impaired and a loss was recognized in the amount of $78,497.  The license was being amortized over 17
years and at September 30, 2002 and
2001 this license has a net value of $0 and $58,497, respectively.  Amortization expense for the years ended September 30, 2002 and 2001 was $0 and
$8,520, respectively.  On August 4, 1999 the Company entered into a second license
agreement with UCSD for a license under patent rights to make, use, sell, offer
for sale, import licensed products, to practice licensed methods, and to use
certain technology. The agreement terminates on the later of the expiration
date of the longest-lived Patent Rights or the twenty-first anniversary of the
effective date. A license fee in the amount of $5,000 was paid upon execution
of the agreement.  In addition, the
Company is obligated to pay for one-half of all past and future patent
costs.  The license is being amortized
over 20 years and at September 30, 2002
and 2001 this license has a net value of $91,554 and $94,715,
respectively.  Amortization expense for
the years ended September 30, 2002 and
2001 was $4,885 and $8,423, respectively.  Under the terms of the agreement, the Company must pay to the
licensor a royalty of 1.5% on net sales of the licensed products.    F-11 
   Note 5 - Intangible Assets(Continued)  At September
30, 2002 and 2001 patent costs payable on the license agreements was
$77,776 and $17,445, respectively.  In January 1999 the Company acquired certain assets
from Trans-Science Corporation, a company under common control and subsequently
acquired on July 7, 2000. Fire test data concerning overlay systems in the form
of technical reports prepared by an independent laboratory in New York
performed prior to the Companys inception was purchased for cash in the amount
of $13,979 from Trans-Science Corporation at its cost.  At September 30, 2002 these assets were
impaired and a loss was recognized in the amount of $13,979.  In January 1999 Trans-Science Corporation sold,
assigned and transferred all of its rights, title and interest in the
Earthquake Retrofit Design Software to the Company for cash in the amount of
$330,000.   In addition, during the year
ended September 30, 1999, the Company paid Trans-Science Corporation $90,000
for upgrade services on this software. 
The Software was placed in service during the year ended September 30 ,
2002 and is being amortized over a period of ten years.  Amortization expense for the years ended September 30, 2002 and 2001 was
$42,000 and $0, respectively.  On July 7, 2000 the Company acquired 100% of the
outstanding shares of common stock of Trans-Science Corporation, a company
under common control through July 7, 2000. 
The Company recorded goodwill in the amount of $751,636 representing the
excess of the cost to acquire Trans-Science Corporation over the historical
cost of the net assets acquired.  The
goodwill was being amortized over a period of five years.  Amortization expense for the year ended
September 30, 2001 was $152,158.  On
October 1, 2001, the Company adopted SFAS No. 142 and since adoption, goodwill
is no longer amortized.  At September
30, 2002 and 2001 this goodwill has a net value of $418,956 and $418,956,
respectively.  Note 6 - Shareholders Equity  Preferred
Stock  The Company has authorized the issuance of ten million
(10,000,000) shares of preferred stock, having one hundredth of a cent ($.0001)
par value per share.  The Board of
Directors of the Company has discretion to determine the rights, preferences
and privileges of this preferred stock. 
There are no shares of preferred stock issued and outstanding at September 30, 2002 and 2001,
respectively.  Common
Stock  In December 1999, a trustee shareholder surrendered
4,300,000 shares, which have been canceled. 
During the period December 1999 to June 2000 the Company issued 668,333
shares of common stock under a private placement in exchange for $760,000 in
cash, net of offering costs.  On July 7,
2000 the Company issued 953,371 shares of common stock valued   F-12 
   Note 6 - Capitalization(Continued)  Common
Stock (Continued)  at $715,028 in exchange for 100% of the outstanding
shares of common stock of Trans-Science Corporation.  On August 31, 2000 the Company issued 150,000 shares of common
stock valued at $93,750 plus $500,000 in cash in exchange for 100% of the
outstanding shares of common stock of Penultimo, Inc. dba Anchor
Reinforcements.  On September 15, 2000
the Company issued 100,000 shares of common stock as finders fees.  On September 28, 2000 the Company issued
300,000 shares of common stock valued at $174,000 in exchange for services. On
March 31, 2001, a shareholder surrendered 150,000 shares of common stock valued
at $93,750.  Also on March 31, 2001, the
Company issued 200,000 shares of common stock as finders fees. At September
30, 2001, the Company issued 1,061,760 shares of common stock valued at
$128,333 in exchange for services. 
During the period October 2000 through December 2000 the Company issued
725,000 shares of common stock valued at $245,000 in private placement. During
year ended September 30, 2002, the Company issued 514,034 shares of common
stock valued at $91,619 in exchange for services, 1,183,149 shares of common
stock for compensation valued at $206,509, 47,350 shares of common stock valued
at $5,682 for interest due, and 2,339,047 shares of common stock valued at
$227,500 for cash and subscription paid. 
There are 18,292,044 and 14,208,464 shares of common stock issued and
outstanding at September 30, 2002 and 2001, respectively.  Stock Incentive Plan  On December 1,
2000 the Company and subsidiaries Board of Directors adopted the 2000 Stock
Incentive Plan pursuant to which incentive stock options or nonstatutory stock
options to purchase up to 1,000,000 shares of common stock may be granted to
employees, directors and consultants. 
Stock options may be exercisable up to ten years from the grant
date.  Stock options vest commencing
April 2001, over service periods that range from zero to five years.  WeightedAverageExercise
  
