As filed with the Securities and Exchange Commission
March 13, 2002 File No. 333-75272
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
COMMERCIAL EVALUATIONS
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0477246
------------------------------ -----------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
2320 Paseo Del Prado, Building B, Suite 205
Las Vegas, NV 89102
(702) 866-6029
--------------------------------------------------------------
(Address and telephone number of registrant's principal offices)
Robert Barcelon, President
COMMERCIAL EVALUATIONS, INC.
2320 Paseo Del Prado, Building B, Suite 205
Las Vegas, NV 89102
(702) 866-6029
-------------------------------------------------------
(Name, address and telephone number of agent for service)
Copies to:
Thomas C. Cook and Associates, Ltd.
Thomas C. Cook, Esq.
4955 S. Durango Drive
Suite 214
Las Vegas, Nevada 89113
(702) 952-8519
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
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, check the following box: [ ]
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. [ ]
CALCULATION OF REGISTRATION FEE
Title of Securities Amount to Proposed Maximum Proposed Maximum Amount of
to be registered be registered Offering Price Aggregate Offering Registration
per share Price Fee
------------- ------------- ------------- ------------- -------------
Common Stock 400,000 shares $0.15 $60,000 $15
The number of shares to be registered is estimated solely for the purpose of
calculating the registration fee.
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 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to completion March 13, 2002
2
PROSPECTUS
$60,000
COMMERCIAL EVALUATIONS, INC.
COMMON STOCK
This is Commercial Evaluations, Inc.'s ("CEI"'s) Initial Public Offering. We are
offering 400,000 shares of common stock. The public offering price is $0.15 per
share. No public market currently exists for our shares. We were formed in 1994
and the mortgage activities began February 29, 2000.
See Risk Factors for certain information you should consider before you purchase
the shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The shares are offered on a best efforts, all or nothing basis directly through
our officers and directors. No commission or other compensation related to the
sale of the shares will be paid to any of our officers or directors. The
proceeds of the offering will be placed and held in a trust account at Thomas C.
Cook and Associates, Ltd. until $60,000 in cash has been received as proceeds
from sale of shares. If we do not receive all of the proceeds within 120 days
from the effective date of this prospectus, unless extended by us for up to an
additional 60 days, your investment will be promptly returned to you without
interest and without any deductions. We may terminate this offering prior to the
expiration date.
Price to Public Commissions Proceeds to Company*
--------------- ----------- -------------------
Per Share $0.15 $-0- $0.15
Offering $60,000 $-0- $60,000
*Approximately $4,000 of the proceeds will be used to pay for filing fees,
legal, accounting, printing and advertising. Net proceeds to Commercial
Evaluations, Inc. are estimated to be $56,000.
The date of this Prospectus is March 13, 2002.
3
Table of Contents
- --------------------------------------------------------------------------------
Prospectus Summary 4
Risk Factors 5
Forward Looking Statements 7
Use of Proceeds 8
Determination of Offering Price 9
Dilution 9
Management's Discussion and Analysis of Financial Condition 9
Description of Business 12
General 12
Organizer 12
Nature of Business 12
Facilities 13
Employees 14
Legal Proceedings 14
Management 16
Executive Compensation 17
Certain Transactions 17
Security Ownership of Certain Beneficial Owners
and Management 17
Description of Securities 18
Shares Eligible for Future Sale 19
Plan of Distribution 21
Legal Matters 22
Experts 22
Additional Information 22
Financial Statements F-1
Indemnification of Directors and Officers 23
Other expenses of issuance and distribution. 23
Recent sales of unregistered securities 24
Exhibits. 24
Undertakings 24
Signatures 25
i
PROSPECTUS SUMMARY
THE COMPANY
This is Commercial Evaluations, Inc.'s Initial Public Offering. We are Offering
400,000 shares of common stock. The public Offering price is $0.15 per share. No
public market currently exists for our shares. We were formed in 1994 and the
mortgage activities began February 29, 2000.
The predecessor company to Commercial Evaluations, Inc. (CEI) was organized as a
Nevada corporation as ZXS, Inc. on June 7, 1994. The name was changed on
February 29, 2000. We operate as a "net branch office" of a mortgage bank
operating under a Nevada exemption, Nevada Revised Statutes (NRS) 645E.15(6)(a).
A net branch office does not possess its own mortgage license. Under an
exclusive net branch agreement with SkoFed Mortgage Funding Corporation, we pay
a fee on each loan closed. SkoFed is licensed with the State of Nevada as a
primary mortgage company. As a net branch office, we operate under the
supervision of SkoFed and is shielded from liabilities associated with being a
primary mortgage company, such as the liabilities associated with the approval
or disapproval of loans, state and federal audits and the potential for having
to repurchase loans (all of which are the responsibility of SkoFed). We may
broker any mortgage loans to any lending source in which a brokerage fee would
be collected. We cannot enter into any other contracts with wholesale lenders,
cannot fund loans from any other source than SkoFed and cannot solicit funds
from private investors directly. These activities are reserved for licensed
mortgage companies. We are responsible for payment of all costs attributed to
the operation and receives a net check at the close of each transaction. Our
primary function will be to arrange mortgage loans for consumers for the
purchase of residential real estate in the short-term (currently and for the
next 12 months); however, wholesale mortgage-banking services, construction
lending brokering services and commercial loan brokering services are planned
for the long-term.
We plan to use the $56,000 net proceeds from this offering to increase
advertising in Nevada publications, hire administrative personnel to assist
additional contract brokers, train new contract brokers, purchase computer
equipment primarily for web site marketing and communication, and add to working
capital primarily as a reserve for acquiring additional office space for hiring
news contract brokers.
Prior to the offering, we recorded increases in mortgage loans for the 12-month
period ended December 31, 2001 to $15,428,455 with gross fees of $314,481,
compared with a seven-month partial period of similar operations with similar
number of brokers for the period ended December 31, 2000 of mortgage loans of
$2,766,653 and gross fees of $89,457. Revenues for the 12-months of 2001 ending
December 31 were $336,373 compared with $64,119 for the seven operational months
of 2000. The net loss for 2001 was $10,521 or a net loss of two cents per share
compared with a net loss of $58,905 or a net loss per share of 11 cents for the
seven months of 2000. Based on the fourth quarter of 2001 ended December 31 and
a review of the first six weeks of 2002 ended February 15, we believe that
trends are increasing and that contract brokers can be hired without significant
additional funds. In the fourth quarter of 2001, net income was $5,842, equal to
one cent per share on revenue of $136,343. The fourth quarter of 2000's net loss
was $18,672, equal a net loss of $.04 per share, on revenues of $12,918. Should
this offering not be completed, office space can be acquired from SkoFed at
rates that can be supported by expected business and that cash flow will support
operations and contribute to net income for the short-term (12 months) and
long-term (two to five years). For example, we agreed to hire eight mortgage
brokers late in the fourth quarter to start in the first quarter of 2002.
Additional office space to accommodate these additions is approximately $2,200
per month while the new eight brokers are expected to generate $50,000 in gross
fees per month. As of February 15, 2002, these eight brokers' backgrounds were
cleared and they all were working for us. Funds from this offering will allow
for more rapid expansion and an opportunity for increased mortgage processing,
commissions and net income. No such performance can be guaranteed, however.
4
RISK FACTORS
Investing in our stock is very risky and you should be able to bear a complete
loss of your investment. Please read the following risk factors closely.
Purchase of the shares offered hereby involves certain risks. Prospective
purchasers should consider, among other things, the following before making a
decision to purchase any securities being offered.
We have a very limited operating history to evaluate an investment in this
offering.
Commercial Evaluations, Inc., was formed on June 7, 1994. We began our mortgage
activities on February 29, 2000, and have had modestly growing revenues from
operations and the initial capitalization by our founders. Accordingly, there
can be no assurance that we will generate revenues in the future or that we will
operate at a profitable level.
You may lose your entire investment.
The shares being offered are highly speculative and involve a high degree of
risk and should not be purchased by any person who cannot afford the loss of his
entire investment. A purchase of our stock in this offering would be unsuitable
for a person who cannot afford to lose his entire investment.
Your investment will suffer immediate dilution.
Assuming the sale of all the shares being offered, the net tangible book value
of our shares would then be approximately $0.080 per share compared to the $0.15
public offering price. Accordingly, persons purchasing common stock in this
offering if all the shares offered are sold would then suffer a ($0.069) per
share dilution to the net tangible book value of their shares.
We may have to raise additional funds in the future.
The funds raised by this offering may not be adequate for our operational needs.
Therefore, we may need to raise additional funds. Even if all of the 400,000
Shares offered hereby are sold, the funds available to us may not be adequate
for us to be competitive in the industry. There is no assurance that additional
funds will be available from any source when we need it for expansion; and, if
not available, we may not be able to expand our operation as rapidly as we could
if such financing were available. If additional shares were issued to obtain
financing, investors in this offering would suffer a dilutive effect on their
percentage of stock ownership in our company.
