As filed with the Securities and Exchange Commission on June 12, 2001
Registration No. 333-45390
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 9
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
COMMERCIAL CONCEPTS, INC.
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(Exact name of small business issuer as specified in its charter)
Utah 7371 87-0409620
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(State or jurisdiction of (Primary Standard Industrial (I.R.S.
incorporation or organization) Classification Code Number) Identification)
324 South 400 West, Suite B
Salt Lake City, UT 84101
(801) 328-0540
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
George E. Richards, Jr.
COMMERCIAL CONCEPTS, INC.
324 South 400 West, Suite B
Salt Lake City, UT 84101
(801) 328-0540
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Gregory Sichenzia, Esq.
Thomas A. Rose, Esq.
Sichenzia, Ross, Friedman & Ference LLP
135 West 50th Street
New York, New York 10020
(212) 664-1200
Approximate date of proposed As soon as practicable following
sale to the public: effectiveness of the Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434 please check the following box.[ ]
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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P R O S P E C T U S
COMMERCIAL CONCEPTS, INC.
9,009,941 Shares
Selling shareholders of Commercial Concepts are registering for resale
up to 9,009,941 shares of common stock which underlie convertible notes and
warrants that they hold. Our common stock trades on the Over-the-Counter
Bulletin Board under the symbol "CMEC." On June 11, 2001, the last reported
sales price of the common stock was $.10. The selling shareholders will sell the
common stock at market prices and Commercial Concepts will not receive any of
the proceeds from those sales, except for the exercise prices for the warrants.
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Investing in Commercial Concepts involves significant risks.
Investors need to read the "Risk Factors" beginning on page 3.
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Neither the Securities and Exchange Commission nor states securities
regulators have approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is ______________, 2001.
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PROSPECTUS SUMMARY
Commercial Concepts
Commercial Concepts is a Utah corporation that develops software. Its
major products are PictureBase(C), an imaging software program, used to
electronically capture medical images generated by equipment used in medical
produces, and Wavescreen(C), an interactive Screen Saver. Commercial Concepts
has recently begun to generate revenues although it has yet to be profitable.
The Offering
Common stock outstanding: 28,492,589 shares
Securities offered: Up to 9,009,941 shares of common stock. The shares
will be sold by the selling stockholders named
herein.
Common stock outstanding, We will not receive any proceeds from the sale of
Use of Proceeds: the shares of common stock by the selling security
holders, although we will receive approximately
$535,500 if the warrants issued to our investors
are exercised. We will pay the costs of
registering the shares under the prospectus. See
"Use of Proceeds."
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RISK FACTORS
The securities offered herein involve a high degree of risk.
Accordingly, before deciding to purchase, investors should carefully consider
the following risk factors along with the other matters discussed herein.
If our products are not accepted by either our customers or distributors, we
will not be able to generate sufficient revenues to be profitable.
Our various products compete in highly competitive markets. Our
prospects for success will therefore depend upon our ability to successfully
market our products either directly to customers or through distributors who may
be inhibited from doing business with Commercial Concepts because of their
commitment to other products. As a result, demand and market acceptance for our
products is subject to a high level of uncertainty. We presently have formal
agreements with two distributors for our Wavescreen product. We are in
discussions concerning distributors for the PictureBase products, but we have no
definitive agreements as of the date hereof. We currently have limited
financial, personnel and other resources to undertake the extensive activities
that will be necessary to produce and market our products. There is no assurance
that we will be able to formalize expanded marketing arrangements or that our
marketing efforts will result in substantial additional revenues. ^ If we do not
successfully complete and implement distribution agreement for our products, we
will not be able to market the products. Furthermore, we estimate we will need
approximately $2.2 million over the next twelve months. If we are not successful
in obtaining such funds, we will be required to scale back our business plan or
cease operations.
We will need significant funds to implement our business plan and we do not
expect to generate such funds from revenues. If we are unable to raise such
funds from other sources, we will be required to scale back or cease operations.
be forced to try and raise additional money.
In order for Commercial Concepts to develop, both internally and
through acquisitions, significant additional funding will be required. We
anticipate we will require approximately $2.2 million of capital to execute our
current business plan. We will need to sell additional debt or equity
securities, incur debt or combination of the foregoing, in order to satisfy
these cash needs. A failure by us to generate or raise sufficient funds, may
require Commercial Concepts to delay or abandon some or all of our future
expansion plans or expenditures or reduce the scope of some or all of our
present operations, which could have a material adverse effect on our financial
condition, results of operations and cash flow. We cannot predict at this time
whether any additional financing will be in the form of equity or debt, or be in
another form. We may not be able to obtain the necessary additional capital on a
timely basis or on acceptable terms, if at all. In any of these events, we may
be unable to implement our current plans and may be required to curtail or cease
operations.
We have tangible net worth deficit and a going-concern qualification in our
certifying accountant's financial statement report, either or both of which may
make capital raising more difficult and may require us to scale back or cease
operations.
We have a net worth deficit as of our latest balance sheet date. This
deficit indicates that we will be unable to meet our future obligations unless
additional funding sources are obtained. To-date we have been able to obtain
funding and meet our obligations in a timely manner. However, if in the future
we are unsuccessful in attracting new sources of funding then we will be unable
to continue in business. In addition, the report of our auditors includes a
going concern qualification which indicates an absence of obvious or reasonably
assured sources of future funding that will be required by us to maintain
ongoing operations. To-date we have successfully funded Commercial Concepts by
attracting additional equity investments and small issues of debt. We believe
that our ongoing efforts will continue to successfully fund operations until
positive cash flow is attained. However, there is no guarantee that our efforts
will be able to attract additional necessary equity and/or debt investors. If we
are unable to obtain this additional funding, we may not be able to continue
operations.
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Our common shares are traded on an inefficient trading market and investors may
be unable to sell their shares.
The common shares of Commercial Concepts are listed for trading on the
NASD Over the Counter Bulletin Board. The Bulletin Board does not offer
investors the transaction liquidity of more traditional exchanges such as the
New York Stock Exchange or the NASDAQ. To-date we have eleven market makers
working to maintain an orderly market for our shares on the Bulletin Board.
However, the number of participating market makers could change at any time. If
we lost all market makers, the Company's shareholders may have difficulty
executing purchase or sale of the Company's shares.
Our commitments to issue additional common stock may adversely affect the market
price of our common stock and may impair our ability to raise capital.
We currently have outstanding commitments in various forms such as
warrants, options, and convertible securities to issue a substantial number of
new shares of our common stock. The shares subject to these issuance
commitments, to some degree, will be issued in transactions registered with the
Securities and Exchange Commission and thus will be freely tradable. In many
other instances, these shares are subject to grants of registration rights that,
if and when exercised, would result in those shares becoming freely tradable.
Furthermore, the number of shares issuable upon conversion or exercise of these
securities is subject to adjustment, depending on the market price of our common
stock. To the extent that the price of our common stock decreases, we will be
required to issue additional shares upon conversion or exercise. There is
essentially no limit to the number of shares which we may be required to issue.
An increase in the number of shares of our common stock that will become
available for sale in the public market may adversely affect the market price of
our common stock and, as a result, could impair our ability to raise additional
capital through the sale of our equity securities or convertible securities.
"Penny Stock" regulations may impose certain restrictions on marketability of
our stock, which may affect the ability of holders of our common stock to sell
their shares.
The Securities and Exchange Commission has adopted regulations that
generally define a "penny stock" to be any equity security that has a market
price of less than $5.00 per share. Our common stock is currently subject to
these rules that impose additional sales practice requirements. For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase of the common shares and must have received the
purchaser's written consent to the transaction prior to the purchase. The "penny
stock" rules also require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny stock market. The
broker-dealer must also disclose:
o the commission payable to both the broker-dealer and the
registered representative,
o current quotations for the securities, and
o if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market.
Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks.
These rules apply to sales by broker-dealers to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse), unless our common shares trade above $5.00 per share.
Consequently, the "penny stock" rules may restrict the ability of broker-dealers
to sell our common shares, and may affect the ability to sell the common shares
in the secondary market as well as the price at which such sales can be made.
Also, some brokerage firms will decide not to effect transactions in "penny
stocks" and it is unlikely that any bank or financial institution will accept
"penny stock" as collateral.
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DESCRIPTION OF BUSINESS
History and Development of Commercial Concepts
We were incorporated in the State of Utah on March 1, 1984 to engage in
the milling and recovery of precious minerals. In November 1997, our last mining
asset, an option to acquire mining property, expired. As a result, we changed
our business focus by acquiring the rights to certain software products
developed to fix computer date recognition problems associated with the year
2000. We acquired computer equipment and hired software developers to refine and
further develop the program. The software tests the internal clock found in
personal computers each time the clock is turned on to determine if the date is
correct. We hold a registered copyright for this software which we began
marketing in April 1998. Because of our late entry into the market, lack of name
recognition and a limited marketing network, our sales of the Y2K software were
insignificant and with the advent of the year 2000 have been discontinued.
The computer equipment acquired and software developers we hired to
develop the Y2K software provided the means for us to become a software
development and technology company. Building on this foundation, Commercial
Concepts hired a new President and Chief Executive Officer in March 1999, a new
Executive Vice President in July 1999 and a new Chief Financial Officer in
February 2000. In June 1999, we acquired 100% of the stock of Advice
Productions, Inc., a graphics design company specializing in customized video
marketing and training tools. The purchase price consisted of one million shares
of restricted Commercial Concepts, Inc. stock valued at $200,000. This amount
was recorded at that time as an asset on our books. The share price of our free
trading stock at the time of the acquisition was approximately $0.40. A fifty
percent valuation allowance was used to value the restricted stock used in the
acquisition. From the acquisition we acquired certain assets that enable us to
create customized compact discs. These assets included part of a digital
recording suite, related software, an established customer database and various
office fixtures. The acquisition, however, did not provide all the benefits we
anticipated. As a result, effective February 29, 2000 we dissolved Advice
Productions and conveyed certain assets consisting of office fixtures with
negligible value to the previous owners of Advice Productions in return for
reconveyance to us of 600,000 shares of the restricted stock that we paid to
these owners in June 1999. The market price of our free-trading stock at the
time of the dissolution was approximately $0.32. As a result of this
transaction, we reversed $120,000 of the initial purchase price of Advice
Productions, Inc. to reflect the recovery and retirement of the 600,000 shares.
The remaining $80,000 of the purchase price was written-off, bringing the book
value of Advice Productions, Inc. assets retained by us to zero.
Products and Services
Our primary focus is on the development of proprietary "platforms" that
serve as a base for subsequent development of "canned" software programs. Until
recently our primary source of revenue came from the development of customized
software and products for clients. Our programmers develop customized software
programs to meet specific needs such as data entry and retrieval, multi media
and internet-based information dissemination. We generally retain all rights,
title and interest in the customized software we develop, including source
codes, with the expectation that we may revise and improve such programs so the
programs can be "canned" and sold to other customers. We are currently
developing several proprietary software products. Certain of these products will
be introduced into the general marketplace beginning in early 2001. Since our
focus remains on proprietary custom software, we have no significant
manufacturing or production operations at the present time.
No funds were spent by Commercial Concepts on research and development
during the fiscal year ended February 28, 1999. For the fiscal year ended
February 29, 2000, we spent approximately $579,000 on the research and
development of new proprietary software products. Of this amount, $543,000 was
expended on research and development of our PictureBase(C) and Wavescreens(C)
products, offset in part by a $12,000 grant to help finance development of
PictureBase(C). No research and development expenditures incurred in fiscal
years 1999 and 2000 have been capitalized.
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At the beginning of fiscal year 2001 we commenced testing of both
PictureBase(C) and Wave Screens(C). Through nine months ending November 30,
2000, $540,700 was capitalized in fiscal 2001. The amount capitalized reflects
all associated costs to develop and improve the software products during active
beta testing. Testing for PictureBase(C) concluded in November, 2000. The beta
testing for Wave Screens(C) showed that extensive reprogramming was required to
permit operation on a wide variety of operating systems and hardware, causing
substantial delays and subsequent expenditures.