  Number of
  
  VestedPrice
  
  Shares
  
  SharesOutstanding,
  October 20, 1997
  
  
  
  
  
  Granted
  
  $
  .40
  
  120,000
  
  Cancelled
  
  $
  .40
  
  (120,000
  )
  Outstanding,
  March 31, 2001
  
  
  
  
  
  Granted
  
  $
  .10
  
  100,000
  
  Outstanding,
  June 30, 2001
  
  $
  .10
  
  100,000
  
  Outstanding,
  September 30, 2001
  
  $
  .10
  
  100,000
  
  Granted
  
  $
  .10
  
  171,428
  
  171,428Outstanding, September 30, 2002
  
  $
  .10
  
  271,428
  
  171,428    F-13 
    Note 6-Capitalization(Continued)  Stock Incentive
Plan (Continued)  The Company accounts for stock-based
compensation using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees,
under which no compensation cost for stock options is recognized for the stock
options awards granted at or above fair market value.  For the year ended September 30, 2002, the Company did not
recognize any compensation expense.  Note 7-Line of Credit  The Company has a business secured open line of credit
with a bank in the amount of $50,000. The line of credit bears interest at the
prime rate, as published in the Wall Street Journal, plus 2.5% (9% at
September 30, 2001).  At September 30, 2002 and 2001 balances
due were $51,534 and $51,396, respectively. Balances included accrued interest
of $316 and $333 for the years ended September 30, 2002 and 2001, respectively.  Note 8 - Notes Payable  On November 20, 2001, the
Company entered into a Secured Promissory Note with Marathon Development
Company, Inc. (Marathon) in the amount of $105,000, including $5,000 of
interest at a rate of 10% per annum. 
The note is secured by the Companys assets and is personally guaranteed
by a director of the Company.  The note
is due on the earlier of February 20, 2002 or the date on which the director
completes a refinance of certain real property.  In addition, if the note is not paid when due, the Company will
issue 10,000 shares of common stock per month to Marathon, until the note is
paid.  At September 30, 2002 there is a
balance due in the amount of $80,500 plus accrued interest in the amount of
$5,502, for the total of $86,002 and the Company has issued 42,350 shares of
common stock valued at $10,571.  Note 9 - Commitments  The Company and subsidiaries lease its office under an
operating lease agreement.  Future
minimum payment under the lease is as follows:  Year EndingSeptember 30,2003
  