The use of a portion of the proceeds for "working capital" from this offering
will be at the discretion of management. Therefore, if we do not use our
discretion wisely, our long-term success could suffer.
Although a portion of the net proceeds of this offering is intended for specific
uses, the balance will be available for whatever management deems appropriate
for our future success. Generally, this will include:
(a) working capital;
(b) fees associated with our future capitalization strategy; and
(c) general corporate purposes.
Therefore, the application of the net proceeds of this offering is substantially
within the discretion of our management. You will be relying on our management
and business judgment based only upon limited information about our specific
intentions. Achieving our financial and strategic objectives cannot be
guaranteed with the application of the net proceeds of this offering.
Purchasers in this offering will have a limited voice in our affairs.
Currently, officers and directors as a group directly own 500,000 shares of
common stock or 100% of the 500,000 shares of common stock outstanding. Assuming
all 400,000 shares of this offering are sold, the officers and directors will
still directly own 55.56% of the issued and outstanding common stock - giving
the individual investor a limited say in matters relating to our direction and
management. Therefore, the decision-making ability of the acting management team
will play a major role in determining our future health.
This offering is being sold on an all or nothing, best efforts basis.
We are offering the shares on an all or nothing, best efforts basis, and no
individual, firm or corporation has agreed to purchase or take down any of the
offered shares. No assurance can be given that any or all of the shares will be
sold. We shall deposit in a trust account the funds received from the purchase
of shares sold. In the event that the offering of $60,000 is not received within
one hundred eighty (180) days of the effective date of this registration
statement, the proceeds so collected will be refunded to investors without
deducting expenses. During this escrow period, you will not have use of nor
derive benefits from the money you have invested which is held in escrow.
5
Investors will not earn interest on their money invested with us while it is in
escrow.
Investors will not receive any return on their money submitted with their
subscription should the minimum offering requirement be reached. At the close of
escrow, all subscriptions and any income received thereon will be paid directly
to us. Should the offering not be reached, interest will not be paid up to the
date the funds are removed from escrow. It could take 180 days to receive back
one's initial investment because subscriptions are irrevocable during the
offering period.
The value of your investment may decrease between the time you invest and the
time a certificate is issued to you.
Investors could lose money because the market value of our shares might decrease
between the date that we close the offering and when we provide you with
certificates thirty days later. An investor is unable to sell their shares of
stock until they are physically in the possession of the stockbroker with whom
he or she is placing the sell order. However, trading in our common stock may
occur prior to the receipt of your certificate. Therefore, the price offered for
our common stock may be lower at the time your certificates are issued than at
the time your investment was first made resulting in a loss of part or all of
your investment.
We will not pay dividends in the foreseeable future.
We do not anticipate paying dividends on our common stock in the foreseeable
future but do plan to retain earnings, if any, for the operation and expansion
of our business. (See Description of Common Stock)
Competition may adversely affect us.
We face substantial competition from numerous mortgage banking entities that
have been in business longer than us and have substantially greater financial
and personnel resources. There are 239 identified entities in Southern Nevada.
The competition has an established share of the mortgage banking market. Both
savings & loans and thrifts have ready access to substantial savings pools
available for lending. We rely on Skofed. Our business may not be able to grow
if our loan officers do not overcome these competitive disadvantages with
personal service.
We must rely on outside experts for legal and accounting and their loss could
affect us.
There are risks inherent in the transactions that we undertake, especially where
we will be relying on others for legal and accounting advice. Should one or more
of these outside experts experience difficulties, they may be difficult to
replace.
A market may not develop for our company's stock because our company's common
stock may not be included in a quotation system.
Before this offering, there has been no public trading market for our common
stock. We seek to have our shares of common stock trade in the over-the-counter
market on the NASD's Over-the-Counter Bulletin Board, an inter-dealer automated
quotation system for equity securities not included in the Nasdaq's Small Cap
Market or National Market. If we are unable to include our shares of common
stock for quotation on the Bulletin Board we expect our shares to trade on the
NQB Pink Sheets published by the Pink Sheets, LLC. Although the Bulletin Board
has recently begun to receive greater recognition from the brokerage community,
the trading volume of securities quoted on the Bulletin Board is normally
substantially less than that of securities traded on the Nasdaq Small Cap Market
and National Markets. Trading volume in Pink Sheet securities is substantially
less than that of Bulletin Board securities.
You may have more difficulty selling our securities or obtaining price
quotations than if our stock was listed on the Nasdaq or a national securities
exchange, particularly if our shares are traded on the Pink Sheets. Because our
common stock is not listed on any national securities exchange, our common stock
may not be easily traded, not only in the amount of shares that could be bought
and sold, but also through delays in the timing of transactions, and lower
prices for our shares of common stock than might otherwise be obtained. Other
drawbacks would include a reduction in the number of securities analysts who
follow our common stock and a lack of news media coverage for our company.
6
A market may not develop for our company's common stock because no underwriters
or broker/dealers have agreed to make a market in our stock.
We are not using an underwriter to sell this issuance, and cannot guarantee that
any broker/dealer will make a market in our common stock. Making a market means
maintaining buy and sell quotations and being able to fulfill transactions at
those quoted prices and in reasonable quantities, subject to various securities
laws and other regulatory requirements. The development of a public trading
market depends on the existence of willing buyers and sellers, which we do not
control. We cannot guarantee that a regular trading market for our common stock
will develop after this offering or that, if developed, it will be sustained.
The ability to withstand a potential loss of all or a portion of one's
investment in this offering should be considered before making an investment
decision.
The trading activity in our common stock may be hindered by the applicability of
penny stock regulations.
Our common stock is subject to penny stock regulations and broker/dealer
practices in connection with transactions in penny stocks, which are regulated
by certain penny stock regulations adopted by the SEC. A penny stock generally
is any equity security with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in the security is provided by the exchange or system). In
addition, a security will be exempt from the penny stock regulations if the
issuer of the security has (i) net tangible assets in excess of $2,000,000, if
the issuer has been in continuous operation for at least three years, or
$5,000,000 if the issuer has been in continuous operation for less than three
years; or (ii) average revenue of at least $6,000,000 for the last three years.
None of these exemptions currently apply to our Company.
The penny stock regulations require a broker/dealer, prior to a transaction in a
penny stock not otherwise exempt from the regulations, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
risks in the penny stock market. The broker/dealer must also provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker/dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock regulations generally
require that prior to a transaction in a penny stock the broker/dealer make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock regulations. Due to the fact that our common stock will be subject
to these penny stock regulations, you may find it more difficult to sell your
securities.
FORWARD-LOOKING STATEMENTS
You should carefully consider the risk factors set forth above, as well as the
other information contained in this prospectus. This prospectus contains
forward-looking statements regarding events, conditions, and financial trends
that may affect our plan of operation, business strategy, operating results, and
financial position. You are cautioned that any forward-looking statements are
not guarantees of future performance and are subject to risks and uncertainties.
Actual results may differ materially from those included within the
forward-looking statements as a result of various factors.
Cautionary statements in the risk factors section and elsewhere in this
prospectus identify important risks and uncertainties affecting our future,
which could cause actual results to differ materially from the forward-looking
statements made in this prospectus.
7
USE OF PROCEEDS
The proceeds from the sale of the 400,000 shares of common stock offered by
Commercial Evaluations, Inc., assuming the all or nothing, best efforts offering
if completed at an initial public offering price of $0.15 per share, will be
$60,000. We will receive net proceeds from this offering of approximately
$56,000 after deducting the costs of this offering which are estimated at
$4,000, including legal, accounting, filing fees, printing, advertising and
transfer agent expenses.
We propose to use the net proceeds from this offering for the following
purposes:
Total Proceeds
Total Offering Percent
-------------- -------
Less: Offering Expenses $ 60,000 100.0%
====== ======
Accounting $ 1,500 2.5%
Legal $ 1,000 1.7%
Transfer Agent $ 500 0.8%
Copying & Advertising $ 500 0.8%
Other (Specify):
Offering Filing Fees $ 500 0.8%
-------- -----
Offering Expenses Total $ 4,000 6.7%
Net Proceeds from Offering $ 56,000 93.3%
Use of Net Proceeds
Total Net Total Net
--------- Proceeds
Percent
--------
Advertising $ 30,000 50.0%
Personnel $ 9,000 15.0%
Training costs $ 7,000 11.7%
Computer & Services $ 5,000 8.3%
Working Capital $ 5,000 8.3%
-------- -----
Net Proceeds Total $ 56,000 93.3%
Offering Expenses $ 4,000 6.7%
-------- ----
TOTAL USE OF PROCEEDS $ 60,000 100.0%
======== ======
We anticipate expending these funds for the purposes indicated above. To the
extent that expenditures are less than projected, the resulting balances will be
retained and used for general working capital purposes or allocated according to
the discretion of the Board of Directors. Conversely, to the extent that such
expenditures require the utilization of funds in excess of the amounts
anticipated, supplementing amounts may be drawn from other sources, including,
but not limited to, general working capital and/or external financing. The net
proceeds of this offering that are not expended immediately may be deposited in
interest or non-interest bearing accounts, or invested in government
obligations, certificates of deposit, commercial paper, money market mutual
funds or similar investments.