Imaging Software
We contracted with Intermountain Health Care to develop imaging
software to capture medical images generated by equipment used in medical
procedures such as ultra sound, catheter cameras, MRIs and CAT scans. The
software is designed to store images generated during medical procedures in real
time on a computer network that can be linked to the internet. The software
permits physicians and administrators to access and annotate the images during
or after the procedure from any computer on the network. We believe that the
market for medical applications of PictureBase(C) includes hospitals and clinics
worldwide where surgical or otherwise invasive medical procedures are performed.
Due to the breadth and variety of the potential market for PictureBase(C), we do
not expect to be dependent on any one customer or small group of customers.
IHC paid Commercial Concepts a $12,000 fee to help finance the
development, in exchange for up to 30 operating room licenses. We retain all
rights, title and interest to the software and its source code. We have filed a
patent application to protect the source code that is pending.
Beta testing at IHC's Cottonwood Hospital commenced in March 2000 and
was successfully completed in May 2000. As a result, IHC is exercising its
option for 30 Commercial Concepts Picture Base operating room licenses pursuant
to which IHC will pay the hardware cost of $1,800 per unit, in addition to the
previously paid $12,000 fee. In June 2000, IHC entered into a five-year
agreement with Commercial Concepts to purchase up to an additional 300 units of
PictureBase(C) medical at a price of $4,800 per unit. IHC is not required to
purchase any units under this contract. IHC will also receive free upgrades to
installed units of PictureBase(C) during the five-year period. In exchange,
Commercial Concepts will continue to have access to IHC facilities for ongoing
research and development of PictureBase(C). The $4,800 per unit purchase price
includes both the initial unit acquisition (allocated $3,000 to software and
$1,800 to the associated hardware component) and subsequent upgrades over a
five-year period. The subsequent upgrades represent an integral component of
this contract. At this time a value cannot be placed on the future
PictureBase(C) upgrades that will be provided. As a result the $3,000 software
component of each per unit fee received will be deferred. Deferred revenue will
be recognized ratably over the remaining life of the contract, in accordance
with AICPA Statement of Position (SOP) 97-2.
Commercial Concepts expects to market and distribute CCI PictureBase(C)
medical through specialized medical distribution channels. We are in discussions
with representatives of medical distributors but no definitive agreement has
been reached at this time. Until such distribution channels are established, we
will market PictureBase(C) directly to hospitals.
PictureBase(C) 1.0 is the version currently being marketed. We intend
to maintain an ongoing program of research and development to constantly improve
and enhance this product's functionality and marketability. Future versions of
PictureBase(C) are being developed and will include among other improvements
video streaming, HL-7 compliance and improved data compression technology.
We perform ongoing research to identify and analyze possible
competition for PictureBase(C). Commercial Concepts has identified certain
products that have similarities to PictureBase(C) and may be considered
competition. However, our research has found no competing products with what we
believe is a material technical advantage compared to PictureBase(C). Competing
products that have been identified appear to us to be substantially more
expensive to own and/or operate than PictureBase(C). Competitive products that
we have identified have list prices $700 to $2,000 higher than the
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PictureBase(C) list price of $10,000 per unit. In addition, the competing
products that we have identified appear to lack certain key technical attributes
of PictureBase(C). The technical attributes that are lacking in our competition
include, but are not limited to, one or more of the following: browser access,
connectivity to patient files, and database storage. We believe that lack of one
or more of these features will create additional ongoing operating cost to
users, as the lack must be made up through additional equipment or labor cost.
We recognize that these competing products may have features and/or attributes
not included with PictureBase(C). To-date, however, we have not been able to
identify any features in competing products that are not included in
PictureBase(C) that places our product at a material competitive disadvantage.
Based on our research, we are confident that PictureBase(C) is competitive both
technically and economically within the current marketplace.
PictureBase(C) is a non-invasive product used to assist and improve the
compilation, storage and dissemination of medical data. Because it has no
diagnostic or treatment capabilities, no Food and Drug Administration approval
is required for the installation and operation of PictureBase(C) in its intended
medical environment. Commercial Concepts is aware that certain medical
distributors require that all products carried by that distributor must be
documented as FDA compliant, even though FDA compliance may not be required for
a particular application. As a result, we believe that proper documentation of
FDA compliance will enhance the marketability of PictureBase(C). We are
currently investigating the process required to attain and document FDA
compliance.
Screen Saver Technology
We have developed technology for an interactive screen-saver for which
a patent is pending. This screen saver software "Wavescreens(C)" is interactive
using our "Push-Pull" technology. Wavescreens(C) permits network administrators
of host organizations to place any image or text they choose on the computer
screen and to change or update the images as often as they desire. This is the
"push" portion of our technology. At all times the installed Wavescreens(C)
monitors when it appears on its host screen. When Wavescreens(C) is activated,
two advertisements are located at the top of the screen. Wavescreens(C)
maintains a log of when the screen saver viewer places a cursor on the exhibited
advertisements and/or clicks on an ad for detailed information or the hot link
to the advertiser's website. Each time the individual screen saver's host
computer is connected to the internet, Wavescreens(C) uploads this accumulated
data to our server. This represents the "pull" portion of our technology.
We believe that there are several uses for Wavescreens(C). Schools,
colleges and other organizations can use Wavescreens(C) to raise funds from
advertising as well as to disseminate information. Parents of schoolchildren can
increase their awareness of school activities by downloading the screensaver on
their home or office computer systems. Second, businesses can use the screen
saver to disseminate information and control what employees have on their
computer screens when they are not in use since the program records when the
screen saver appears.
Commercial Concepts expects to generate revenues from advertising and
placement commissions. The primary revenue source will be advertising. The
Wavescreens(C) that appear on each host network screen will have two boxes at
the top of the screen reserved for advertising. The revenues from one box will
accrue to the host network and the revenue from the second box will accrue to
Commercial Concepts. It is expected that each individual host for Wavescreens(C)
will find their own paying advertisers for the advertising box allocated to the
host. In situations where the host is unwilling or unable to find its own
advertisements, we will place advertisements on behalf of the host, at the
host's written request, in exchange for a 20% advertising placement commission.
Based on our initial market research, advertisers are paying up to $.01
per impression per day for internet banner advertisements. We believe, although
we have only conducted limited research, that advertisers will pay at least $.01
per day per screen for Wavescreen(C) advertising, plus additional fees for
documented "hits" to the advertiser's website and/or discount offers. Each
Wavescreen(C) will have ^ 90 5-second advertising slots for each of the two
screen advertising boxes, which will rotate in a loop continuously through the
day. If the advertising slots are completely sold, we expect to have gross
revenue of approximately $1.00 per day per operating screen, which represents
the revenue from the advertising box allocated to us.
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We believe that public and private schools as well as colleges and
universities are primary customers for Wavescreens(C). Nationwide, many schools
would like to increase their computer-to-student ratio. Unfortunately, budget
constraints frequently prevent schools from acquiring the desired computers.
Installation of Wavescreens(C) combined with sale of the host school's available
advertising slots could provide the funding for new computers, if desired, as
well as other uses. We have received interest from school districts we have
contacted to use the Wavescreens(C) program as a vehicle to acquire more
computers for student education.
The new computers desired by host schools will have to be purchased
from each school's future Wavescreens(C) advertising revenues. We believe it is
unlikely that independent financing institutions will accept the risk of leasing
computers to public school districts using this revenue stream as collateral.
Also, Commercial Concepts does not intend to take direct ownership of personal
computers in order to lease them to interested school districts, using the
Wavescreens(C) advertising revenue for payment. To facilitate the acquisition of
new computers by Wavescreen(C) host schools and thereby increase the
attractiveness of the Wavescreen(C) program, we plan to establish a
financing/leasing entity independent of Commercial Concepts, to have
responsibility for these transactions.
We face competition in the screen saver market from numerous
competitors, some of which have greater resources than us. There is technology
presently in the market that permits network administrators to place any image
they choose on the computer screen and to update or change the images as often
as they desire. We do not know of any screen saver software in the market that
is interactive in a manner similar to our product. To be exact, none of the
existing screen saver software keeps a record of when the screen saver appears
and the demographics of the viewer logged onto the computer viewing the screen
saver. We believe the interactive features of our Wavescreens(C) program will
give us a competitive advantage.
We initiated the Wavescreens(C) pilot program in March 2000 with three
Davis County, Utah, schools. In December 2000 this program was expanded to
include all schools in Davis County that wished to become a host to
Wavescreens(C). Initially, we had intended a full roll-out of Wavescreens(C) in
the winter of 2000-2001. This full rollout was delayed and replaced with the
increased participation of Davis County schools so that compatibility of
Wavescreens(C) with the various operating systems and network configurations
that would most likely be encountered could be verified. This verification is
critical in ensuring the home download version of Wavescreens(C) will be fully
operational upon introduction in Summer, 2001. In addition, feedback from
advertisers and host personnel has led to our redesign of certain "back office"
data capture and recording features that we believe will enhance our value to
Wavescreens(C) hosts and advertising customers.
As of May 31, 2001 we have 4,313 active Wavescreens(C) installed
throughout 35 Davis County schools. As of March 29, 2001, we reported 5,673
active screens. This March estimate was based on information received from the
Davis County school system listing active computers in the schools that were
hosting Wavescreens(C). A subsequent inventory conducted by our sales group
showed that 4,313 screens in these schools were actually loaded with
Wavescreens.
Sales of advertising space has been limited to a small number of local
advertisers due to the continuing development of the Wavescreens(C) system.
Total advertisements sold during the recent testing period represent less than
15% of available space. The responses we have received from these local
advertisers has been generally favorable. Advertising revenue for the three
months ending May 31, 2001 was approximately $3,000. Regional and national
advertisers have been approached regarding potential advertising participation
in a Wavescreens rollout. Interest in placing advertisements has been expressed
by certain of these regional and national advertisers, but participation by
these parties requires an installed database of at least 10,000 screens,
including home downloads.
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We expect to commence full roll-out of Wavescreens(C) in the summer of
2001. As most schools are out for the summer break, the initial rollout during
the summer months will emphasize loading screens in new, year round schools and
non-profit hosts. Local, regional and national advertisers will be booked, with
most ads becoming live in August/September 2001. At this time we expect to
commence sharing revenue with the Wavescreens(C) hosts.
Electronic Brochures
Using photos, logos, advertising and other information provided by
clients, and the templates we have designed, we create customized presentations
and advertising on compact discs. The compact discs are designed to replace
traditional printed advertising and brochures, and even business cards. The
compact discs come in a variety of designs (the most common of which is a disc
the size of a business card) and can be uniquely packaged for each client.
Because we use pre-designed templates, the compact discs can be created at an
affordable cost of between $2,000 and $4,000. Our research has found that the
average price of similar compact discs from our local competitors is
approximately $10,000.
Sales and Marketing
We have five full-time sales and marketing persons who are compensated
with a combination of salary and commissions, but expect to rely on wholesale
distributors and sales persons with established distribution networks and
contacts to market our products as they are developed. Such persons or
organizations will be paid on a commission basis.
We intend to market our products based on their high value-added
benefits to the user and ongoing service, and not on basis of price. We believe
our products are priced very favorably with competitors that have been
identified.
Employees
As of June 1, 2001, we have 15 full- and 2 part-time employees. No
union or other collective bargaining group represents our employees. Management
believes relations with our employees are good.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Information in this prospectus may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934. This information may involve
known and unknown risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially different from
projected results, performance or achievements expressed or implied by any
forward-looking statements. These factors include the risks described in "Risk
Factors." Forward-looking statements, which involve assumptions and describe our
future plans, strategies and expectations, are generally identifiable by use of
the words "may," "should," "expect," "could," "anticipate," "estimates,"
"believe," "intend," or "project" or the negative of these words or other
variations on these words or comparable terminology.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of
common stock owned by the selling security holders, although we will receive
approximately $535,500 if all of the warrants are exercised. We would use the
net proceeds of the warrant exercise for the funding of potential acquisitions,
working capital and general corporate purposes. At the present time, there are
no plans, arrangements or understandings with respect to and proposed
acquisitions. All proceeds from the sales of shares of common stock owned by the
selling security holders will be for their own account.