  $
  48,5462004
  
  37,491Thereafter
  
  $
  86,037    F-14 
   Note 9 - Commitments(Continued)  Rental expense was $44,352 and $97,814 for the years
ended September 30, 2002 and 2001,
respectively, and $250,483 for the period from October 27, 1997(inception) to
September 30, 2002.  Note 10 - Earnings Per Share  The computations of basic and diluted earnings
per share from continuing operations for the years ended September 30, 2002 and
2001 and the period October 27, 1997 (inception) to September 30, 2002 were as
follows:  October
  20, 1997Year Ended
  
  (Inception)
  toSeptember 30,
  
  September 30,2002
  
  2001
  
  2002Loss
  per common share, basicNumeratorNet loss from
  continuing operations
  
  $
  (1,166,742
  )
  $
  (1,451,810
  )
  $
  (4,245,985
  )(Loss) income
  from
  discontinued operation
  
  
  
  (93,267
  )
  (72,460
  )Gain on sale of
  subsidiary
  
  
  
  177,755
  
  177,755Net loss
  
  $
  (1,166,742
  )
  $
  (1,367,322
  )
  $
  (4,351,280
  )DenominatorWeighted-average
  shares
  
  17,549,692
  
  13,582,193
  
  16,326,140  At September 30, 2002 and
2001, 175,310 and
72,712 weighted-average shares of common stock issuable under stock options,
respectively, were not included in the calculation of fully diluted earnings
per share because their effects would have been antidilutive. Therefore,
diluted earnings per share were the same as basic earnings per share at September 30, 2002 and 2001.   F-15 
   Note 11 - Income Taxes  At September 30, 2002, the Company has a net operating
loss carryforwards for tax purpose of approximately $1,350,000 which expires
through the year 2022. The Internal Revenue Code contains provisions which may
limit the loss carryforward available if significant changes in shareholder
ownership of the Company occur.  The components of the provision for income taxes for
the years ended September 30, 2002 and
2001 are as follows:  2002
  
  2001CurrentFederal
  
  $
  
  
  $
  68State
  
  3,000
  
  7,6603,000
  
  7,728DeferredFederal
  
  
  
  State
  
  
  
  
  
  Provision for
  income taxes
  
  $
  3,000
  
  $
  7,728  The components of the net deferred tax assets were as
follows:  September
  30,2002
  