8
The working capital reserve may be used for general corporate purposes to
operate, manage and maintain the current and proposed operations including
employee wages, professional fees, expenses and other administrative costs.
Costs associated with being a public company, including compliance and audits of
our financial statements will be paid from working capital and revenues
generated from our operations. Pending expenditures of the proceeds of this
offering, we may make temporary investments in short-term, investment grade,
interest-bearing securities, money market accounts, insured certificates of
deposit and/or in insured banking accounts.
DETERMINATION OF OFFERING PRICE
The offering price of the shares was arbitrarily determined by our management.
The offering price bears no relationship to our assets, book value, net worth or
other economic or recognized criteria of value. In no event should the offering
price be regarded as an indicator of any future market price of our securities.
In determining the offering price, we considered such factors as the prospects
for our products, our management's previous experience, our historical and
anticipated results of operations and our present financial resources.
DILUTION AND COMPARATIVE DATA
Net tangible book value is the amount that results from subtracting the total
liabilities and intangible assets of an entity from its total assets. Dilution
is the difference between the public offering price of a security such as the
common stock, and its net tangible book value per share immediately after the
offering, giving effect to the receipt of net proceeds in the offering. As of
December 31, 2001, the net tangible book value of the company was $23,255,
$0.0331 per share of common stock, prior to the offering of 400,000 shares of
common stock at $0.15 per share (total offering, $60,000).
The following table illustrates the pro forma per share dilution that present
shareholders will incur and the benefits to new shareholders assuming that all
of the shares offered are sold.
Public Offering price per share...............................$0.15
Net tangible book value per share before Offering $0.0331
Net tangible book value per share after Offering $0.0806*
Increase (Decrease) in net tangible book value per share
to new Shareholders after Offering ($0.0693)
Increase to current Shareholders in net tangible
book value per share after the Offering $0.0475
*After offering expenses are deducted.
The numbers used for present shareholders assumes that none of the present
shareholders purchase additional shares in this offering.
Investors will have contributed $60,000 if the offering is completed, compared
to $50,000 contributed by initial shareholders. Further, investors will only own
44.44% of the total shares.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with
the financial statements and accompanying notes contained elsewhere in this
Prospectus.
Commercial Evaluations, Inc. began its commercial operations in loan
processing in June 2000. Previously, time was spent in organizing people and
operations. Loan processing was delayed by the incapacity of a founder. There
were only seven months of operations in 2000 compared with a full year of
operations in 2001 as of December 31, 2001. Therefore, year-to-year comparisons
are not relevant. Below is a table illustrating the mortgage loan closings for
CEI from June 1, 2000 through December 31, 2001. For the only seven comparable
9
months year-to-year (June through December), there were $2,766,653 mortgage
loans closed in 2000, generating $89,457 in fees and $15,428,455 mortgage loans
closed in the similar period in 2001, generating $314,481 in fees.
Loan Closings
- -------- --------- -------- -------- ------- -------- -------- -------- ---------- -------- --------- -------- ----------
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
- -------- --------- -------- -------- ------- -------- -------- -------- --------- -------- --------- --------- ---------
92,150 128,520 117,325 130,100 124,969 178,000 135,709
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
127,266 118,300 127,800 122,220 60,000 126,100 112,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
119,310 102,300 127,500 111,084 142,500
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
131,580 83,420 30,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
218,500
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
TOTAL 219,416 366,130 245,125 486,200 312,469 717,104 420,209
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
FEES 6,303 9,599 7,170 17,719 14,839 21,188 12,639
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
2001
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
118,146 164,730 125,100 121,500 153,900 128,189 162,000 110,140 340,000 156,000 483,000 137,837
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
240,000 178,650 130,561 134,883 92,547 101,250 195,500 136,852 203,000 82,300 122,900 130,400
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
705,000 34,743 143,000 255,200 144,000 32,000 111,500 110,761 59,885 76,830 105,494
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
94,400 104,646 86,000 165,300 120,000 152,000 82,321 75,110
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
109,650 130,945 119,735 89,300 43,826 75,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
180,000 122,000 229,300 121,000 49,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
200,000 172,500 86,800 137,145 245,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
94,000 112,730 256,500 77,600 109,200
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
400,000 136,000 94,450 103,499
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
107,100 940,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
194,412 89,725
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
118,900 170,520
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
160,000 315,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
100,000 85,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
126,000 15,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
112,000 400,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
25,000 134,707
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
76,000 78,350
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
159,000
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
136,300
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
118,146
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
TOTAL 1,063,146 378,123 255,661 399,383 596,047 478,085 1,459,150 1,061,967 893,496 1,744,043 2,948,981 4,150,373
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
FEES 26,914 11,726 8,580 12,216 15,901 15,778 27,310 29,223 24,015 28,321 41,977 72,520
- -------- --------- -------- -------- ------- -------- -------- --------- --------- -------- --------- --------- ---------
1. The chart lists gross loan amounts. Commercial Evaluation receives a small
brokerage fee on these loans. See "Average Loan Fee" below.
2. The average brokerage fee ("points") on these loans were: 3.23% in 2000,
2.04% in 2001 for an average of 2.22%.
10
Liquidity
Cash at the end of 2001 was $12,413, which was $12,130 greater than cash at the
beginning of the period. Minimal office equipment was purchased for new loan
officers added during the period. Liquidity is expected to be sufficient to
provide for additional equipment. No major expenditures are anticipated.
The Board of Directors elected to register this prospectus to provide for
additional working capital to hire more loan officers and to expand the
marketing program. Failure to close this offering will not impact current
operations as depicted in the chart above. However, we will not be able to
expand as rapidly as desired with the increased mortgage loan closings that
would be anticipated with the addition of more loan officers and increased
advertising and promotion.
Cash Flow
It is expected that the cash flow provided by these people will continue to be
sufficient to support operations as currently defined. The successful closing of
this offering is expected to increase cash flow beyond the expenditures required
to support additional loan officers. The failure of the offering will not affect
current operations, which generated an excess of $8,976 in cash over expenses in
the fourth quarter ended December 31, 2001 compared with cash available at the
beginning of the period.
Average Loan Fees
Mortgage loan closings are generally increasing as the chart above indicates.
Current officers, directors and independent contractors made these closings. We
collect 25% of the commissions on the first $500,000 of each loan officer's
production, then 20% of the commission of each loan officer's production each
month. The "points" or gross commission on each loan range between 1.5 and 5
depending on market conditions and the services provided on a particular loan.
Officer and Director Robert Barcelon also acts as a broker and receives 100% of
the gross commissions for mortgage loans he sells in reflection of his
uncompensated service in these capacities over the past 19 months. This
arrangement will be reviewed in June 2002 by the Board.
Results of Operations
The most recent quarterly results (October to December, 2001) saw mortgage loan
closings at $8,843,397, the largest in the brief history of our company. This
continues a trend of generally increasing quarterly mortgage loan closings since
June 1, 2000. Revenues for the year ended December 31, 2001 were $336,373
compared with revenues of $64,119 in seven months of full-time mortgage
operations in 2000. The net loss for 2001 was $10,521, equal to a net loss of
two cents per share, compared with a net loss in seven months of 2000 of
$58,905, equal to 11 cents per share. For the final three months of 2001,
revenues were $136,343 compared with $12,918 in the fourth quarter of 2000. Net
income for the fourth quarter of 2001 was $5,842, equal to one cent per share,
compared with a net loss of $18,672, equal to a net loss of $.04 cents per share
in the fourth quarter of 2000. Increased loan volume was higher in part because
of lower interest rates prompting both purchase of new homes and refinancings
and growth in the Southern Nevada region prompting new home building and higher
mortgages on higher sales prices of existing home sales.
Material Events
1) This initial public offering of securities was filed after the audited
financial statements were filed for December 31, 2001. 2) Eight new mortgage
brokers were hired and began filing loan applications in February 2002. 3)
Additional office space was leased for those brokers at a rent increase of
approximately $2,200 per month. 4) A six-weeks review for the period ended
February 15, 2002 was conducted by our auditor, Mark S. Sherman, CPA to confirm
the trends of the fourth quarter of 2001. Revenue for the period was $80,072,
compared with revenues of $136,343 for the entire 12 weeks of the fourth quarter
of 2001. Net income for the first six weeks of 2002 was $11,556 equal to two
cents per share, compared with net income of $6,363, equal to one cent per share
for the entire 12 weeks of the fourth quarter of 2001. There were no comparable
results for the first six weeks of 2001 since mortgage operations had not
commenced in this period. January 2002 closings were higher because some of
loans were processed during late November and December of 2001 and did not
actually close until January 2002 due to the traditional holiday slowdowns in
loan administration. 5) We are a principle in the purchase of a condominium for
$43,500 and placed the property up for sale at $65,500. A purchaser is in escrow
as of the filing of this offering. It is not expected that we will purchase
property for our own account in the future. 6) There have been no other material
events after the CPA review of the results of operations for the first six weeks
of 2002 ended February 15.