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DESCRIPTION OF PROPERTY
We conduct our business operations at 324 South 400 West, Suite B, Salt
Lake City, Utah, where we have approximately 7,105 square feet of office space
under lease through February 29, 2004. All of our research, development and
other activities take place at this facility. The space we lease represents
approximately 65% of leaseable space in the building. Under the terms of the
lease, we pay $6,143 per month, which amount increases by 4% annually. There is
no renewal option under the terms of this lease.
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, office and age of each officer
and director of Commercial Concepts:
Name Title Age
---- ----- ---
George E. Richards, Jr. Chairman, President & CEO 38
Scott G. Adamson Executive Vice President 44
Karl A. Hansen CFO, Secretary & Director 47
Lee R. Kunz. Sr. Director 73
Lee Greenberg Director 44
George E. Richards
George E. Richards has served as Chief Executive Officer and a director
since March 1, 1999. Since June 1996, Mr. Richards has served as the President
and Director of Richards & Associates, Inc., a financial consulting firm of
which Mr. Richards is the sole shareholder. From May 1993 to June 1996, Mr.
Richards was employed by The Goldenberg Group, Inc., a division of Plygem, Inc.
Mr. Richards attended Cal State Fullerton.
Scott G. Adamson
Scott G. Adamson has served as Executive Vice President and a director
since July 1999. Since 1986, Mr. Adamson has served as the President and a
director of SGA Financial Group, Inc., a financial company that he founded to
provide project and debt financing, and currency conversion services. From 1981
to 1986, Chase Manhattan employed Mr. Adamson in its Latin American Division as
a second Vice President. Mr. Adamson received a Bachelors of Science in Business
Administration from Weber State University in 1979 and a Masters of
International Management from the American Graduate School of International
Management in 1981.
Karl A. Hansen
Karl A. Hansen has served as Chief Financial Officer and director since
February 2000. He is a Certified Public Accountant. From June 1999 to February
2000, Mr. Hansen served as a consultant with RHI Management Resources, providing
financial consulting services to an Internet related company. From December 1997
to May 1999, Mr. Hansen served as CFO of East European Imports, Inc., a
Miami-based importation company. From December 1987 to 1997, Mr. Hansen served
as CFO of two related mining companies, American Pacific Mining Company and
Jordex Resources, Inc. From 1977 to 1987, Mr. Hansen worked in financial
positions with Ernst & Young, Salomon Brothers and Lever Brothers. Mr. Hansen
received a Bachelors of Science in Management from Rensselaer Polytechnic
Institute and a Bachelors of Science in Accounting from the Rochester Institute
of Technology 1977.
Lee R. Kunz, Sr.
Lee R. Kunz Sr. has served as a director since April 2000. He is the
retired CEO of Kunz Construction Company. Mr. Kunz served for 19 years on a
hospital board of directors and has been associated with the development of
biological and pharmaceutical companies.
12
Lee Greenberg
Lee Greenberg was President of the west coast subsidiary of Ply Gem
Industries, CEO of the Lion Group in the United States, and a top executive with
TCII. Mr. Greenberg has also served as CEO of the American Israel Chamber of
Commerce in the Western U.S. and as President of The American Israel Economic
Education Foundation in the Western United States. Mr. Greenberg received a
Bachelor's degree from the University of Hartford and a law degree from
Pepperdine University.
If any outside director is requested to perform services for Commercial
Concepts beyond normal service as a director, such director will be compensated
for the performance of such services at rates to be agreed upon by such director
and Commercial Concepts.
There are no family relationships between any directors or executive
officers of Commercial Concepts.
Compliance with Section 16 Reporting Obligations
The directors and executive officers of Commercial Concepts are
required under the Securities Act of 1934 to file reports with the Securities
and Exchange Commission evidencing their ownership of, and their current
transactions in, Commercial Concepts' equity securities. This is a personal
obligation of the executive officers and directors. Based on information
provided to Commercial Concepts from a review of the SEC EDGAR database, it
appears that all directors and executive officers filed these reports in a
timely manner through the period ending February 28, 2001.
Market for Common Equity and Related Stockholder Matters
Our common stock currently trades on the OTC Bulletin Board where it
has been listed since March 9, 2000. Between October 20, 1999 and March 9, 2000,
the quotation was transferred off the OTC Bulletin Board to the National
Quotation Bureau's "Pink Sheets" pursuant to NASD Eligibility Rule 6530 issued
on January 4, 1999, which provides that issuers who do not make current filings
pursuant to Sections 13 and 15(d) of the Securities and Exchange Act of 1934 are
ineligible for listings on the OTC Bulletin Board. Subsequent to October 20,
1999, we prepared a complete registration statement that brought our filing
status to current and permitted the March 9, 2000 re-listing to the OTC Bulletin
Board.
The following table sets forth the high and low bid prices for shares
of our common stock for the periods noted, as reported by the National Daily
Quotation Service and the OTC Bulletin Board. Quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not represent
actual transactions.
Bid Prices
-----------------------
Fiscal Year Period High Low
- ----------------------------- ----------------------- ------------ ----------
February 28, 2001 Fourth Quarter 0.40 0.07
Third Quarter 0.43 0.11
Second Quarter 0.94 0.25
First Quarter 1.10 0.28
- ----------------------------- ----------------------- ------------ ----------
February 29, 2000 Fourth Quarter 0.31 0.08
Third Quarter 0.20 0.06
Second Quarter 0.54 0.04
First Quarter 1.25 0.13
- ----------------------------- ----------------------- ------------ ----------
As of February 28, 2001, we had 28,192,589 shares of common stock
issued and outstanding, and there were 325 record stockholders. As of the date
hereof, we have not paid or declared any cash dividends. Management has followed
the policy of retaining any and all earnings to finance the development of the
business. Such a policy is likely to be maintained as long as necessary to
provide working capital for our operations.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
General
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the financial
statements (including the notes thereto), and the other information included
elsewhere herein. Our fiscal year runs from March 1 through the last day of
February.
Effective March 1, 1998, we began earning revenues and were no longer
classified as a development stage company.
RESULTS OF OPERATIONS
Fiscal Year Ended February 28, 2001
vs. Fiscal Year Ended February 29, 2000
Sales decreased by $191,159 to $70,104 for the fiscal year ended
February 28, 2001 $261,263 for the fiscal year ended February 29, 2000.
The decrease in respective sales is the result of our decision to
concentrate activity on the development and testing of new products instead of
customizing software and computer products for clients.
Operating expenses for the fiscal year ended February 28, 2001
increased $366,137 to $1,387,903 from $1,021,766 during the twelve months ended
February 29, 2000. The $85,018 increase in general and administrative expenses
for fiscal year 2001 to $353,545 versus $268,527 in fiscal year 2000 results
from increased marketing and investor relations efforts. The increase in
development effort is reflected in the $550,291 development expense for this
fiscal year ended February 28, 2001. Although it is $28,709 less than the
comparable expenditure for fiscal year 2000, this development expense is after
the capitalization of an equal dollar amount of expense that was directly
attributable to beta testing of our new products. The primary reason for the
increase was the addition of senior technical and administrative staff, plus
support services, to expedite development of our software products. Increase in
depreciation and interest expenses reflect an expanded fixed asset base required
to support the development efforts, and debt service on convertible and other
loans necessary to fund our operations.
Our expenditures for services paid for with restricted common stock
increased $74,318 to $458,882 for the twelve months ended February 29, 2001 from
$384,564 for the twelve months ended February 29, 2000 with most of the shares
issued in the second and fourth fiscal quarters ended August 31, 2000 and
February 28, 2001, respectively. These expenditures using restricted common
stock recognized the efforts of certain programmers and management in the
development of our products and systems.
We capitalized $550,291 in product development expenditures in the
fiscal year ended February 28, 2001. Two of our proprietary software products
were in active beta testing for the first six months of this period, with one of
these products for all twelve months, as a final step before commercial release.
In accordance with Generally Accepted Accounting Principles, all costs related
to this testing period have been capitalized. There were no product development
expenditures capitalized in the comparable period for 1999.
Commercial Concepts has two proprietary products - Wavescreens(C) and
PictureBase(C) - that entered beta testing in early fiscal year 2001. Beta
testing commenced when each product's technological feasibility was confirmed to
management's satisfaction. Through February 282001 $197,508 and $352,532 have
been capitalized for PictureBase(C) and Wavescreens(C), respectively.
Development of both products was initiated in the spring of 1999. Costs
associated with the development of each product prior to inception of beta
testing approximated $271,500, or $543,000 combined. We received $12,000 from a
customer towards the development of our PictureBase(C) product.
Management concluded that technological feasibility was established for
both products at the beginning of this fiscal year based on several criteria.
These criteria included successful in-house testing, the incorporation of and
improvement on current technology, the presence of a clearly identified
commercial market for the completed product, and concurrence of the beta host
technical personnel that beta testing is appropriate.
14
Commercial product release for PictureBase(C) occurred during our third
fiscal quarter ending November 30, 2000. Full commercial release of
Wavescreens(C) is anticipated in the first quarter of fiscal 2002.
Liquidity and Capital Resources
At February 28, 2001, we had cash and other current assets of $26,552
compared to cash and other current assets of $75,973 at February 292000. The
decrease of $49,421 results primarily from decrease in receivables due to lower
for-client work, and increased operating capital requirements. During the
previous twelve months Commercial Concept's expenditures and cash requirements
were met using a combination of sales, equity placements and debt.
We borrowed $15,000 from an individual and an additional $10,000 from a
second individual, neither of which are shareholders of the Corporation, in
August of 1999, pursuant to promissory notes, at the rate of 10% per annum with
each note being respectively due and payable on February 12, 2000 and February
16, 2000. Both promissory notes remained outstanding at year-end and both were
converted into restricted common shares of Commercial Concepts, Inc. in April of
2000. During the fiscal year ended February 28, 2001, we borrowed a total of
$167,988 from various individuals, some of which were shareholders of the
Corporation, at interest rates from 10% to 15% per annum. The various loan
details are explained at Note 5 of our financial statements.
Through November 30, 2000, we issued two $250,000 6% convertible notes
due July 20, 2003 and September 20, 2003 respectively to a private investment
group. In addition, 850,000 five-year warrants were issued for shares of common
stock at a price not to exceed $.4375, in connection with the issuance of the
first note, and an additional 850,000 five-year warrant was issued at an
exercise price not to exceed $.1925, in connection with the second $250,000
note. The exercise prices of the warrants approximated the fair market value of
our common stock at the time of issuance.
During the fiscal year ended February 28, 2001, we generated $310,575
from the sale of 900,000 restricted common shares, primarily in March and April.
We issued 3,628,960 shares of restricted common stock in lieu of cash for
various services through the twelve months ending February 28, 2001, with the
majority of these shares issued in the second and fourth fiscal quarters ending
August 31, 2000 and February 28, 2001, respectively.
We anticipate we will require approximately $2.2 million of capital to
execute our current business plan. We will need to sell additional debt or
equity securities, incur debt or combination of the foregoing, in order to
satisfy these cash needs. A failure by us to generate or raise sufficient funds,
may require Commercial Concepts to delay or abandon some or all of our future
expansion plans or expenditures or reduce the scope of some or all of our
present operations, which could have a material adverse effect on our financial
condition, results of operations and cash flow.
Changes in and Disagreements with Accountants
On August 31, 1999, Commercial Concepts terminated its independent
auditor relationship with David T. Thomson, P.C.
Thomson's report on the financial statements of Commercial Concepts for
the fiscal year ended February 28, 1998, did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles. The Thomson report for the fiscal year
ended February 28, 1998, contained a statement as to the ability of Commercial
Concepts to continue as a going concern. Other than the foregoing, there were no
adverse opinions or disclaimers of opinions, or qualifications or modifications
as to uncertainty, audit scope or accounting principles.