  2001Deferred tax
  assetsStart-up costs
  
  $
  1,248,971
  
  $
  714,432Organization
  costs
  
  398
  
  398Syndication
  costs
  
  1,168
  
  1,168Penalties
  
  29
  
  Impairment loss
  
  62,020
  
  Accrued
  vacation/other accruals
  
  4,845
  
  Depreciation/amortization
  
  9,691
  
  Net operating
  loss
  
  538,379
  
  592,4961,865,501
  
  1,308,494Deferred tax
  liabilitiesState income
  taxes
  
  126,188
  
  91,6201,739,313
  
  1,216,874Less valuation
  allowance
  
  (1,739,313
  )
  (1,216,874
  )Net deferred tax
  assets
  
  $
  
  
  $
      F-16 
   Note 12 - Related
Party Transactions  Intangible Assets  In January 1999 the Company acquired certain
intangible assets from Trans-Science Corporation, a company under common
control through July 7, 2000.  Also in
January 1999, Trans-Science Corporation sold, assigned and transferred all of
its rights, title and interest in the Earthquake Retrofit Design Software to
the Company.  Stock-Based Compensation  During the years ended September 30, 2002 and 2001, the Company issued 1,183,149 and
643,937 shares of common stock with value of $206,508 and $94,407,
respectively, to certain employees in exchange for compensation.  Notes Payable  On February 24, 2000 the Company issued an unsecured
promissory note to borrow up to $75,000 from the director. The note bears an
interest rate of 7% per annum on the outstanding advances.  During the period July 20, 2000 to November
21, 2000, the director advanced the Company $31,996, which was repaid, and as
of September 30, 2002 and 2001 there was no balance due.  In October and November of 2000, an officer advanced
the Company $5,680. The loan was paid in full at September 30, 2001.  On January 8, 2001, the Company entered into a
promissory note with an officer in the amount of $159,439. Principal is to be
advanced in various amounts and will accrue interest at 12%. The principal and
interest are to be paid nine months from the date of latest advance. As of
September 30, 2002 and 2001, there was a principal balance outstanding in the
amount of $ 35,439 and $159,439 and accrued interest in the amount of $21,830
and $10,696, respectively.  On January 15, 2001, the Company issued a promissory
note payable to an employee in the amount of $10,203 for various advances to
the Company. The Company paid back the note in full within 30 days with no interest
charged.  On April 20, 2001, the Company issued a promissory
note to an officer for amount of $56,965. Principal is to be advanced in
various amounts and will accrue interest at 12%. The principal and interest are
to be paid nine months from the date of the latest advance.  As of September 30, 2002 and 2001, there was
a principal balance outstanding in the amount of $61,782 and $45,445 and
accrued interest in the amount of $6,202 and $1,663, respectively.  On April 23, 2001, the Company issued a promissory
note payable to an employee in the amount of $41,945. The principal is to be
advanced to the Company in various amounts. 
As    F-17 
   Note 12 - Related Party Transactions(Continued)  Notes
Payable (Continued)  of September 30, 2002 and 2001, there was a principal
balance outstanding in the amount of $33,376 and $36,912 and accrued interest
in the amount of $4,442 and $1,578, respectively.  Principal and interest at 12% are to be paid nine months from the
date of the latest advance.  During the year ended September 30, 2002 an employee
loaned the Company a total of $1,782. 
As of September 30, 2002 there is a $0 balance due.  During the year ended September 30, 2002 an officer
loaned the Company a total of $400 to cover operating expenses.  As of September 30, 2002 there is a $0
balance due.  On January 17, 2002, the Company issued a
promissory note payable to a shareholder in the amount of $10,000, plus
interest at a rate of 10% per annum. 
The principal is to be advanced to the Company in various amounts.  The accrued interest shall be paid in the
Companys common stock each quarter. 
The note is due on January 17, 2003. 
As of September 30, 2002, principal in the amount of $10,000 was
outstanding.  As of September 30, 2002
theCompany has
accrued a liability to issue 2,520 shares of common stock valued at $252.  On June 17, 2002, the Company issued a promissory note
payable to a shareholder in the amount of $3,000, plus interest at a rate of
10% per annum.  The note is due on July
17, 2002.  At September 30, 2002 there
was a principal balance outstanding in the amount of $3,000 and accrued
interest in the amount of $95.  On July 23, 2002, the Company issued a promissory note
payable to a shareholder in the amount of $5,000, plus interest at a rate of 8%
per annum.  The note is due on July 24,
2003. At September 30, 2002 there was a principal balance outstanding in the
amount of $5,000 and accrued interest in the amount of $76.  An officer of the Company loaned $1,185 to
Trans-Science Corporation to cover operating costs. This advance was
outstanding at September 30, 2002.  Consulting Agreements  The Company has several consulting
agreements with shareholders and officers for management, marketing and technical