11
Outlook
Regardless of the success of this offering, we expect to continue to generally
increase its mortgage loan closing rate due to the increased exposure of our
quality of service to others, increased marketing recognition with our existing
limited funds, a robust housing economy in the Las Vegas area and its continued
good relations with SkoFed. The successful completion of this offering provides
us with additional capital to expand upon the solid base established in the
previous 19 months of active operations in the mortgage lending business in
Nevada. The known short-term (next 12 months) trends are for continued growth
for Commercial Evaluations without commensurate addition of facilities or staff.
Plans are to recruit brokers who have a proven "book" or "pipeline" of current
business that has been generated elsewhere but to be closed with Commercial
Evaluations sufficient to underwrite the rent and services required to support
their business. Additional short-term office space is readily available adjacent
to current offices from SkoFed. The long-term plan would be implemented when
office space becomes unavailable for additional brokers. The effect of
additional brokers is to increase our revenues and earnings with little impact
on liquidity since the primary expense is for office space, which is on
favorable terms from SkoFed. Each additional broker over the next 12 months
would equate to $650 of increased overhead expense per month at the contracted
rental rates while generating an average of $5,500 per month of revenue per
broker based on management's analysis of the fourth quarter of 2001, the first
six weeks of 2002, orders in the backlog as of Februrary 15, 2002 and increased
projections based on the addition of eight new brokers as of February 15, 2002
compared with December 31, 2001. Should any of these estimates change, the
result would be to reduce the number of brokers back to the current levels,
which are profitable. No additional funds will be required to achieve these
objectives in the short-term or the long-term. There will be no research or
development, significant purchase of equipment or property or expansion into new
product lines.
DESCRIPTION OF BUSINESS
General
The predecessor company to Commercial Evaluations, Inc., (CEI) was organized as
a Nevada corporation as ZXS, Inc. on June 7, 1994. The name was changed on
February 29, 2000. We operate as a net branch of a mortgage bank operating under
a Nevada exemption, NRS 645E.15(6)(a). Under the net branch agreement with
SkoFed Mortgage Funding Corporation, we pay rent or a fee on each loan closed.
We are responsible for payment of all costs attributed to the operation and
receive a net check at the close of each transaction. Our primary function will
be to arrange mortgage loans for consumers for the purchase of residential real
estate in the short-term (currently and for the next 12 months). In the
long-term, however, wholesale mortgage-banking services, construction lending
brokering services and commercial loan brokering services will also be offered.
The Organizer
Commercial Evaluations, Inc., President, Robert Barcelon, replaced founder
Robert Kelly as an Organizer on November 27, 2001 due to Mr. Kelly's continued
inability to participate in CEI's activities because of serious ill health. Mr.
Barcelon has more than 27 years of experience in home construction and mortgage
lending in the Las Vegas area.
The Nature of the Business
Residential Lending Services: In the residential lending service area, we derive
fees that are paid by the borrower. We earn fees out of the gross proceeds of
the residential loans, earns these fees. Fees assessed are comprised of an
origination fee, processing fee, document preparation fee, inspection fee, and
warehouse differential fees. Typically, we pay a commission to the independent
contractor, or loan officer, responsible for originating the loan. Also, if a
transaction involves a wholesale residential loan, we also remit a portion of
the total fee to the originating mortgage company. The amount of any remittance
varies according to the arrangement established with the originating mortgage
company. Generally, SkoFed receives $400 per loan brokered out and .5 point on
in-house loans by us. Processing fees, underwriting fees, tax service, wire
fees, flood certificate costs are charged directly to the customer by SkoFed and
are not reflected in our revenue or commission schedules.
Within this market, our approach to residential lending involves:
(1) in the short-term (currently and for the next 12 months), locating
potential borrowers, primarily through a retail approach whereby a
staff loan officer meets directly with the consumer, or borrower, to
arrange financing for the purchase or refinance of residential real
estate, and;
(2) in the long-term, funding of these residential loans, construction
lending and commercial lending through use of funds made available to
us by a warehouse bank provided by SkoFed. When we have 20 brokers
concentrating on residential business, we will recruit up to five
additional brokers with contacts in the wholesale line of business.
For the foreseeable future, these commercial loans will be transacted
through SkoFed. We expect that these types of brokers will be
available along similar terms and conditions as residential brokers.
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Government Regulation: Many of the financial products being offered will be
governed by rules and regulations as set forth by the Department of Veteran
Affairs (VA), the Department of Housing and Urban Development (HUD), the Federal
Housing Authority (FHA), the Federal Home Loan Mortgage Corporation (FHLMC or
Freddie Mac), the Federal National Mortgage Association (FNMA or Fannie Mae),
and the Government National Mortgage Association (GNMA or Ginnie Mae).
As of the date of this filing, no substantive changes were being undertaken at
the federal or state level with regard to these agencies and programs.
Facilities: Our principal address is 2320 Paseo Del Prado, Building B, Suite
205, Las Vegas, NV 89102. The lease agreement calls for a three-year lease with
five monthly payments starting with October 1, 2001 at $1,474.40 and then $6,000
to be prorated for the remainder of the lease with 8% interest. The rent for
months 7-12 calls for a base rent of $2,228.66 plus the prorated amount. The
lease calls for annual increases of $0.05 per square foot. In January 2002, we
agreed to lease additional office space from SkoFed for eight new mortgage
brokers. The lease commitment is for $2,242.35 per month for 30 months.
Investment Policies:
(1) Real Estate: We do not plan to use any of its capital to purchase any
real property for speculative investment purposes.
(2) Real Estate Mortgages: Although our purpose is to facilitate real
estate finance in construction and permanent loans, we will not
shelf/warehouse any of the loans. All real estate loans successfully
closed will be transferred to one of SkoFed's warehouse banks.
Construction Lending Brokering Services: In the long-term, we plan to act as an
intermediary between the builder who is seeking funds to complete his project
and the financial institution who is willing to lend these funds. We will
continue to transact business for construction loans through SkoFed for the
foreseeable future. The benefits to placing a construction loan are not simply
the fees generated by the construction loan, but by the built-in business that
is secured through the residential mortgage banking services that are provided,
subsequently, as the homes are sold to individual borrowers. When negotiating
with a builder for construction financing, we obtain a forward commitment
guaranteeing that the majority of residential loans are to be placed through our
residential mortgage banking services area. As of December 31, 2001, residential
brokers handled less than 5% of the total loan business (representing three
loans) as construction loans as a courtesy to their contacts rather than as a
consequence of a marketing plan. These loans were consolidated into the
"residential" category due to the minor nature of the transactions to date.
Commercial Lending Brokering Service: In the commercial loan brokering business
area in the long-term, our loan officers call upon developers of commercial
property to secure applications for loans secured by commercial real estate.
After our personnel process these applications, we serve as an intermediary in
finding suitable lenders (or Investors) for the loans. Because of the typically
large dollar amount of these loans, insurance companies, pension plans and
savings and loan associations fund most of the loan. Upon funding of a
commercial loan, we receive a fee from the lender. We plan to transact this
business through SkoFed for the foreseeable future. The amount of the fee is
determined by the dollar size of the transaction, prevailing competition, and
market conditions. As of December 31, 2001, no commercial lending has been
recorded.
Marketing: To date, our mortgage loan applicants have been obtained by (1) the
actions of the our loan officers and originators, (2) personal contacts through
our officers and (3) referrals from previous borrowers. We will also market its
loan services by means of direct mail and newspaper advertising.
Market Area: In the short-term (currently and for the next 12 months) we will
provide residential loan services to Southern Nevada. According to "Las Vegas
Perspective 2001" published by Metropolitan Research Association (MRA), in 2000
there were 523,314 households in our service area. Existing home resales totaled
29,515 with an average sales price of $155,455. There were 20,520 new homes
constructed in 2000. New home construction and existing home resales are
estimated by management to increase 15% in 2002 on an annualized basis in 2002,
although final statistics are not available yet for 2001.
Competition: We are in direct competition with numerous local business entities
that provide mortgage banking and brokering services. According to the Nevada
Department of Business and Industry/Financial Institution Division, 239 lending
institutions are able to compete with our residential loan services. This figure
includes all banks, credit unions and mortgage bankers in all of Nevada. The
vast majority of mortgage loans are processed by institutions in the immediate
area of the home sale. However, it is management's opinion that there are less
than 30 consistent competitors for mortgage lending in Southern Nevada.
13
We face intense competition from the mortgage banking operations of savings &
loan and thrift institutions that possess substantially greater financial
resources than our company. The competition also has an established share of
mortgage banking market, which we believe is increasing. Further, both savings &
loan and thrifts have ready access to substantial savings pools available for
lending large, multi-store branch systems. Both possess the ability to research
and develop new loan products to market through their branch systems.