During the fiscal years ended February 28, 1997, 1998 and 1999, and the
period March 1, 1999 through August 31, 1999, there were no disagreements with
Thomson on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures or any reportable events.
On September 5, 1999, we engaged Fitzgerald Sanders, LLC ("Fitzgerald")
as our independent auditors to audit and report on the financial statements for
the fiscal year ended February 28, 1999.
15
The decision to change accountants was approved by the Board of
Directors. We authorized Thomson to respond fully to Fitzgerald's inquiries
concerning Commercial Concepts.
Prior to engaging Fitzgerald, neither Commercial Concepts nor anyone
acting on its behalf consulted with Fitzgerald regarding the application of
accounting principles to any specified transaction or the type of audit opinion
that might be rendered on our financial statements. In addition, during our
fiscal years ended February 29, 2000 and February 28,1999 and 1998, neither
Commercial Concepts nor anyone acting on its behalf consulted with Fitzgerald
with respect to any matters that were the subject of a disagreement or a
reportable event.
Fitzgerald Sanders has served as our independent accountants since
August 1999 and has advised us on accounting and tax matters.
Subsequent to the filing of Commercial Concept's May 31, 2000,
quarterly financial statements, Fitzgerald Sanders, LLC ^, reorganized and
discontinued its audit practice, and as a consequence, resigned as the Company's
independent accountants. The report of Fitzgerald Sanders on our financial
statements for the past fiscal year contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to audit scope or accounting
principles.
During our most recent fiscal year and through the date of the last
report, we had no disagreements with Fitzgerald Sanders on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Fitzgerald Sanders have caused it to make reference thereto in its report on our
financial statements for such year.
On October 10, 2000, the Board of Directors approved the change in
independent accountants and the appointment of Christensen & Duncan CPA's LC as
the new principal independent accountant of Registrant.
Executive Compensation
In October, 2000, we entered into an employment agreement with George
Richards, our President and Chief Executive Officer. The agreement is for a term
of three years, renewable at Mr. Richard's option for an additional three year
term. Pursuant to the agreement, Mr. Richards is to be paid a base salary of
$120,000 per year and is entitled to other customary benefits.
In December, 2000, we entered into an employment agreement with Karl
Hansen, our Chief Financial Officer. The agreement is for a term of three years,
renewable at Mr. Hansen's option for an additional three year term. Pursuant to
the agreement, Mr. Hansen is to be paid a base salary of $110,000 per year and
is entitled to other customary benefits.
In December, 2000, we entered into an employment agreement with Scott
Adamson, our Executive Vice President. The agreement is for a term of three
years, renewable at Mr. Adamson's option for an additional three year term.
Pursuant to the agreement, Mr. Adamson is to be paid a base salary of $110,000
per year and is entitled to other customary benefits.
The following sets forth a summary of cash and non-cash compensation
for each of the last three fiscal years ended February 28, 2001, February 29,
2000 and February 28, 1999. Beginning in fiscal year 2001, we have instituted a
performance-based bonus plan for management. We have no deferred compensation
plan.
16
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation Awards
- -------------------------------- ---------- ------------------------------ ------------------------- ------------------
Restricted Options/
Name and Fiscal Salary Bonus Stock SARs # All Other
Principal Position Year $ $ Awards $ Compensation
- -------------------------------- ---------- --------------- -------------- -------------- ---------- ------------------
Scott G. Adamson 2001 $110,000(6) $43,518(7) -- -- --
Executive Vice President 2000 $73,233(8) $34,900(9) -- -- --
1999 -- -- -- -- --
-- -- -- -- --
Karl A. Hansen 2001 $110,000(10) $149,692(11) -- -- --
Chief Financial Officer 2000 -- $1,000(12) -- -- --
1999
- -------------------------------- ---------- --------------- -------------- -------------- ---------- ------------------
1 $103,278 paid in cash and $16,722 deferred. Payment of deferred wages will be
with cash or, at the option of Mr. Richards, in common stock valued at the
average closing price of the common shares of Commercial Concepts during the
periods in which Mr. Richard's compensation was deferred.
2 $28,695 received and $18,778 deferred. The amount received includes $5,387
paid in cash. The remainder of the amount received consists of restricted
common stock. On August 23, 2000 we issued 37,363 shares of restricted common
stock to Mr. Richards, valued at $.165 per share. On December 19, 2000 we
issued 342,857 shares of restricted common stock to Mr. Richards, valued at
$.05 per share. The deferred amount includes a future cash payment of $9,778
and future issuance of 138,462 shares of restricted common stock valued at
$.065 per share.
3 $72,000 paid in cash and $48,000 deferred. Deferred compensation is payable
by Commercial Concepts under the same conditions as described in Paragraph 1
above.
4 Bonus paid in stock. On December 23, 1999 we issued 147,500 restricted shares
to Mr. Richards, valued at $.08 per share.
5 Salary paid in stock. On February 3, 1999 we issued 50,000 shares, valued at
$.20 per share.
6 $91,664 paid in cash and $18,336 deferred. Deferred compensation is payable
by Commercial Concepts to Mr. Adamson under the same conditions as described
for Mr. Richards in Paragraph 1 above.
7 $27,018 received and $16,500 deferred. The amount received included $5,652
paid in cash. The remainder of the amount received consisted of restricted
common stock. On August 23, 2000 we issued 34,253 restricted shares to Mr.
Adamson, valued at $.165 per share. On December 19, 2000 we issued 314,286
restricted shares, valued at $.05 per share. The deferred bonus amount
includes a future cash payment of $8,250 and future issuance of 126,953
shares of restricted common stock valued at $.065 per share.
8 $25,305 paid in cash and $47,928 deferred. Deferred compensation is payable
by Commercial Concepts to Mr. Adamson under the same conditions as described
for Mr. Richards in Paragraph 1 above.
9 Bonus amount consists of $9,900 paid in stock and $25,000 deferred. On
December 23, 1999 Commercial Concepts issued 123,750 shares of restricted
common stock to Mr. Adamson, valued at $.08 per share. The deferred bonus
compensation is payable by Commercial Concepts to Mr. Adamson under the same
conditions as described for Mr. Richards in Paragraph 1 above.
10 $91,662 paid in cash and $18,338 deferred. Deferred compensation is payable
by Commercial Concepts to Mr. Hansen under the same conditions as described
for Mr. Richards in Paragraph 1 above.
17
11 $132,465 received and $17,227 deferred. The amount received included $3,512
paid in cash. The remainder of the amount received consisted of restricted
common stock. On March 6, 2000 Mr. Hansen received 450,000 restricted shares
of the 500,000 restricted shares awarded to him as an initial signing bonus,
valued at $.02 per share. On May 31, 2000 Mr. Hansen received 200,000
restricted shares, valued at $.20 per share, of a total 500,000 issued as
additional bonus to Mr. Hansen. The remaining 300,000 restricted shares of
this additional bonus, also valued at $.20 per share, were issued to Mr.
Hansen on January 2, 2001. The deferred bonus amount includes a future cash
payment of $8,977 and future issuance of 126,953 shares of restricted common
stock valued at $.065 per share.
12 Bonus amount consisted of 50,000 restricted common shares, valued at $.02. We
issued the shares to Mr. Hansen on December 19, 1999 as part of his initial
signing bonus.
Compensation of Directors
Members of our Board of Directors are not entitled to any compensation
for performing services in such capacity.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of February 28, 2001 by (a) each
person known to us to be the beneficial owner of more than 5% of our common
shares; (b) each of our directors; (c) each executive officer; and (d) all the
directors and executive officers as a group (5 persons). As of February 28,
2001, we had 28,192,589 shares of common stock issued and outstanding.
Security Ownership of Beneficial Owners
- ----------------------------------------------------------------------------------------------------------------------
Number of Percent
Name Address Shares Owned of Class
- ---------------------------------------- --------------------------------------- --------------------- ---------------
Karl A. Hansen 225 South 200 West 1,424,976 5.1%
Salt Lake City, UT 84101
- ---------------------------------------- --------------------------------------- --------------------- ---------------
Lee Kunz Denver, CO 1,500,000 5.3%
- ---------------------------------------- --------------------------------------- --------------------- ---------------
Michael C. Lombardi 755 East Gregg St. #25 1,750,000 6.2%
Sparks, NV 89431
- ---------------------------------------- --------------------------------------- --------------------- ---------------
Michael Verdakis 47 East 400 South 1,613,164 5.7%
Salt Lake City, UT 84111
- ---------------------------------------- --------------------------------------- --------------------- ---------------
All officers and directors 7,050,622 25.0%
as a group (5 persons)
- ---------------------------------------- --------------------------------------- --------------------- ---------------
DESCRIPTION OF SECURITIES
We are authorized to issue 75,000,000 shares of common stock with $.001
par value. The holders of the common stock are entitled to one vote per each
share held and have the sole right and power to vote on all matters on which a
vote of stockholders is taken. Voting rights are non-cumulative. The holders of
shares of common stock are entitled to receive dividends when, as and if
declared by the Board of Directors, out of funds legally available therefore and
to share pro-rata in any distribution to shareholders. We anticipate that any
earnings will be retained for use in our business for the foreseeable future.
Upon liquidation, dissolution, or winding up of Commercial Concepts, the holders
of the common stock are entitled to receive the net assets after distributions
to the creditors. The holders of common stock do not have any pre-emptive right
to subscribe for or purchase any shares of any class of stock. The outstanding
shares of common stock and the shares offered hereby will not be subject to
further call or redemption and will be fully paid and non-assessable.
18
Indemnification of Directors and Officers
Commercial Concepts' articles of incorporation provide that it will
indemnify any officer, director or former officer or director, to the full
extent permitted by law. This could include indemnification for liabilities
under securities laws enacted for shareowner protection. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of Commercial Concepts
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
We are required pursuant to the Utah Revised Business Corporation Act
to indemnify our officers and directors from liability to the extent that such
officer or director is successful in defense of any proceedings. Our Articles of
Incorporation and By-laws do not alter this statutory protection or provide any
additional protection from liability. Under the Utah Revised Business
Corporation Act, we may purchase and maintain insurance on behalf of any
director or officer against any liability asserted against him and incurred by
him in any capacity.
Certain Relationships and Related Transactions
On December 19, 2000 we issued 342,857 restricted common shares to
Richards & Associates, Inc., a Utah corporation, of which our current President
and Chief Executive Officer, George E. Richards Jr., is the sole shareholder;
314,286 shares to Scott Adamson, Executive Vice President; 314,286 to Karl
Hansen, Chief Financial Officer; and an aggregate of 500,172 shares to all other
employees as our year-end employee bonus program.
On August 23, 2000 we issued 37,367 restricted common shares to
Richards & Associates, Inc., a Utah corporation, of which our current President
and Chief Executive Officer, George E. Richards, Jr., is the sole shareholder;
34,253 shares to Scott G. Adamson, Executive Vice President; 25,690 shares to
Karl Hansen, Chief Financial Officer, and an aggregate of 56,049 shares to three
other management employees, in accordance with our six-month management
performance incentive program, for the six month period ended June 30, 2000.
In July of 2000, Lombardi Research Foundation ownership of 4,000,000 of
our restricted shares was evenly divided between the Foundation's beneficial
control parties, Vince C. Lombardi and Michael Angelo. Subsequent to the share
division, Rule 144 filings for sale of the restricted shares have been submitted
by Mr. Lombardi and Mr. Angelo for 250,000 shares and 150,000 shares
respectively, leaving net ownership of our restricted shares at 1,750,000 for
Mr. Lombardi and 1,850,000 for Mr. Angelo. Mr. Angelo has since transferred his
shares to Michael Verdakis.
On October 21, 1999, Karl Hansen accepted an offer to become the Chief
Financial Officer of Commercial Concepts. Our offer included a bonus of 500,000
restricted common shares. The bonus was increased by an additional 500,000
shares on May 31, 2000. Mr. Hansen received 200,000 of these shares in May 2000,
and the remaining 300,000 shares on January 2, 2001. Between October 21, 1999
and September 30, 2000, Mr. Hansen purchased 85,000 common shares of Commercial
Concepts.