services. Consulting fee for years ended September 30, 2002 and 2001 were $299,903 and $386,978,
respectively.  Representation and
Advisory Agreement  On March 6, 2001, the Company entered
into a Representation and Advisory Agreement (the Agreement) with AF Capital
and Ace International Domaine (collectively referred as AFA) for corporate
financing and investment advisory services. According to the   F-18 
   Note 12 - Related Party Transactions(Continued)  Representation and Advisory
Agreement (Continued)  agreement, the Company would pay a
non-refundable engagement retainer of $50,000, of which $15,000 was payable on
or before March 14, 2001 with the balance of $35,000 payable in full on April
15, 2001. In addition the Agreement required the Company to make monthly
retainer of $10,000 for twelve months beginning on April 1, 2001. Total amount
of such retainers shall be payable in full upon the Company receiving at least
$2,000,000 in financing. The Company is also required to pay a representation
and placement fee equal to 10% of the amount of capital raised, and warrants to
purchase shares of common stock of the Company equal to 15% of the number of
shares of common stock and common stock equivalents issued pursuant to the
Agreement.  Effective July 18, 2001, the Agreement
was terminated by the Company. 
According to the terms of the Agreement, in the event of termination,
the Company would not be liable to pay the monthly payments of $10,000 after
the termination date.  On July 3, 2001 Michael Perlman,
president and chief executive officer of Ace International Domaine was
appointed president and chief executive officer of the Company.  Initial compensation for prior and
continuing services in the amount of $17,500 will offset the $35,000 due to Ace
International Domaine.  On November 30, 2001, Michael Perlman
resigned from the Company.  The $17,500
balance of the non-refundable engagement retainer remains an unpaid liability
of the Company at September 30, 2002.  Note 13 - Strategic Alliance Agreement  On December 7, 2000 the
Company entered into a Global Alliance Agreement (the Agreement) with The
Prime Group (Prime) located in Seoul, Korea. 
According to the terms of the Agreement, the Company would receive a 15%
equity position in The Prime Group.  The
Prime Group entered into a subscription agreement to purchase between 4,166,667
and 5,000,000 shares of the Companys common stock for cash in the amount of $2,000,000.  The first 2,500,000 shares of common stock
was to be equally issued quarterly at $0.40 per share for a total consideration
of $1,000,000.  A second 2,500,000
shares of common stock was to be issued at $0.40 per share if payment was
received by May 31, 2001 or 1,666,667 was to be issued at $0.60 per share if
payment was received after May 31,2001.  In December 2000, the Company received $250,000
representing a subscription for 625,000 shares of common stock.  On January 4, 2001 the Company issued
500,000 shares of common stock valued at $200,000.  However, on February 28, 2001 the agreement was terminated by
Prime.  The Company did not issue the
remaining 125,000 shares of common stock and has recorded $50,000 as a
liability as of September 30, 2002 and 2001.   F-19 
   Note 14  Going Concern  The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern.
The Companys financial position and operating results raise substantial doubt
about the Companys ability to continue as a going concern, as reflected by the
net loss of $1,166,742 for the year ended September 30, 2002 and losses of $4,211,822 accumulated from October 20, 1997
(Inception) to September 30, 2002.
In addition the Companys current liabilities exceed current assets by
$1,541,887 at September 30, 2002.
The ability of the Company to continue as a going concern is dependent upon
commencing operations, developing sales and obtaining additional capital and
financing. The consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern. The Company is currently seeking additional capital to allow it to
begin its planned operations.  Note 15 - Subsequent Events  Stock Issued For Patent Costs  During the period October 2002 through December
2002, the Company issued 522,024 shares of common stock valued at $59,000 in
lieu of patent payment due to UCSD.  At
September 30, 2002, there was balance of patent costs payable on the license
agreements for $77,776.  $59,000 of the
outstanding balance is paid by this stock issuance.   Note 16 -
Fair Value of Financial Instruments  The estimated fair
values of the Companys financial instruments are as follows:  September
  30, 2002
  
  September
  30, 2001Carrying
  
  Fair
  
  Carrying
  
  FairValue
  
  Value
  
  Value
  
  ValueCash
  
  $
  50,521
  
  $
  50,521
  
  $
  4,204
  
  $
  4,204Accounts payable
  
  909,747
  
  909,747
  
  552,398
  
  552,398Related party
  accounts payable
  
  50,000
  
  50,000
  
  50,000
  
  50,000Line of credit
  
  51,534
  
  51,534
  
  51,396
  
  51,396Related party
  notes payable
  
  173,975
  
  173,975
  
  242,581
  
  242,581Accrued expenses
  
  258,897
  
  258,897
  
  140,830
  
  140,830   F-20