However, we believe that an unusual mixture of competition and cooperation
characterizes the financial services industry. Because of the many types of loan
products available in today's marketplace, no individual lending institution
specializes in one or, at most, a few loan products.
We work directly with SkoFed approved mortgage bankers, mortgage brokers, and
other mortgage originators, making our residential loan services available to
their respective sales forces. By taking this overall approach, we believe that
we have the ability to lend a broader geographical market area without incurring
the expense of numerous branch office facilities, the clerical help in these
locations or the direct sales personnel needed to reach a wide segment of the
population.
Employees
We currently have 18 employees. Three are officers: Robert Barcelon, Heather
Cain and Linda Valez. There is one secretary supporting 14 loan brokers as
independent contractors. The officers and directors currently receive no
compensation for their duties in corporate capacities. Robert Barcelon and Linda
Valez receive compensation based on the commissions as loan brokers. All brokers
have a minimum of five years of experience in mortgage loans and are dedicated
to residential loans at this time, but are capable of handling construction
loans when we plan to concentrate on this area. Our officers and directors
devote full time to our business. At present we do not intend to hire additional
full-time employees until such time as operations require.
Affiliations
Commercial Evalutation's affiliation with SkoFed is by contract and a fee
agreement (see Exhibit 10). There are no other terms or agreements with SkoFed
outside of those described in Exhibit 10. We have no affiliates that have any
agreement with SkoFed or any other entity. Neither we nor any affiliate have a
verbal or written agreement with any other organization for mortgage loans or
any other business service.
Legal proceedings
Our company is not a party in to any bankruptcy, receivership or other legal
proceeding, and to the best of our knowledge, no such proceedings by or against
Commercial Evaluations, Inc. have been threatened.
PLAN OF OPERATION
CEI Original Goals and Milestones
Shortly after renaming the company to Commercial Evaluations, Inc. on February
29, 2000, management negotiated an agreement with SkoFed Mortgage Funding as a
licensed mortgage company as a Net Branch Operator. Founded in the early 1990s,
SkoFed is a regional mortgage banker licensed in Nevada, California, Utah and
Oregon. In July of 2000, an improved contract was arranged with SkoFed. One of
the first short-term (to the present time) goals was to create a staff that was
already well known in the area. After accomplishing this, the original staff was
composed of a branch manager, senior loan officer, training officer and five
loan officers. These goals were reached before December 31, 2001.
Company Short-Term Goals and Milestones
In the next 12 months, our goal is to hire six new residential loan officers
candidates and train them so they may properly enhance our production and
possible lead to additional branches here in Las Vegas. Other support people
will be added to handle the additional workload. This milestone will be
supported by existing office space provided by SkoFed and will not entail
significant purchase of equipment or services. Support will be underwritten by
the existing "pipeline" of business retained by the new-hire brokers as a
prerequisite of their hiring.
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Company Long-Term Goals and Milestones
In year two through five, we plan to arrange for other branches both here and
other states, such as Texas, California, Utah and Arizona. There have been a few
serious meetings regarding creating a web site that will specialize in immediate
approvals with a small cost per loan. The web site can be created at a cost of
$10,000 and maintained for $2,500 per month, all out of profits from operation
and working capital from this Offering. It is expected that the web site would
be in full operation early in year two. The lack of a web site would not damage
us, merely block an avenue of increase in revenues and earnings. There will be
no harm to the business if this goal is not met on time or at all, simply the
lack of another growth element in revenues and earnings. The advantages would be
to collect additional fees and to enter into agreements with wholesalers and
other mortgage bankers. It is estimated that we will grow to 20 brokers in the
current location before moving to branch offices. Such a move will only be made
when a milestone of $25,000 in cash reserves is available for each office
opening and at least six brokers familiar with the new areas are available on
similar terms and conditions as the current broker agreements. The ultimate
milestone in five years is to be a large mortgage broker in the Western States
with 100 loan officers. The cost of rental space and overhead will be funded out
of cash reserves.
Description of Securities
We intend to apply the proceeds of this sale of common stock to conducting its
business. We do not intend to pay any dividend on our common stock in the
immediate or foreseeable future. We plan to apply the profits from its business,
if any, to expansion and growth. (See Use of Proceeds.) If the offering is
unsuccessful, we will continue with the current number of brokers in the current
office location. Such operations have created a positive cash flow with net
income. Lack of funds will inhibit expansion plans to cash generated from
operations. No cash requirement is required in the next 12 months to continue
our expansion at the rate exhibited in the past 12 months, especially in the
last quarter of 2001 when six brokers were working full time for three months.
Staffing and Training
We believe that the continuation of our success will be heavily dependent on the
quality of our mortgage services to our customers. We feel we must assure that
our employees provide a consistently high level of service from the beginning;
therefore we plan to ensure that our staff is adequately trained.
15
MANAGEMENT
Directors are elected for one-year terms in June of each year.
PRESIDENT AND DIRECTOR - ROBERT BARCELON, 49: Responsible for market planning,
advertising, public relations, sales promotion, merchandising and training. Has
been a lifetime resident of Las Vegas. He has been a full-time loan officer and
high producer on a consistent basis. Prior to establishing Commercial
Evaluations, Inc., Mr. Barcelon was a loan officer with Family Home Mortgage in
Las Vegas from 1995 to 2000. Previously, he was a loan officer with ABC Mortgage
of Las Vegas from 1992 to 1995. He was a member of Las Vegas Local 135 Asbestos
Workers from 1974 to present. He setup their apprenticeship program, set on
joint apprenticeship committee, the executive board, and was involved heavily
with contract negotiations between contractors and union.
VICE PRESIDENT OF FINANCE - ROBERT BARCELON, 49: Mr. Barcelon is also
responsible for managing the working capital including receivables, cash and
marketable securities. He performs financial forecasting including capital
budget, cash budget, pro forma financial statements, external financing
requirements and financial condition requirements. He directs financial affairs
of the organization. He prepares all necessary reports and analysis needed to
produce financial statements and budgets. It is expected that this post will be
filled by a new hire after the close of this Offering. From 1992 to 1999, Mr.
Barcelon was an independent mortgage loan broker. He was President of Las Vegas
Local 135 Asbestos Workers from 1983 to 1993.
SECRETARY - HEATHER CAIN, 30: Ms. Cain was a senior loan processor from 1989 to
1999 with ten years of experience with local mortgage companies and her own
firm, Southern Nevada Processing Center. She is experienced in FHA, VA,
conventional and sub-prime loans. She has lived in Las Vegas since 1987. She is
the wife of Robert Barcelon, married in 1996, but has maintained her maiden name
for professional reasons.
TREASURER AND DIRECTOR - LINDA VELEZ, 42: Ms. Velez is a mortgage loan broker.
She has five years in the loan business with Western Mortgage of Las Vegas from
1995 to 2000. Prior to that she was a special education teacher at the
University of California, Riverside from 1985 to 1995. She has an undergraduate
degree in liberal arts/finance, June 1985, and a master's degree in business
management, June 1987, both from UCLA.
OUTSIDE DIRECTOR - ANNE DEANE, 56: Ms. Dean has been a business consultant to
new businesses from 1990 to the present. for the past 10 years. She specializes
in the documentation of the formation of new incorporations in the State of
Nevada and acts as the designated resident agent for corporations as required by
Nevada law. Corporations may contract for all of some of the resident agent
services: accepting legal notices, office services, banking services, tax
filings, corporation filings and similar corporate maintenance activities. For
the previous 27 years she was a mining analyst for Anaconda Mining and a project
analyst for a similar Company, Peter Keiwitt. These duties included the analysis
of filed testing data, economic modeling, risk/reward analysis for drilling
programs, contract negotiations with contractors and mineral purchasing
companies as well as monitoring of regulatory activities. Ms. Dean received an
undergraduate degree in business in 1967 and earned a Ph.D. in business in 1974
from the University of Nebraska, Lincoln.
16
COMPENSATION OF OFFICERS, DIRECTORS, AND MANAGEMENT
All compensation received by Officers of our company will be determined
from time to time by the Board of Directors. At present there is no compensation
for directors. Officers are paid on a commission basis. Robert Barcelon receives
100% of the total fees from SkoFed for his sales. Other members of management
receive from 50% (for in-house generated sales leads) up to 80% (for sales based
on leads generated by the sales person and on mortgages totaling more than
$500,000 in any one month) of the total fees from SkoFed.
Management Compensation
2000
Outside Commissions
Name Services Commissions Salary Payable
Robert Kelly $28,191 -- -- --
Robert Barcelon -- $20,836 -- --
Heather Cain -- $11,313 -- --
2001
Robert Barcelon -- $38,125 -- --
Linda Velez -- $ 5,045 -- --
Heather Cain -- $64,764 -- --
Executive Compensation
Subsequent to the offering, CEI will pay $18,000 per year to Loan Processor
Heather Cain. Heather Cain is also an employee of SkoFed Mortgage as a Loan
Processor. She receives and income from SkoFed, independent of that from CEI.