Lee Kunz, a director since April 2000, purchased 300,000 common shares
for $24,000 in November 1999, on behalf of L&B Charitable Trust, a Colorado
trust. Mr. Kunz, on behalf of L & B Charitable Trust, on or about February 2000
also purchased 500,000 restricted common shares for $75,000. On or about January
2000, Mr. Kunz on behalf of L & B Charitable Trust purchased 200,000 restricted
common shares for $20,000. The 200,000 shares acquired by L & B Charitable Trust
were a part of the 2,198,000 shares issued to Scott G. Adamson, the Executive
Vice President, in August 1999. The shares were endorsed to L & B Charitable
Trust in March 2000.
On or about April 18, 2000, L&B Charitable Trust purchased 500,000
restricted common shares for $100,000. The funds will be remitted to Commercial
Concepts at the rate of $20,000 per month over five months. The purchase price
also included two-year warrants to purchase an additional 500,000 common shares
of Commercial Concepts at a price of $.50 in the first year and $.75 in the
second year.
19
Ron Poulton, the trustee of Tech Trust, a shareholder owning more than
5% of the outstanding shares of stock, rendered legal services to Commercial
Concepts from 1985 to November 1999. Legal fees and expenses paid or payable to
Mr. Poulton in the twelve-month period ended February 29, 2000 totaled $28,988
and totaled $57,862 and $5,700 for the fiscal years ended February 28, 1999 and
1998, respectively.
On December 23, 1999, we issued 147,500 shares of common stock to
Richards & Associates, Inc., a Utah corporation, of which George E. Richards,
Jr., President and Chief Executive Officer, is the sole shareholder; 123,750
shares to Scott Adamson, Executive Vice President; 69,300 shares to Larry D.
Rogers, Vice President; and an aggregate of 134,500 shares to all other
employees as year-end employment bonuses.
On December 15, 1999, we agreed to issue an option to purchase 500,000
shares of common stock, at an exercise price of $.104 per share, to Wilfred
Blum, then a director, as repayment of $52,000 of reimbursements and other
expenses allegedly owed by us to Mr. Blum. We have negotiated a written
agreement regarding the same with Mr. Blum.
In August of 1999, we reached an oral agreement with Cybercenters
International, Inc., a principal shareholder of which is Scott Adamson, an
Executive Vice President, to acquire all of the issued and outstanding stock of
Cybercenters after February 28, 2000. As part of the transaction, we issued
342,000 shares of stock to three shareholders of Cybercenters in consideration
of an oral agreement by such persons to pay an aggregate of $18,642. Mr. Adamson
was issued 2,198,000 shares of common stock in consideration of an oral
agreement to pay $131,880. At December 8, 2000, $80,880 of the obligation
remains outstanding. The foregoing obligations are not due and payable until the
stock is sold. Mr. Adamson subsequently endorsed 800,000 of the 2,198,000 common
shares issued to him to other investors for the benefit of Commercial Concepts.
All funds realized by such sales were remitted directly to us and partially
offset Mr. Adamson's indebtedness to us. No interest accrues on the obligations.
In July of 1999, Richards & Associates, Inc., a Utah corporation, of
which Mr. Richards is the sole shareholder, and Wilfred Blum, then a director,
each pledged 2,000,000 shares of stock personally held by them (for an aggregate
amount of 4,000,000 shares) to Lombardi Research Foundation to secure a
short-term loan to Commercial Concepts in the amount of $30,000. The proceeds of
the loan were used to finance a business development trip to China and to
purchase assets. The loan was to be repaid on or before August 1999. When the
loan was not repaid by August 1999, Lombardi Research Foundation caused all
4,000,000 shares to be transferred to it pursuant to a security agreement. The
shares pledged by Richards & Associates to secure the loan were issued to it on
May 5, 1999 as described below. The shares pledged by Mr. Blum however, were
issued to Mr. Blum by our transfer agent at Mr. Blum's request without the
approval of the Board of Directors. Since all of the proceeds of the loan were
used for our benefit, on December 23, 1999, we issued 2,000,000 shares of common
stock to Richards & Associates to replace the shares that were transferred to
Lombardi. We did not issue replacement shares to Mr. Blum. We have also
implemented certain procedures to prevent the issuance of stock without the
approval of the Board of Directors.
On May 5, 1999, we issued 2,000,000 shares of common stock to Richards
& Associates, Inc., a Utah corporation, of which our current Chief Executive
Officer and President, George E. Richards, Jr., is the sole shareholder, in
consideration of an oral agreement to pay Commercial Concepts $120,000. The
obligation is not payable until the shares of stock are sold and no interest
accrues on the obligation. The obligation is still outstanding as of December 8,
2000.
On January 25, 1999, we issued 2,000,000 shares of restricted common
stock valued at $.06 per share, for a total amount of $120,000 to Wilfred Blum,
then a director and the Chief Executive Officer and President. Of the shares
issued, 1,600,000 shares or $96,000 worth of stock was issued for services
rendered during the fiscal year ended February 28, 1999, and 400,000 shares, or
$24,000 worth of stock was issued to repay cash advances to Commercial Concepts.
On or about July 1999, we loaned $12,340 to Mr. Blum. No note was executed for
this advance. The loan did not bear interest. The loan was repaid in calendar
year 2000.
20
On February 3, 1999, we issued 50,000 shares of restricted common stock
valued at $.20 per share, for a total amount of $10,000 to Richards &
Associates, Inc., a Utah corporation, of which Mr. George E. Richards, Jr., the
current Chief Executive Officer and President, is the sole shareholder, for
services rendered by Mr. Richards to Commercial Concepts during the fiscal year
ended February 29, 1999.
Selling Security Holders
The following table lists the selling security holders, the number of
shares of common stock held by each selling security holder as of the date
hereof, the number of shares included in the offering and the shares of common
stock held by each such selling security holder after the offering. The shares
included in the prospectus are issuable to the selling security holders upon
conversion of the debentures or the exercise of warrants.
Total
Shares of Total
Common Percentage Shares of Percentage
Stock of Common Common Beneficial Percentage of Common
Issuable Stock, Stock Ownership of Common Beneficial Stock
Upon Assuming Included in Before the Stock Owned Ownership Owned
Conversion Full Prospectus Offering Before After the After
Name of Notes(1) Conversion (2) (2) Offering(3) Offering Offering
- ------------------- ------------- ------------ ------------- ------------ ------------ ----------- ------------
The Keshet Fund 1,074,561 3.63% 1,790,935 1,074,561 3.63% 0 -
L.P. (4)(7) --------- ----- --------- --------- ----- -
- ------------------- ------------- ------------ ------------- ------------ ------------ ----------- ------------
Keshet, L.P. 1,469,298 4.91% 2,448,830 1,469,298 4.91% 0 -
--------- ----- --------- --------- ----- - -
- ------------------- ------------- ------------ ------------- ------------ ------------ ----------- ------------
Nesher Ltd. (3) 1,184,211 3.99% 1,973,684 1,184,211 3.99% 0
--------- ----- --------- --------- ----- -
- ------------------- ------------- ------------ ------------- ------------ ------------ ----------- ------------
Talbiya B. 2,357,895 7.64% 2,796,491 1,496,453 4.99% 0 -
Investments --------- ----- --------- --------- ----- - -
Ltd. (4)
- ------------------- ------------- ------------ ------------- ------------ ------------ ----------- ------------
"*" means less than one percent.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares which the selling stockholder has the right to acquire within 60
days. The actual number of shares of common stock issuable upon the conversion
of the debentures and exercise of the debenture warrants is subject to
adjustment depending on, among other factors, the future market price of the
common stock, and could be materially less or more than the number estimated in
the table.
21
(1) Represents shares of common stock issuable upon conversion of
debentures or exercise of warrants of the selling shareholder, at an
assumed conversion price of $0.114 per share. Because the number of
shares of common stock issuable upon conversion of the debentures is
dependent in part upon the market price of the common stock prior to a
conversion, the actual number of shares of common stock that will be
issued upon conversion will fluctuate daily and cannot be determined at
this time. However, the selling shareholder has contractually agreed to
restrict its ability to convert its debentures or exercise its warrants
and receive shares of our common stock such that the number of shares
of common stock held by it and its affiliates after such conversion or
exercise exceed 4.99% of the then issued and outstanding shares of
common stock following such conversion or exercise.
(2) Includes 200% of the shares issuable on conversion of the debentures,
based on the market price of our common stock on May 3, 2001, as
required by our agreement with the selling shareholders. The number
of shares of common stock issuable upon conversion of the debentures is
dependent in part upon the market price of the common stock prior to a
conversion, the actual number of shares of common stock that will be
issued in respect of such conversions and, consequently, offered for
sale under this registration statement, cannot be determined at this
time. As a result of the contractual agreement not to exceed 4.99%
beneficial ownership, the selling shareholder does not believe it is a
control person as defined in the Securities Exchange Act of 1934 or is
required to file a Schedule 13D. Each selling stockholder is deemed to
be an underwriter of the securities they are selling.
(3) In accordance with Rule 13d-3 under the Securities Exchange Act of
1934, John Clark may be deemed a control person of the shares owned by
such entity. All selling stockholders are under common control and all
shares registered hereunder may be deemed to be beneficially owned by
such control person. All such selling stockholders may be deemed to be
a purchasing group for purposes of Rule 13d, but are not required to
file a Form 13D because of the limitation of their beneficial ownership
to 4.99%, as a group.
(4) Includes 1,700,000 shares of common stock issuable upon exercise of
common stock purchase warrant.
Plan of Distribution
The shares of common stock offered hereby by the selling security
holders may be sold from time to time by the selling security holders, or by the
pledges, donees, transferees and other successors in interest. These pledges,
donees, transferees and other successors in interest will be deemed "selling
security holders" for the purposes of this prospectus and we would be required
to file a post-effective amendment to the registration statement of which this
prospectus forms a part, prior to any sales by such selling security holders.
The shares of common stock may be sold on one or more exchanges or in the
over-the-counter market (including the OTC Bulletin Board); or in privately
negotiated transactions.
The shares of common stock may be sold to or through brokers or
dealers, who may act as agent or principal, or in direct transactions between
the selling security holders and purchasers. In addition, the selling security
holder may, from time to time, sell short the common stock, and in these
instances, this prospectus may be delivered in connection with the short sale
and the common stock offered hereby may be used to cover the short sale. In the
event any sales are proposed to be made by broker/dealers as principals, we will
first file a post-effective amendment to the registration statement of which
this prospectus forms a part, to disclose the terms of such transactions and
identify the broker/dealer.
22
Transactions involving brokers or dealers may include, without
limitation, the following:
o ordinary brokerage transactions;
o transactions in which the broker or dealer solicits
purchasers;
o block trades in which the broker or dealer will attempt to
sell the shares of common stock as agent but may position and
resell a portion of the block as principal to facilitate the
transaction; and
o purchases by a broker or dealer as a principal and resale by
such broker or dealer for its account.
In effecting sales, brokers and dealers engaged by the selling security
holders or the purchasers of the shares of common stock may arrange for other
brokers or dealers to participate. These brokers or dealers may receive
discounts, concessions or commissions from the selling security holders and/or
the purchasers of the shares of common stock for whom the broker or dealer may
act as agent or to whom they may sell as principal, or both (which compensation
as to a particular broker or dealer may be in excess of customary commissions).
Commercial Concepts is bearing all of the costs relating to the
registration of the shares of common stock other than certain fees and expenses,
if any, of counsel and other advisors to the selling security holders. These
costs are expected to include the following:
Legal $ 22,500
Accounting $ 3,000
Misc., including filing fees $ 2,880
---------
Total $ 28,380
Any commissions, discounts or other fees payable to brokers or dealers
in connection with any sale of the shares of common stock will be borne by the
selling security holders, the purchasers participating in the transaction, or
both.