Robert Barcelon and Linda Velez will continue to be paid a commission according
to the current schedule on loans that they submit and close.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Capital Contributions
The principal shareholders have contributed $50,000 in capital
contributions received from Karlton Management, Inc. which was secured in a
promissory note by their 500,000 Shares. The loans were repaid as of September
24, 2001.
Loans Guaranteed By Principal Stockholder
There are no current or anticipated corporate loans guaranteed by the
principal Shareholders.
Security Ownership of Management
The following table sets forth, as of the date of this offering, the outstanding
shares of common stock of Commercial Evaluations, Inc., owned of record or
beneficially by each person who owned of record, or was known by us to own
beneficially, more than 5% of the our Common Stock, and the name and
shareholdings of each officer and director and all officers and directors as a
group:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Class Owner Owned Before Owned After
COMMON DESERT PROFESSIONAL
SERVICES, INC.* 450,000 90% 450,000 50.00%
4160 S. Pecos Rd, #20
Las Vegas, Nv 89121
COMMON LINDA VELEZ 50,000 10% 50,000 5.56%
300 E. Coast Hwy 500,000 100% 500,000 55.56%
Newport Beach, CA 92660
* Desert Professional Services is owned by Anne Dean, Director of CEI and Robert
Barcelon President and Director of CEI.
17
Recent Transfers of Unregistered Securities
On March 3, 2000, CEI sold 300,000 shares of common stock to our founder Robert
Kelly, 100,000 shares of common stock to Robert Barcelon, 50,000 shares of
common stock to Anne Dean and 50,000 shares of common stock to Linda Velez.
These stock issuances were made in accordance with Section 4(2) of the
Securities Act of 1933, as amended. On November 29, 2000, Desert Professional
Services, Inc., whose sole 50% shareholders are Robert Barcelon and Anne Dean,
agreed to purchase the 300,000 shares previously held by Mr. Kelly in a private
transaction pursuant to Section 4(2) of the Securities Act.
DESCRIPTION OF THE SECURITIES
Common Stock
The authorized capital stock of CEI consists of 50,000,000 shares of common
stock, $0.001 par value per share. The holders of common stock (i) have equal
ratable rights to dividends from funds legally available therefore, when, as and
if declared by the Board of Directors of CEI; (ii) are entitled to share ratably
in all of the assets of CEI available for distribution or winding up of the
affairs of CEI; (iii) do not have preemptive subscription or conversion rights
and there are no redemption or sinking fund applicable thereto; and (iv) are
entitled to one non-cumulative vote per share, on all matters which shareholders
may vote on at all meetings of shareholders.
Non-Cumulative Voting
The holders of shares of common stock of CEI do not have cumulative voting
rights which means that the holders of more than 50% of such outstanding shares,
voting for the election of directors, can elect all of the directors to be
elected, if they so choose, and, in such event, the holders of the remaining
shares will not be able to elect any of CEI's directors. After the present
offering is completed, if all of the shares offered are sold, the public
shareholders will own approximately 44.44% of the outstanding shares of CEI. The
present shareholder may, however, purchase more than fifty percent (50%) of the
shares being offered, which would increase their percentage and decrease that of
new shareholders. The present shareholders do not plan to purchase shares in the
offering.
Dividends
The payment by CEI of dividends, if any, in the future, rests within the
discretion of our Board of Directors and will depend, among other things, upon
CEI's earnings, its capital requirements and its financial condition, as well as
other relevant factors. CEI has not paid or declared any dividends to date due
to its present financial status, but anticipates paying dividends upon its
common stock in the future, provided it has sufficient earnings for that
purpose. (See Risk Factors - No Dividend)
Reports
CEI intends to file annual reports to shareholders with the Securities and
Exchange Commission within 90 days of the end of the fiscal year, certified by
its independent auditors, and will file unaudited quarterly reports, reviewed by
its independent auditors, within 45 days of the end of each quarter.
Escrow Agent/Transfer Agent
Transfer Agent: Silverado Stock Transfer, Inc.
8170 Eastern Avenue
Suite 4-602
Las Vegas, NV 89123
(702) 263-0920
Trustee: Thomas C. Cook and Associates, Ltd.
Client Trust Account
4955 South Durango Drive
Suite 214
Las Vegas, NV 89113
(702) 952-8519
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Shares Eligible for Future Sale
All of the 500,000 shares of common stock that are held by the initial
shareholders were issued in reliance on the private placement exemption under
the Securities Act of 1933, as amended (the Act). Such shares are not to be
available for sale in the open market without registration except in reliance
upon the volume limitation requirements of Rule 144(e) of the Securities Act of
1933, as amended.
Shares held by officers, directors, and the initial shareholder, are classified
as restricted stock. In general, under Rule 144(e), a person (or persons whose
shares are aggregated) who has beneficially owned shares acquired in a
non-public transaction for at least one year, including persons who may be
deemed affiliates of the company as that term is defined under the Act, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of common stock, or the
average weekly reported trading volume on all national securities exchanges and
through Nasdaq during the four calendar weeks preceding such sale (whichever is
higher), provided that certain current public information is then available. The
shares of common stock acquired by the initial shareholders will not be eligible
for public sale under Rule 144(e) subject to the foregoing restrictions until
November 29, 2002. None have been filed for sale. The founders' 500,000 Shares
are not being included in this registration.
Rule 144 governs resale of restricted securities for the account of any person,
other than an issuer, and restricted and unrestricted securities for the account
of an affiliate of the issuer. Restricted securities generally include any
securities acquired directly or indirectly from an issuer or its affiliates that
were not issued or sold in connection with a public offering registered under
the Securities Act. An affiliate of the issuer is any person who directly or
indirectly controls, is controlled by, or is under common control with the
issuer. Affiliates of the Company may include its directors, executive officers,
and person directly or indirectly owning 10% or more of the outstanding common
stock. Under Rule 144 unregistered resales of restricted common stock cannot be
made until it has been held for one year from the later of its acquisition from
the company or an affiliate of the company. Thereafter, shares of common stock
may be resold without registration subject to Rule 144's volume limitation,
aggregation, broker transaction, notice filing requirements, and requirements
concerning publicly available information about the company (Applicable
Requirements). Resales by the company's affiliates of restricted and
unrestricted common stock are subject to the applicable requirements. The volume
limitations provide that a person (or persons who must aggregate their sales)
cannot, within any three-month period, sell more that the greater of one percent
of the then outstanding shares, or the average weekly reported trading volume
during the four calendar weeks preceding each such sale. A non-affiliate may
resell restricted common stock that has been held for two years free of the
Applicable Requirements.
19
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
We have two shareholders. Currently, there is no public trading market for our
securities and there can be no assurance that any market will develop. If a
market develops for our securities, it will likely be limited, sporadic and
highly volatile. At some time in the future, a market maker may make application
for listing our shares.
Presently, we are privately owned. This is our Initial Public Offering. Most
Initial Public Offerings are underwritten by a registered broker-dealer firm or
an underwriting group. These underwriters generally will act as market makers in
the stock of a company they underwrite to help insure a public market for the
stock. This offering is to be sold by Robert Barcelon, President and Director of
the company. We have no commitment from any brokers to sell shares in this
offering. As a result, we will not have the typical broker public market
interest normally generated with an initial public offering. Lack of a market
for shares of our stock could adversely affect a shareholder in the event a
shareholder desires to sell his shares.
Currently the shares are subject to Rule 15g-1 through Rule 15g-9, which
provides, generally, that for as long as the bid price for the shares is less
than $5.00, they will be considered low priced securities under rules
promulgated under the Exchange Act. Under these rules, broker-dealers
participating in transactions in low priced securities must first deliver a risk
disclosure document which describes the risks associated with such stocks, the
broker-dealer's duties, the customer's rights and remedies, and certain market
and other information, and make a suitability determination approving the
customer for low priced stock transactions based on the customer's financial
situation, investment experience and objectives. Broker-dealers must also
disclose these restrictions in writing to the customer and obtain specific
written consent of the customer, and provide monthly account statements to the
customer. Under certain circumstances, the purchaser may enjoy the right to
rescind the transaction within a certain period of time. Consequently, so long
as the common stock is a designated security under the Rule, the ability of
broker-dealers to effect certain trades may be affected adversely, thereby
impeding the development of a meaningful market in the common stock. The likely
effect of these restrictions will be a decrease in the willingness of
broker-dealers to make a market in the stock, decreased liquidity of the stock
and increased transaction costs for sales and purchases of the stock as compared
to other securities.
20
PLAN OF DISTRIBUTION
We are offering 400,000 shares on an all or nothing, best efforts basis directly
to the public through Robert Bercelon, President and Director of CEI. If we do
not receive the minimum proceeds within 120 days from the effective date of this
prospectus, unless extended by us for up to an additional 60 days, your
investment will be promptly returned to you without interest and without any
deductions. We may terminate this offering prior to the expiration date.
In order to buy our shares, you must complete and execute the subscription
agreement and make payment of the purchase price for each share purchased either
by cashiers check or by check payable to the order of Thomas C. Cook Client
Trust Account.
Until all 400,000 shares are sold, all funds will be deposited in a non-interest
bearing trust account at Thomas C. Cook and Associates, Ltd., 4955 South Durango
Drive, Suite 214, Las Vegas, Nevada 89113. In the event that 400,000 shares are
not sold during the 180 day selling period commencing on the effective date of
this prospectus, all funds will be promptly returned to investors without
deduction or interest.
Solicitation for purchase of our shares will be made only by means of this
prospectus and communications with our officers and directors who are employed
to perform substantial duties unrelated to the offering, who will not receive
any commission or compensation for their efforts, and who are not associated
with a broker or dealer.
Our President and Director, Robert Barcelon, will not register as a
broker-dealer pursuant to Section 15 of the Securities Exchange Act of 1934, in
reliance upon Rule 3a4-1, which sets forth those conditions under which a person
associated with an Issuer may participate in the Offering of the Issuer's
securities and not be deemed to be a broker-dealer. Mr. Barcelon falls into the
category of described by Rule 3a4-1-a-4-ii which provides an exemption when the
associated person meets all of the following conditions: A. The associated
person primarily performs, or is intended primarily to perform at the end of the
offering, substantial duties for or on behalf of the issuer otherwise than in
connection with transactions in securities; and B. The associated person was not
a broker or dealer, or an associated person of a broker or dealer, within the
preceding 12 months; and C. The associated person does not participate in
selling an offering of securities for any issuer more than once every 12 months
other than in reliance on paragraph (a)4(i) or (a)4(iii) of this section, except
that for securities issued pursuant to rule 415 under the Securities Act of
1933, the 12 months shall begin with the last sale of any security included
within one rule 415 registration.
Further, as this offering is intended to be sold only in the State of Nevada and
pursuant to the rules set forth by the Nevada Secretary of State, Securities
Division, Mr. Barcelon has been granted a waiver requiring a license to sell our
stock. (See Exhibits - Nevada Waiver Order)
We have the right to accept or reject subscriptions in whole or in part, for any
reason or for no reason. All monies from rejected subscriptions will be returned
immediately by us to the subscriber, without interest or deductions.
Subscriptions for securities will be accepted or rejected within 48 hours after
we receive them.
21
LEGAL MATTERS
The legality of the issuance of the shares being offered and certain other
matters will be passed upon for Commercial Evaluations, Inc. by Thomas C. Cook
and Associates, Ltd., 4955 South Durango Drive, Suite 214, Las Vegas, Nevada
89113.
EXPERTS
The financial statements included in this registration statement, to the extents
and for the periods indicated in its report, have been included herein in
reliance upon the report of Mark Sherman, CPA, the Company's independent
certified public accountant, given upon the authority of such firm as experts in
accounting and auditing. Mark Sherman was not retained on a contingent basis and
received no interest in CEI. Mark Sherman will not act as a promoter,
underwriter, voting trustee, director, officer or employee of our company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ADDITIONAL INFORMATION
We have filed a registration statement on Form SB-2 under the Securities Act of
1933, as amended (the Securities Act), with respect to the shares being offered.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to Commercial Evaluations, Inc. and the shares being
offered, reference is made to the registration statement and the exhibits and
schedules being filed. Statements contained in this prospectus as to the
contents of any contract or any 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. A copy of the
registration statement, and the exhibits and schedules thereto, may be inspected
without charge at the public reference facilities maintained by the Securities
and Exchange Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, 500 West Madison Street, Building B, Suite 1400, Chicago, Illinois 60661,
and copies of all or any part of the registration statement may be obtained from
the Commission upon payment of a prescribed fee. This information is also
available from the Commission's Internet Website, http://www.sec.gov.
22
COMMERCIAL EVALUATIONS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2001
F-1
COMMERCIAL EVALUATIONS, INC.
DECEMBER 31, 2001
CONTENTS
Page
----
Independent Auditor's Report F-3
Financial Statements
Balance Sheet F-4
Statement of Operations F-5
Statement of Stockholders' Equity F-6
Statement of Cash Flows F-7
Notes to Financial Statements F-8
F-2
MARK SHERMAN, CPA
316 SOUTH JONES BOULEVARD
LAS VEGAS, NV 89107
PHONE (702) 645-6318 FAX: (702) 645-1604
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Commercial Evaluations, Inc.
Las Vegas, Nevada
I have audited the accompanying balance sheet of Commercial Evaluations,
Inc. as of December 31, 1999, December 31, 2000 and December 31, 2001; and the
related statement of operations, stockholders' equity and cash flows from
inception through December 31, 2001. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financials referred to above present fairly, in all
material respects, the financial position of Commercial Evaluations, Inc. at
December 31, 1999, December 31, 2000 and December 31, 2001; and the results of
operations and their cash flows for the period ended December 31, 1999, December
31, 2000 and December 31, 2001 in conformity with generally accepted accounting
principles.
/s/ Mark S. Sherman
- ------------------------
Mark S. Sherman
February 6, 2002
F-3
COMMERCIAL EVALUATIONS, INC.
BALANCE SHEET
DECEMBER 31, 2001
ASSETS
CURRENT ASSETS
Cash $ 12,413
Prepaid Expenses 1,500
--------
TOTAL CURRENT ASSETS 13,913
FIXED ASSETS
Equipment., Furn. & Fixtures,
net of accum. depr. of $3,091 $ 14,659
OTHER ASSETS
Deposits $ 2,064
Investment in real estate 43,500
TOTAL OTHER ASSETS $ 45,564
TOTAL ASSETS $ 74,136
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 3,236
Commissions Payable 4,300
Note payable 1,833
Current Portion of Long-term debt 305
TOTAL CURRENT LIABILITIES $ 9,674
LONG-TERM LIABILITIES
Note Payable, less current portion $ 41,207
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
Authorized 50,000,000 shares;
Issued and outstanding at
December 31, 2001 500,000 shares $ 500
Additional Paid In Capital $ 92,181
Retained Earnings (Deficit) ($69,426)
--------
TOTAL STOCKHOLDERS' EQUITY $ 23,255
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 74,136
========
See accompanying notes to financial statements.
F-4
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF OPERATIONS
June 7, 1994
Jan 1, 2001 Jan 1, 2000 Jan 1, 1999 (Inception)
to to to to December
Dec 31, 2001 Dec 31, 2000 Dec 31, 1999 31, 2001
INCOME
Revenue $ 336,373 $ 64,119 $ 0 $ 400,492
--------- --------- --------- ---------
TOTAL INCOME 336,373 64,119 0 400,492
EXPENSES
General and
Administrative ($ 344,197) ($ 121,796) $ 0 ($ 465,993)
--------- --------- ---------
Depreciation and Amortization ($ 2,697) ($ 1,228) $ 0 ($ 3,925)
--------- --------- --------- ---------
TOTAL EXPENSES $ 346,894 $ 123,024 $ 0 $ 469,918
--------- --------- --------- ---------
NET PROFIT (LOSS) ($ 10,521) ($ 58,905) $ 0 ($ 69,426)
========= ========= ========= =========
NET PROFIT (LOSS)
PER SHARE ($ 0.02) ($ .11) $ 0 ($ 0.13)
========= ========= ========= =========
AVERAGE NUMBER OF
SHARES OF COMMON
STOCK OUTSTANDING 500,000 500,000 500,000 500,000
========= ========= ========= =========
See accompanying notes to financial statements
F-5
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock
------------
Number Additional Retained
of Paid In Earnings
Shares Amount Capital (Deficit)
Inception 6-7-94
To 12-31-99 0 0 0 0
--------- --------- --------- ---------
March 9, 2000
Issued for cash 500,000 $ 500 $ 49,500 --
Net (Loss), 12-31-00 -- -- -- ($ 58,905)
--------- --------- --------- ---------
Balance Dec. 31, 2000 500,000 $ 500 $ 49,500 ($ 58,905)
Net (Loss), 3-31-01 -- -- -- ($ 191)
--------- --------- --------- ---------
Balance March 31, 2001 500,000 $ 500 $ 49,500 ($ 59,096)
Shareholder contributed capital -- -- $ 34,697 --
Net (Loss), 6-30-01 -- -- -- ($ 15,347)
--------- --------- --------- ---------
Balance June 30, 2001 500,000 $ 500 $ 84,197 ($ 74,443)
Shareholder contributed capital -- -- 6,635 --
Net loss, 9-30-01 -- -- -- ($ 825)
--------- --------- --------- ---------
Balance September 30, 2001 500,000 $ 500 $ 90,832 ($ 75,268)
Shareholder contributed capital -- -- $ 1,349 --
Net income, 12-31-01 -- -- -- 5,842
--------- --------- --------- ---------
Balance, December 31, 2001 500,000 $ 500 $ 92,181 ($ 69,426)
See accompanying notes to financial statements.