Any shares covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act of 1933, as amended, may be sold under Rule
144 rather than pursuant to this prospectus.
Under certain circumstances, the selling stockholders and any
broker-dealers that participate in the distribution might be deemed to be
"underwriters" within the meaning of the Securities Act and any commission
received by them and any profit on the resale of the shares of common stock as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares against certain liabilities arising under the Securities Act. Liabilities
under the federal securities laws cannot be waived.
The four selling stockholders, The Keshet Fund L.P., Keshet L.P.,
Nesher Ltd., and Talbiya B. Investments, are "underwriters" within the meaning
of the Securities Act in connection with the sale of common stock offered by
them under this prospectus. These four investors are foreign entities and it may
be difficult for us to enforce claims against them. Therefore, the selling
stockholders will be subject to prospectus delivery requirements under t he
Securities Act. Furthermore in the event of a "distribution" of their shares,
the selling stockholders, any selling broker or dealer and any "affiliated
purchasers" may be subject to Rule 10b-6 under the Exchange Act or Regulation M
under the Exchange Act, which prohibits, with certain exceptions, any such
person from bidding for or purchasing any security which is the subject of such
distribution until such person's participation in that distribution is
completed. In addition, Rule 10b-7 under the Exchange Act or Regulation M
prohibits any "stabilizing bid" or "stabilizing purchase" for the purpose of
pegging, fixing or stabilizing the price of the common stock in connection with
this offering. We have informed the selling stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
23
If we are notified by the selling stockholders that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special order, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a post-effective
amendment to the registration statement of which this prospectus forms a part,
disclosing the following:
o The names of the selling stockholders and of the participating
broker-dealer(s);
o The number of shares involved;
o The price at which such shares were sold;
o The commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable;
o That such broker-dealer(s) did not conduct any investigation
to verify the information set out or incorporated by reference
in this prospectus; and
o Other facts material to the transaction.
The selling stockholders may be entitled under agreements entered into
with us to indemnification from us against liabilities under the Securities Act.
In order to comply with certain state securities laws, if applicable,
these shares of common stock will not be sold in a particular state unless they
have been registered or qualified for sale in that state or any exemption from
registration or qualification is available and complied with.
EXPERTS
The consolidated balance sheets of Commercial Concepts, Inc. as of
February 29, 2000 and the related statements of operations, stockholders'
deficit and cash flows for the period ended February 29, 2000, included in this
prospectus, have been included herein in reliance on the report of Fitzgerald
Sanders, LLC, independent certified public accountants, given on the authority
of that firm as experts in accounting and auditing.
LEGAL MATTERS
Sichenzia, Ross, Friedman & Ference LLP has passed on certain legal
matters for Commercial Concepts in connection with this offering.
WHERE CAN YOU FIND ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto,
relating to the units offered hereby has been filed with the Securities and
Exchange Commission. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules thereto.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by such reference. For further information with respect to
Commercial Concepts and the shares offered hereby, reference is made to such
registration statement, exhibits and schedules. A copy of the registration
statement may be inspected by anyone without charge at the commission's
principal office located at:
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Copies of all or any part thereof may be obtained from the public
reference branch of the commission upon the payment of certain fees prescribed
by the commission. The commission also maintains a site on the worldwide web at
http://www.sec.gov that contains information regarding registrants that file
electronically with the commission.
24
Commercial Concepts, Inc.
Financial Statements
and
Notes to Financial Statements
As of February 28, 2001 and February 29, 2000
and for the years then ended
With Independent Auditors' Report
Contents
Independent Auditors' Report - Christensen & Duncan ...................... F-2
Independent Auditors' Report - Fitzgerald Sanders......................... F-3
Financial Statements:
Balance Sheets as of February 28, 2001 and February 29, 2000.......... F-4
Statements of Operations for the years ended February 28, 2001
and February 29, 2000............................................... F-5
Statement of Stockholders' Deficit for the years ended February
28, 2001 and February 29, 2000...................................... F-6
Statements of Cash Flows for the years ended February 28, 2001 and
February 29, 2000................................................... F-7
Notes to Financial Statements......................................... F-8
F-1
Christensen & Duncan CPAs, LC
Certified Public Accountants
(801) 944-4020 Mobile (801) 597-3207 Fax (801) 944-4866 slcpas@integrity.com
7086 South Highland Dr. #200 / Salt Lake City, Utah 84121
Independent Auditors' Report
Board of Directors
Commercial Concepts, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheet of Commercial Concepts, Inc. as
of February 28, 2001, and the related statements of operations, stockholders'
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of the Company for the year ended February 29, 2000, were audited by
other auditors whose report, dated May 17, 2000, expressed an unqualified
opinion on those statements and included an explanatory paragraph concerning the
Company's ability to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Commercial Concepts, Inc. as of
February 28, 2001, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has current liabilities in excess of current
assets, has a net stockholders' deficit and has incurred substantial operating
losses, all of which 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 3. The financial statements do not include any adjustments that might
result from the outcome of the uncertainty.
/s/ CHRISTENSEN & DUNCAN CPA's LC
CHRISTENSEN & DUNCAN CPA's LC
May 10, 2001
F-2
Independent Auditors' Report
To the Board of Directors and Stockholders
of Commercial Concepts, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Commercial Concepts, Inc. (a
Utah corporation) as of February 29, 2000, and February 28, 1999, and the
related statements of operations, stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements and
supplementary information of Commercial Concepts, Inc. as of February 28, 1998
were audited by other auditors whose report dated March 11, 1998, on those
statements included an explanatory paragraph that described a substantial doubt
about the Company's ability to continue as a going concern due to losses from
operations and limited working capital discussed on Note 4 to the financial
statements.
We conducted our audits in accordance with generally accepted auditing
standards. 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 provides 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 Commercial Concepts, Inc. as of
February 29, 2000 and February 28, 1999, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements as of February 29, 2000, have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 4 to the financial statements, the Company has suffered
recurring losses from operations and has limited working capital. The factors
raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 4. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Fitzgerald Sanders, LLC
Fitzgerald Sanders, LLC
Salt Lake City, Utah
May 17, 2000
F-3
COMMERCIAL CONCEPTS, INC.
BALANCE SHEETS
February 28, 2001 and February 29, 2000
February 28, February 29,
2001 2000
---------------- --------------
ASSETS
CURRENT ASSETS
Cash in bank $ 1,621 $ 31,171
Accounts receivable 11,548 37,811
Employee advances 11,700
Prepaid expenses 1,683 6,991
---------------- --------------
Total current assets 26,552 75,973
---------------- --------------
PROPERTY AND EQUIPMENT
Property and equipment 118,228 93,140
Less: accumulated depreciation (47,995) (22,810)
---------------- --------------
Property and equipment, net 70,233 70,330
---------------- --------------
OTHER ASSETS
Investment in software development 550,291
Deposits 7,217 100
---------------- --------------
Total other assets 557,508 100
---------------- --------------
TOTAL ASSETS $ 654,293 $ 146,403
================ ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 88,030 $ 269,265
Accrued salaries 301,622
Accrued interest 8,418
Current portion of long-term debt 4,850 4,514
Short-term debt 167,988 45,000
---------------- --------------
Total current liabilities 570,908 318,779
---------------- --------------
LONG TERM DEBT 830,172 17,432
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value, 75,000,000 shares
authorized, 28,197,590 and 23,683,630 shares issued
and outstanding, respectively 28,198 23,683
Common stock subscription receivable (200,880) (225,922)
Additional paid-in capital 2,807,473 2,015,357
Accumulated deficit (3,381,578) (2,002,926)
---------------- --------------
Total Stockholders' Deficit (746,787) (189,808)
---------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 654,293 $ 146,403
================ ==============
See accompanying notes to financial statements
F-4
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF OPERATIONS for the
Years Ended February 28, 2001 and February 29, 2000
2001 2000
---- ----
REVENUES:
Sales $ 70,104 $ 261,263
Less cost of goods sold 5,078 81,797
---------------- --------------
Gross Profit 65,026 179,466
EXPENSES:
General and Administrative Expenses 903,836 847,527
Services provided for common stock 458,882 158,642
Depreciation 25,185 15,597
---------------- --------------
Total Expenses 1,387,903 1,021,766
---------------- --------------
NET LOSS FROM OPERATIONS (1,322,877) (842,300)
OTHER INCOME:
Interest income 568 15,806
Other income 8,607
Interest expense (64,950) (5,510)
---------------- --------------
NET LOSS BEFORE INCOME TAXES (1,378,652) (832,004)
PROVISION FOR INCOME TAXES - -
NET LOSS $ (1,378,652) $ (832,004)
================ ==============
NET LOSS PER COMMON SHARE:
Weighted Average Shares Outstanding:
Basic 25,999,966 16,640,080
Diluted 25,999,966 16,640,080
Net Loss per Common Share:
Basic $ (.053) $ (.050)
Diluted $ (.053) $ (.050)
See accompanying notes to financial statements
F-5
COMMERCIAL CONCEPTS, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT for
the Years Ended February 28, 2001 and February 29, 2000
Common Stock Additional Common Stock
---------------------- Paid-in Accumulated Subscription
Shares Amount Capital Deficit Receivable
------ ------ --------- ------- ----------
Balance, March 1, 1999 9,136,280 $ 9,136 $ 1,231,580 $(1,170,922)
Issuance of common stock for cash and receivable 2,400,000 2,400 309,600 - -
Issuance of common stock for various technology 700,000 700 79,600 - -
Issuance of common stock for loan inducement fee 100,000 100 9,900 - -
Issuance of common stock for litigation settlement 360,000 360 11,100 - -
Issuance of common stock for services 6,747,350 6,747 151,895 - -
Stock subscription receivable 4,240,000 4,240 221,682 - $ (225,922)
Net loss - - - (832,004) -
--------------------------------------------------------
Balance, February 29, 2000 23,683,630 23,683 2,015,357 (2,002,926) (225,922)
Issuance of common stock for services at various dates 3,628,960 3,630 455,252 - -
Issuance of common stock for cash at various dates 900,000 900 309,675 - -
Beneficial note conversion feature - - 27,174 - -
Payment received on stock subscription receivable - - - - 25,042
Cancellation of shares (15,000) (15) 15 - -
Net loss - - - (1,378,652) -
---------- --------- ----------- ----------- ----------
Balance, February 28, 2001 28,197,590 $ 28,198 $ 2,807,473 $(3,381,578) $ (200,880)
========== ========= =========== =========== ==========
See accompanying notes to financial statements
F-6
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF CASH FLOWS for the
Years Ended February 28, 2001 and February 29, 2000
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,378,652) $ (832,004)
Non-cash items included in net loss:
Services, fees and settlements paid in stock 458,882 260,402
Depreciation 25,185 15,597
Interest expense on convertible note conversion
feature 27,174 -
Changes in assets and liabilities:
Prepaid expenses 5,308 (6,991)
Accounts receivable 26,263 (37,811)
Employee advances (11,700) 12,340
Inventory - 4,500
Accounts payable (181,235) 51,241
Accrued expenses 314,890 162,363
---------------------------------------
Net cash flows used in operating activities (713,885) (370,363)
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in deposits (7,117) -
Increase in investment in software development (550,291) -
Purchase of equipment (25,088) (32,537)
---------------------------------------
Net cash flows used in investing activities (582,496) (32,537)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from sale of stock 310,575 312,000
Stockholder loans 25,042 -
Net proceeds from short-term debt 118,474 -
Net proceeds from long-term debt 812,740 44,376
---------------------------------------
Net cash flows from financing activities 1,266,831 356,376
---------------------------------------
NET DECREASE IN CASH (29,550) (46,524)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 31,171 77,695
---------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,621 $ 31,171
=======================================
SUPPLEMENTAL INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest $ 56,532 $ 5,510
=======================================
Income taxes $ 100 $ 100
=======================================
See accompanying notes to financial statements
F-7
COMMERCIAL CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS for the
Years Ended February 28, 2001 and February 29, 2000
NOTE 1 - THE COMPANY
Business Operations Commercial Concepts, Inc. (The Company) creates proprietary
software platforms. From these platforms individual internet related database
software products are developed. As each product completes beta testing, the
Company seeks a distribution partner to market and provide ongoing support for
the product.