F-6
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF CASH FLOWS
Jan 1, 2001 Jan 1, 2000 Jan 1, 1999
to December 31, 2001 to Dec 31, 2000 to Dec 31, 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (Loss) ($10,521) ($58,905) ($ 0)
Gain (Loss) on Sale of Equipment -- ( 2,669) --
Depreciation 2,697 1,228 --
Accounts Receivable dec(inc) $ 0 0 --
Prepaid expenses increase ($ 1,500) 0 --
Other Assets increase ($ 2,064) 0 --
Accounts Payable (dec)inc ($ 6,063) 10,566 --
Current liabilies inc (dec) 6,133 63 --
CASH FLOWS FROM
OPERATING ACTIVITIES ($11,318) ($49,717) --
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment ($15,978) 0 --
Purchase of Real Estate ( 1,000) -- --
CASH FLOWS FROM
INVESTING ACTIVITIES ($16,978) 0 --
CASH FLOWS FROM
FINANCING ACTIVITIES
Principal payments on notes payable ($ 2,255) 0 --
Issuance of common stock -- 500 --
Additional paid-in capital 42,681 $49,500 --
CASH FLOWS FROM
FINANCING ACTIVITIES $40,426 $50,000 --
Net increase
(decrease) in Cash $12,130 $ 283 --
Cash
Beginning of Period 283 $ 0 --
Cash
------- -------
December 31, 2001 $12,413 $ 283 $ --
======= ======= =======
Supplemental Disclosure of cash flow information:
Purchase of Real Property for $1,000 cash and assumption of notes payable of $42,500.
See accompanying notes to financial statements.
F-7
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICIES
The Company was incorporated June 7, 1994 under the laws of the State of Nevada.
The Company was organized to engage in any lawful activity. The corporation was
originally organized under the name of ZXS Corporation and on February 29, 2000
changed its name to Commercial Evaluations, Inc.
The Company's accounting policies and procedures are as follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share are computed using the weighted average number of
shares of common stock outstanding.
3. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
4. The Company depreciates its equipment based on the straight line
method over the applicable useful lives of the assets.
5. The Company's fiscal year end is December 31st.
NOTE 2 - CASH
For the Statements of Cash Flows, all highly liquid investments with maturity of
three months or less are considered to be cash equivalents. There were no cash
equivalents as of December 31, 2001, December 31, 2000 and December 31, 1999.
NOTE 3 - COMMON STOCK
On March 9, 2000 500,000 shares of $.001 par value stock was issued in exchange
for $50,000.
NOTE 4 - BUSINESS AGREEMENT
The Company has an agreement with a Mortgage funding entity whereby the Company
provides mortgage loans to this funding company and the funding company in turn
processes and funds the mortgage loans. Substantially all of the revenues
generated by the Company are derived from this Mortgage funding entity. Upon the
closing of any mortgage loan a loan fee is paid to the Company for the providing
of the loan, usually 1% of the loan but it may vary depending on the credit
worthiness of the customer.
NOTE 5 - LEASE AGREEMENTS
The Company entered into a 3 year lease of its facilities beginning September 1,
2001. The agreement calls for 5 monthly payments starting with October 1, 2001
at $1,474.40 and then $6,000 to be prorated for the remainder of the lease with
(8%) interest. The rent for months 7-12 calls for base rent of $2,228.66 plus
the prorated amount. The lease calls for annual increases of 5 cents per square
foot.
F-8
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 31, 2001
NOTE 5 - LEASE AGREEMENT (CONT'D)
The future minimum lease commitments are as follows:
2001-2002 25,687
2003 30,724
2004 26,391
On January 28, 2002 the Company entered into a 30 month lease of additional
facilities. The agreement calls for 30 monthly payments fixed at $2,242.35 per
month.
The future minimum lease commitments are as follows:
2002 22,423
2003 26,908
2004 17,938
NOTE 6 - NOTE PAYABLE-REAL ESTATE
On November 15, 2001 the Company purchased a condominium for $1,000 and assumed
the existing first and second deed of trust on this property. The purchase price
was $43,500 and the notes totaled $43,500 of which the $1,000 was used as a down
payment. The first deed of trust assumed was for $35,598.82 at 13% with payments
of $400.49 per month until paid in full. The second deed of trust assumed was
for $7,901.18 at 13% with payments of $85.60 per month until paid in full. The
current portion of long-term debt on this note is $305. On November 20, 2001 the
Company entered into an agreement to rent out this property for $600.00 per
month. As of December 31, 2001 $800.00 worth of rental was collected and
included in revenues.
On November 26, 2001 the Company entered into a sale agreement with the existing
renter for above said property contingent upon the buyer securing adequate
financing. The sale price is $65,500 with an escrow closing date on or before
July 31, 2002.
NOTE 7 - RECOGNITION OF REVENUE/COMMISSIONS EXPENSE-
An Officer of the Company in his capacity as one of the sales representatives
has an agreement with the Company to receive 100% of his commissions related to
the loans that he personally closes. Included in revenues for the year ended
December 31, 2001 were $146,709 of sales that were also accrued as commissions
payable to the Officer.
F-9
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our company's charter provides that, to the fullest extent that limitations on
the liability of directors and officers are permitted by the Nevada Revised
Statutes, no director or officer of CEI shall have any liability to CEI or its
stockholders for monetary damages. The Nevada Revised Statutes provide that a
corporation's charter may include a provision which restricts or limits the
liability of its directors or officers to the corporation or its stockholders
for money damages except: (1) to the extent that it is provided that the person
actually received an improper benefit or profit in money, property or services,
for the amount of the benefit or profit in money, property or services actually
received, or (2) to the extent that a judgment or other final adjudication
adverse to the person is entered in a proceeding based on a finding in the
proceeding that the person's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. CEI's charter and bylaws provide that the Company shall
indemnify and advance expenses to its currently acting and its former directors
to the fullest extent permitted by the Nevada Revised Business Corporations Act
and that CEI shall indemnify and advance expenses to its officers to the same
extent as its directors and to such further extent as is consistent with law.
The charter and bylaws provide that we will indemnify our directors and officers
and may indemnify our employees or agents to the fullest extent permitted by law
against liabilities and expenses incurred in connection with litigation in which
they may be involved because of their offices with Commercial Evaluations, Inc.
However, nothing in our charter or bylaws of CEI protects or indemnifies a
director, officer, employee or agent against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. To the extent that a director has been successful in defense of any
proceeding, the Nevada Revised Statutes provide that he shall be indemnified
against reasonable expenses incurred in connection therewith.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of CEI pursuant to
the foregoing provisions, or otherwise, CEI has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy and is, therefore, unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with this registration
statement. We will pay all expenses of the offering. All of such expenses are
estimates, other than the filing fees payable to the Securities and Exchange
Commission.
Offering Filing Fees $ 500
Printing Fees and Expenses 500
Legal Fees and Expenses 1,000
Accounting Fees and Expenses 1,500
Trustee's and Registrar's Fees 500
------
TOTAL $4,000
23
RECENT SALES OF UNREGISTERED SECURITIES
On March 3, 2000, CEI sold 300,000 shares of common stock to our founder Robert
Kelly, 100,000 shares of common stock to Robert Barcelon, 50,000 shares of
common stock to Anne Dean and 50,000 shares of common stock to Linda Velez.
These stock issuances were made in accordance with Section 4(2) of the
Securities Act of 1933, as amended. On November 29, 2000, Desert Professional
Services, Inc., whose sole 50% shareholders are Robert Barcelon and Anne Dean,
agreed to purchase the 300,000 shares previously held by Mr. Kelly in a private
transaction pursuant to Section 4(2) of the Securities Act.
EXHIBITS.
Exhibits Title of Document
3.1 Articles of Incorporation
3.2 By-laws
5 Legal Opinion
10 Material Contracts
23.1* Consent of Thomas C. Cook
and Associates
23.2 Consent of Mark Sherman, CPA
99.1 Subscription Agreement
99.2 Escrow Agreement
99.3 Nevada Waiver Order
* Contained in exhibit 5
UNDERTAKINGS
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 the provisions described in this Registration Statement
or otherwise, we have been advised that in the opinion of the 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 us of expenses incurred or paid
by a director, officer or controlling persons of Commercial Evaluations, Inc. 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, we will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether 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 undersigned 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:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and
(iii) 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.
24
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, Commercial
Evaluations, Inc. certifies that it has reasonable ground to believe that it
meets all of the requirements of filing on Form SB-2 and authorizes this
Registration Statement to be signed on its behalf, in the City of Las Vegas,
State of Nevada, on March 11, 2002.
Dated: March 13, 2002 COMMERCIAL EVALUATIONS, INC.
By: /s/ Robert Barcelon
--------------------------------
Robert Barcelon
Chairman of the Board,
Director,
Chief Executive Officer,
and President
Dated: March 13, 2002 By: /s/ Heather Cain
--------------------------------
Heather Cain
Chief Operating Officer,
and Director
Dated: March 13, 2002 By: /s/ Linda Valez
--------------------------------
Linda Valez
Chief Financial Officer
Dated: March 13, 2002 By: /s/ Anne Dean
--------------------------------
Anne Dean
Director
25