The Company has elected a February fiscal year end for accounting and reporting
purposes.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment - The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of leasehold
improvements is depreciated (amortized) over the lesser of the length of the
related leases or the estimated useful lives of the assets.
As of February 28, 2001 and February 29, 2000, property and equipment
consisted of the following:
2001 2000
---- ----
Leasehold improvements $7,000 $7,000
Equipment 99,055 73,967
Furniture and fixtures 12,173 12,173
------ ------
Total $118,228 $ 93,140
======== =========
Capitalization of Software Development Costs - The Company's policy is to
expense research and development costs until technological feasibility is
reached and all related research and development activities are completed,
subsequent production expenses to bring the product to market are then
capitalized. Capitalization of software costs is discontinued when the product
is available for general release to customers.
Amortization expense of capitalized software costs has not been provided for in
the accompanying statements of operations because the software products are not
available as yet for sale to customers.
Income Taxes - Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Net Income (Loss) per Common Share - Basic net income (loss) per common share is
computed based upon the average number of common shares outstanding during the
period. The diluted per share computation adds to the weighted average common
shares outstanding the incremental increase in shares due to outstanding common
stock equivalents (options, warrants etc.) unless such common stock equivalents
are considered anti-dilutive.
F-8
COMMERCIAL CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS for the
Years Ended February 28, 2001 and February 29, 2000
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassification - Certain items on the February 29, 2000 financial statements
have been reclassified to conform to classifications adopted in 2001.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates the continuation of
the Company as a going concern. As reflected in the accompanying financial
statements, the Company has current liabilities in excess of current assets, has
a net stockholders' deficit and has incurred substantial operating losses, all
of which raise substantial doubt about its ability to continue as a going
concern.
In order to develop additional working capital and attract continued equity
investment, the Company has reorganized management, formulated a new business
plan, and developed and marketed new business products. On or about July 18,
2000, the company initiated a borrowing relationship with a private investment
group (see Notes 6 and 9). Through February 28, 2001, the Company has borrowed
$500,000 under the terms of two $250,000 convertible notes payable. In addition,
$300,000 was borrowed on December 3, 2000 from this investment group. Management
believes that the actions presently being taken will provide the opportunity for
the Company to continue as a going concern.
NOTE 4 - INCOME TAXES
Deferred tax assets at February 28, 2001 and February 29, 2000, consisted of the
following:
2001 2000
---- ----
Deferred tax asset arising from:
Net operating loss carryforwards $1,100,000 $ 623,431
Less allowance valuation at 100% (1,100,000) (623,431)
---------- -----------
Deferred tax asset $ NONE $ NONE
========== ===========
The Company has unused net operating loss carry forwards of approximately
$3,000,000 to offset future taxable income which expire at various times and
amounts through 2021.
NOTE 5 - SHORT-TERM AND LONG-TERM DEBT
Short-term debt consisted of the following at February 28, 2001 and February 29,
2000:
2001 2000
---- ----
Notes payable (non-collateralized) to individual dated June 22,
2000 through February 16, 2001, due at various dates through
February 5, 2002, plus all accrued interest at 15%. $ 68,500
Note payable to individual dated November 3, 2000, collateralized
by 200,000 shares of the Company's common stock, payable on
demand plus all accrued interest at 15%. 15,000
F-9
COMMERCIAL CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS for the
Years Ended February 28, 2001 and February 29, 2000
NOTE 5 - SHORT-TERM AND LONG-TERM DEBT (CONTINUED)
Short-term debt (continued)
Note payable (non-collateralized) to individual dated June 15,
2000 payable on demand plus all accrued interest at 10%. 42,988
Note payable to limited partnership dated February 2001,
collateralized by 571,250 shares of the Company's common stock,
payable on March 15, 2001 plus all accrued interest at 12%. 30,000
Note payable to corporation (non-collateralized) dated January
23, 2001 due on demand plus all accrued interest at 10%. 10,000
Notes payable to three individuals paid in full during the year
ended February 28, 2001 plus all accrued interest at 10%. $ 45,000
Other 15,000
---------- ----------
Total $ 167,988 $ 45,000
========== ==========
Long-term debt consisted of the following at February 28, 2001 and February 29,
2000:
2001 2000
---- ----
Convertible notes payable to private investment group with
$250,000 due on July 20, 2003 and $250,000 due on September 20,
2003 plus all accrued interest at 6% (see Note 6). $ 514,712
Convertible note payable to private investment group due December
3, 2003 plus all accrued interest at 8% (see Note 6). 305,918
Capital leases (see Note 8). 14,392 $ 21,946
------------ ----------
Total 835,022 21,946
Less current-portion (4,850) (4,514)
------------ ----------
Long-term portion $ 830,172 $ 17,432
============ ==========
Long term debt as of February 28, 2001 is scheduled to mature as follows:
Year ended February 28:
2002 $ 4,850
2003 5,000
2004 825,172
-----------
Total $ 835,022
===========
F-10
COMMERCIAL CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS for the
Years Ended February 28, 2001 and February 29, 2000
NOTE 6 - CONVERTIBLE NOTES PAYABLE AND OTHER EQUITY INSTRUMENTS
Through February 28, 2001, the Company issued to a private investment group two
$250,000, 6% convertible notes due July 20, 2003 and September 20, 2003,
respectively. The notes are convertible into common shares of the Company based
upon the three lowest closing prices for the Company during the thirty trading
days prior to the date of the note, or the three lowest closing prices during
the sixty trading days prior to the conversion date. In accordance with Emerging
Issues Task Force No. 98-5, the Company recorded interest expense and a
corresponding increase to additional paid-in capital in the amount of $27,174 in
connection with the beneficial conversion feature during the year ended February
28, 2001. The Company retains a redemption clause in the notes that allow the
Company to repurchase the notes upon payment of 130% of the note's face value,
plus accrued interest. In addition, the Company issued warrants to purchase
850,000 shares of the Company's common stock at an exercise price of $0.4375, in
connection with the issuance of the first $250,000 note and warrants to purchase
850,000 shares were issued at an exercise price of $.1925, in connection with
the second $250,000 note, which exercise prices approximated the fair market
value of the Company's common stock.
On December 3, 2000, the Company received $300,000 from a private investment
group under the terms of a convertible 8% note payable due December 3, 2003. In
connection therewith, the Company issued 750,000 five-year warrants having an
exercise price of $0.115.
On March 7, 2001 the Company issued warrants to purchase 40,816 shares of the
Company's common stock at $.175 in connection with a short-term $50,000 note
payable entered into on March 1, 2001.
Four employees including two officers of the Company have the option to convert
accrued salaries in the amount of $151,059 into 1,575,893 shares of the
Company's common stock.
NOTE 7 - RELATED PARTY TRANSACTIONS
During the year ended February 28, 2001, L&B Charitable Trust purchased 500,000
restricted common shares of the Company for $100,000. The purchase price also
included two-year warrants to purchase an additional 500,000 common shares of
the Company at an exercise price of $0.50 in the first year and $0.75 in the
second year.
During the year ended February 28, 2001, the Company issued 2,018,739 restricted
shares of common stock to three officers of the Company for services.
F-11
COMMERCIAL CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS for the
Years Ended February 28, 2001 and February 29, 2000
NOTE 8 - LEASE COMMITMENTS
As of February 28, 2001, the Company leased office space and certain equipment
under non-cancelable operating and capital leases. Future minimum lease payments
required under the operating and capital leases are as follows:
Operating Capital
Leases Leases
------ ------
2002 ................................... $ 78,379 $ 8,064
2003 ................................... 81,737 8,064
2004 ................................... 85,162 8,064
2005 ................................... - 2,181
---------- ---------
Total minimum lease payments $ 245,278 26,373
==========
Less amount representing interest 11,981
---------
Present value of net minimum lease payments 14,392
Less current portion 4,850
---------
Total $ 9,542
=========
As of February 28, 2001, the Company has equipment purchased under
non-cancelable capital leases with a cost of $22,570 and accumulated
amortization of $5,556.
NOTE 9 - Subsequent Event
On July 18, 2000 the Company initiated a $6.5 million equity line of credit with
a private investment group. Full implementation of the credit line required the
Company to submit an appropriate SB-2 registration statement to the Securities
and Exchange Commission (SEC). This SB-2 registration statement was filed with
the SEC in September 2000. In March 2001 the Company received notification from
the SEC that the registration cannot be approved if the financing structure
remains as an equity line of credit. As a result, the Company and the private
investment group have agreed that the SB-2 registration should be amended to
reflect only the first two disbursements that were made under the equity line,
in the form of convertible notes (see note 6). The amended SB-2 was filed with
the SEC in April 2001. The investment group has agreed to continue financial
support for the Company. An additional convertible note for $300,000 was
executed in April 2001, between the investment group and the Company. An
agreement formalizing the revised financing terms is currently being negotiated.
F-12
No dealer, salesman or other person is
authorized to give any information or
to make any representations other than
those contained in this prospectus in
connection with the offer made hereby.
If given or made, such information or
representations must not be relied upon COMMERCIAL
as having been authorized by the CONCEPTS, INC.
Company. This prospectus does not 9,009,941
constitute an offer to sell or a Shares of Common Stock
solicitation of an offer to buy any of
the securities covered hereby in any
jurisdiction or to any person to whom
it is unlawful to make such offer or
solicitation in such jurisdiction.
Neither the delivery of this prospectus
nor any sale made hereunder shall, in
any circumstances, create any
implication that there has been no
change in the affairs of Commercial
Concepts since the date hereof.
Table of Contents
Page
PROSPECTUS SUMMARY 4
RISK FACTORS 5
DESCRIPTION OF BUSINESS 7
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS 11
USE OF PROCEEDS 11
DESCRIPTION OF PROPERTY 12 PROSPECTUS
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS 12
MANAGEMENT'S DISCUSSION AND
ANALYSIS 14
RESULTS OF OPERATIONS 14
DESCRIPTION OF SECURITIES 18
EXPERTS 24
LEGAL MATTERS 24
WHERE CAN YOU FIND ADDITIONAL
INFORMATION 24 , 2001
FINANCIAL STATEMENTS F-1
25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or officers of the
registrant are insured or indemnified in any manner against any liability which
they may incur in such capacity are as follows:
The Registrant's Articles of Incorporation provide for the
indemnification of the Registrant's directors and officers to the fullest extent
permitted by the Utah Revised Business Corporation Act ("URBCA"). The liability
of directors and officers of the Registrant is limited such that a director or
officer is not liable to the Registrant or its shareholders for any action taken
or any failure to take any action, as an officer or director, as the case may
be, unless:
(i) The director or officer has breached or failed to perform
the duties of the office in compliancess. 16-10 (a)-841 of the URBCA; and
(ii) The breach or failure to perform constitutes gross
negligence, willful misconduct, or intentional infliction of harm on the
Registrant or its shareholders.
Directors of the Registrant are personally liable if such director votes for or
assents to an unlawful distribution under the URBCA or the Registrant's Articles
of Incorporation.
The Registrant will pursuant to ss. 16-10a-902 of the URBCA, indemnify
an individual, made party to a proceeding because he was a director, against
liability incurred in the proceeding if:
(i) The director's conduct was in good faith;
(ii) The director reasonably believed that his conduct was in,
or not opposed to, the Registrant's best interests; and
(iii) In the case of any criminal proceeding, he has no
reasonable cause to believe his conduct was unlawful; provided that, the
Registrant may not indemnify the same director if (A) indemnification is sought
in connection with a proceeding by or in the right of the Registrant in which
the director was adjudged liable to the Registrant; or (B) indemnification is
sought in connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not including action in his
official capacity, in which proceeding he was adjudged liable on the basis that
he derived an improper personal benefit.
Indemnification under this section in connection with a proceeding by or in the
right of the Registrant is limited to reasonable expenses incurred in connection
with the proceeding.
In accordance with ss. 16-10a-903 of the URBCA, the Registrant shall
indemnify a director or an officer, who is successful on the merits or
otherwise, in defense of any proceeding, or in the defense of any claim, issue
or matter in the proceeding, to which he was a party because he is or was a
director or an officer of the Registrant, as the case may be, against reasonable
expenses incurred by him in connection with the proceeding or claim with respect
to which he has been successful.
In accordance with ss. 16-10a-1-904 of the URBCA, the Registrant will
pay or reimburse the reasonable expenses incurred by a party to a proceeding in
advance of the final disposition of the proceeding, provided that:
(i) The director furnishes the corporation a written
affirmation of his good faith belief that he has met the applicable standard of
conduct described in ss. 16-10a-902 of the URBCA;
(ii) The director furnishes to the Registrant a written
undertaking, executed personally or on his behalf, to repay the advance if it is
ultimately determined that he did not meet such standard of conduct; and
26
(iii) A determination is made that the facts then known to
those making the determination would not preclude indemnification thereunder.
Section 16-10a-905 permits a director or officer who is or was a party
to a proceeding to apply for indemnification to the court conducting the
proceeding or another court of competent jurisdiction.
The Registrant will indemnify and advance expenses to an officer,
employee, fiduciary or agent of the Registrant to the same extent as a director;
or to a greater extent in some instances if not inconsistent with public policy.
The registrant's Articles of Incorporation limit liability of its
Officers and Directors to the full extent permitted by the Utah Revised Business
Corporation Act.
ITEM 25. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated costs and expenses to be
paid by Commercial Concepts in connection with the offering described in the
Registration Statement.
Amount
---------------------------------------------------- ------------------
SEC registration fee $ 2,172.19
Printing and shipping expenses $ 2,000.00
Legal fees and expenses $10,000.00
Accounting fees and expenses $ 5,000.00
Transfer, escrow and miscellaneous expenses $ 2,000.00
---------------------------------------------------- ------------------
Total $21,172.19
---------------------------------------------------- ------------------
* All expenses except SEC registration fee are estimated.
ITEM 26. Recent Sales of Unregistered Securities
On or about December 3, 2000, Commercial Concepts, Inc. issued to an
accredited private investor an 8% convertible note due November 30, 2003 in the
aggregate amount of $300,000. The note is convertible into Common Stock of the
registrant at a price that is the function of the three lowest intraday trading
prices of the Common Stock for the forty day trading period immediately
preceding the conversion date or the lowest intraday trading price for the three
day trading period immediately preceding the conversion date. The Registrant
retains a redemption clause that allows the Registrant to repurchase the note
upon payment of 150% of the note's face value, plus accrued interest. In
addition, 750,000 five-year warrants were issued for shares of the Registrant's
common stock at a price not to exceed $0.115. These securities were sold to
accredited investors in reliance on Section 4(2) of the Securities Act of 1933.
On or about September 15, 2000, Commercial Concepts, inc. issued to
four private investors, all of whom are accredited investors, convertible notes
due September 15, 2003 in the total aggregate amount of $250,000. The notes are
convertible into shares of Common Stock of the Registrant at a price and upon
the same conditions as those set forth in the following paragraph. The notes are
also subject to redemption and 850,000 warrants were issued upon the same
conditions as those set forth in the following paragraph. Commercial Concepts,
Inc. issued the notes in reliance upon the exemption from registration under
Section 4(2) of the securities Act of 1933, as amended. The notes were issued to
accredited investors in connection with a structured financing entered into
prior to the filing of this registration statement. The investors were only
obligated to purchase the notes subject to satisfaction of specified conditions
that were not within the control of the investors. As such, Commercial Concepts,
Inc. believes that the private placement of the notes is not subject to
integration with the public offering contemplated by this registration
statement. These securities were sold to accredited investors in reliance on
Section 4(2) of the Securities Act of 1933.
27
On or about July 18, 2000, Commercial Concepts, Inc. issued to a
private investment group a $250,000, 6% convertible note due July 20, 2003. The
note is convertible into common shares of the Registrant at a price that is a
function of the three lowest closing prices for the Registrant during the 30
trading days prior to the date of the note, or the three lowest closing prices
during the 60 trading days prior to the conversion date. The Registrant retains
a redemption clause in the note that allows the Registrant to repurchase the
note upon payment of 130% of the note's face value, plus accrued interest. In
addition, 850,000 five-year warrants were issued for shares of the Registrant's
common stock at a price not to exceed $0.4375.
These securities were sold to accredited investors in reliance on Section 4(2)
of the Securities Act of 1933.
On or about April 18, 2000, L & B Charitable Trust purchased 500,000
restricted common shares of the Registrant for $100,000. The purchase price also
included two-year warrants to purchase an additional 500,000 common shares of
the Registrant at a price of $.50 in the first year and $.75 in the second year.
These shares were issued in reliance on Rule 506 of Regulation D promulgated
under the 1933 Act to an accredited investor.
On or about March 6, 2000, the Registrant entered into a subscription
agreement with an investor for the purchase by the investor of 1,008,434
restricted common shares. As payment for the shares, the Registrant accepted a
note receivable due August 31, 2000 for $550,000. The term of the note was
subsequently moved to September 30, 2000. At November 30, 2000, $210,560 had
been received by the Registrant. The share certificates will be issued after
payment for the balance of the note is received. These securities were sold to
an accredited investor in reliance on Section 4(2) of the Securities Act of
1933.
On or about November 14, 1999, Lee Kunz, a director of the Registrant
since April 2000, purchased 300,000 common shares of the Registrant for $24,000
on behalf of L & B Charitable Trust, a Colorado trust. The shares were issued in
reliance on Rule 504 of Regulation D promulgated under the 1933 Act. Mr. Kunz,
on or about February 2000, also purchased 500,000 restricted common shares of
the Registrant for $75,000. These shares were issued in reliance on Rule 506 of
Regulation D promulgated under the 1933 Act to an accredited investor. On or
about January 2000, Mr. Kunz on behalf of L&B Charitable Trust purchased 200,000
restricted common shares of the Registrant for $20,000 received by the
Registrant. The 200,000 shares acquired by L & B Charitable Trust were a part of
the 2,198,000 shares issued to Scott G. Adamson, the Executive Vice President of
the Registrant, in August 1999. The shares were endorsed to L & B Charitable
Trust in March 2000.
On or about December 28, 1999, the Registrant issued 475,050 shares of
common stock to its employees, including each of its officers, as a year-end
bonus for their services. The shares were issued in reliance on Section 4(2) of
the 1933 Act.
On December 21, 1999, the Registrant issued 360,000 restricted shares
of common stock as settlement for a lawsuit brought by a plaintiff against the
Registrant and a former officer of the Registrant. These securities were sold to
an accredited investor in reliance on Section 4(2) of the Securities Act of
1933.
On or about October 10, 1999, the Registrant issued 400,000 shares to
Manoj Associates, LLC, a Colorado limited liability company for $12,000. The
shares were issued in reliance on Rule 504 of Regulation D promulgated under the
1933 Act.
On or about August 31, 1999, the Registrant issued 100,000 shares of
restricted common stock to an unaffiliated individual as additional compensation
to issue a loan to the Registrant. These securities were sold to an accredited
investor in reliance on Section 4(2) of the Securities Act of 1933.
On or about June 15, 1999, the Registrant issued 1,000,000 shares to
acquire the stock of Advice Productions, Inc. The shares were issued in reliance
on Section 4(2) of the 1933 Act to an accredited investor.
28
On or about May 31, 1999, the Registrant issued 300,000 shares of
restricted common stock to an unaffiliated individual in exchange for all shares
of Outdoor Technologies, Inc., a private Nevada corporation including as its
sole asset all rights and interests to various patentable recreational concepts.
These securities were sold to an accredited investor in reliance on Section 4(2)
of the Securities Act of 1933.
On or about May 1, 1999, the Registrant sold 2,000,000 shares of common
stock to an officer of the Company for $120,000. The transaction was exempt from
Registration pursuant to Section 4(2) of the 1933 Act to an accredited investor.
From March 1, 1999 to date, the Registrant has sold 1,500,000 shares to
unaffiliated investors for $191,000 in reliance on Rule 504 of Regulation D
promulgated under the 1933 Act.
On January 25, 1999, we issued 2,000,000 shares of restricted common
stock valued at $.06 per share, for a total amount of $120,000 to Wilfred Blum,
then a director and the Chief Executive Officer and President. Of the shares
issued, 1,600,000 shares or $96,000 worth of stock was issued for services
rendered during the fiscal year ended February 28, 1999, and 400,000 shares, or
$24,000 worth of stock was issued to repay cash advances to Commercial Concepts.
The transaction was exempt from registration pursuant to Section 4(2) of the
1933 Act to an accredited investor.
On November 25, and December 2, 1998, the Company issued a total of
234,100 shares of restricted common stock valued at $.22 per share to D. Welker,
who at the time of the transaction was an officer of the Company, to repay
previous net unpaid cash advances to the Company of $51,500. The transaction was
exempt from Registration pursuant to Section 4(2) of the 1933 Act to an
accredited investor.
From August 26, 1998 to October 31, 1998, the Registrant sold a total
of 1,221,000 shares to unaffiliated investors for $310,800 in reliance on Rule
504 of Regulation D promulgated under the 1933 Act. Proceeds were used to fund
the Company's operations.
ITEM 27. Exhibits
Exhibit No. SEC Reference Document
- ----------- ----------------------
2.1 Articles of Incorporation*
2.2 Bylaws*
4.1 Subscription Agreement, dated as of July 20, 2000
4.2 Form of Convertible Notes Pursuant to Subscription Agreement,
dated as of July 20, 2000
4.3 Form of Warrants Pursuant to Subscription Agreement, dated as of
July 20, 2000
5.1 Opinion and Consent of Ray, Quinney & Nebeker***
10.1 Lease Agreement, dated November 10, 1999*
10.2 Office Building Lease, dated February 18, 1999*
10.3 First Amendment to Office Building Lease, dated October 5, 1999*
10.4 Agreement to Develop Software, dated June 27, 1999*
10.5 Settlement Agreement and General Release with Larry Rogers**
10.6 Commercial Concepts, Inc. Bonus Plan***
10.7 Intermountain Health Care Agreement***
10.8 Marketing Contract between Commercial Concepts, Inc. and Larry
and Debra Chilson, dated as of November 15, 2000
10.9 Distribution Agreement between Commercial Concepts, Inc. and Vaun
Andrus, dated as of August 24, 2000
24.1 Consent of Fitzgerald Sanders, LLC
24.2 Consent of Christensen & Duncan, CPAs, LC
24.3 Consent of Ray, Quinney & Nebeker is contained in Exhibit 5.1
* Incorporated by reference from Registration Statement on
Form 10
** Incorporated by reference from Form 10-KSB, as filed on
May 30, 2000
*** Previously filed herewith.
29
ITEM 28. Undertakings
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred to that section.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to its Articles of Incorporation or provisions of the
Utah Revised Business Corporation Act, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question, whether or not such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to (a)
Include any prospectus required by Section 10(a)(3) of the Securities Act; (b)
Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and (c) Include
any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it has met
all of the requirements of filing on Form SB-2 and has authorized this
Registration Statement to be signed on its behalf by the undersigned, in Salt
Lake City, Utah on June 12, 2001.
Commercial Concepts, Inc.
By:/s/ George E. Richards Jr.
--------------------------
George E. Richards, Jr.
Chief Executive Officer,
Director, and President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
/s/ Karl Hansen Chief Financial Officer, June 12, 2001
- ------------------- Secretary and Director
Karl Hansen
/s/ Scott Adamson Executive Vice President and June 12, 2001
- -------------------- Director
Scott Adamson
/s/ Lee R. Kunz, Sr. Director June 12, 2001
- --------------------
Lee R. Kunz, Sr.
/s/ Lee Greenburg Director June 12, 2001
- -------------------
Lee Greenberg
31