As filed with the Securities and Exchange Commission June 20, 2003
File No. 333-75272
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post Effective Amendment No. 1
FORM SB-2/A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
COMMERCIAL EVALUATIONS, INC.
----------------------------------------------------
(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: June 23. The
registration is to be effective until closed or December 31, 2003 unless
extended.
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. [X] 333-75272
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 June 20, 2003. 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.
Post Effective Amendment 1. June 20, 2003
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 (RISK FACTORS, PAGE 5) 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 June 20, 2003.
2
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 10
Description of Business 18
General 18
Organizer 18
Nature of Business 18
Employees 21
Legal Proceedings 21
Management 24
Executive Compensation 25
Certain Transactions 25
Security Ownership of Certain Beneficial Owners
and Management 26
Description of Securities 26
Shares Eligible for Future Sale 27
Plan of Distribution 29
Legal Matters 30
Experts 30
Additional Information 30
Financial Statements F-1
Indemnification of Directors and Officers 31
Other expenses of issuance and distribution. 31
Recent sales of unregistered securities 32
Exhibits. 32
Undertakings 32
Signatures 34
3
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.
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 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.)
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.
Summary Results of Operations
Summary Comparison of Income for the Third Quarter of 2002 and 2001
and the First Nine Months of 2002 and 2001
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 2002 September 30, 2001 September 30, 2002 September 30, 2001
Income $193,739 $89,053 $554,627 $197,365
Net Profit (Loss) $ 13,501 ($ 751) $ 7,511 ($ 16,363)
Net Profit (Loss) per Share $ 0.03 ($ 0.01) $ 0.01 ($ 0.03)
Average Shares Outstanding 500,000 500,000 500,000 500,000
Summary Comparison of Income for the Years Ended 2001 and 2000
Year Ended Year Ended
December 31, 2001 December 31, 2000
Income $336,373 $64,119
Net Profit (Loss) ($10,521) ($58,905
Net Profit (Loss) per Share ($0.02) ($0.11)
Average Shares Outstanding 500,000 500,000
4
Future Business
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.
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 $0.10 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 ($0.05) 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.
5
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.
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.
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 on the Over-the-Counter
Bulletin Board, an inter-dealer automated quotation system for equity
securities. 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 major exchanges. 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 a national securities exchange,
particularly if our shares are traded on the Pink Sheets. If 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.
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.
6
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, 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
This offering contains forward-looking statements about our business, financial
condition and prospects that reflect our assumptions and beliefs based on
information currently available. We can give no assurance that the expectations
indicated by such forward-looking statements will be realized. If any of our
assumptions should prove incorrect, or if any of the risks and uncertainties
underlying such expectations should materialize, our actual results may differ
materially from those indicated by the forward-looking statements.
The key factors that are not within our control and that may have a direct
bearing on operating results include, but are not limited to, acceptance of our
services, our ability to expand our customer base, our ability to raise capital
in the future, the retention of key employees and changes in the regulation of
our industry. There may be other risks and circumstances that we are unable to
predict. When used in this offering, words such as, "believes," "expects,"
"intends," "plans," "anticipates," "estimates" and similar expressions are
intended to identify forward-looking statements, although there may be certain
forward-looking statements not accompanied by such expressions.
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
September 30, 2002, the net tangible book value of the company was $30,766,
$0.06 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 $0.06
Net tangible book value per share after Offering $0.10*
Increase (Decrease) in net tangible book value per share
to new Shareholders after Offering ($0.05)
Increase to current Shareholders in net tangible
book value per share after the Offering $0.04
*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.
9
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. Below is a table illustrating the
mortgage loan closings for CEI from June 1, 2000 through September 30, 2002. For
the only seven comparable 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. The first nine months of 2002 shows that loan closings
amounted to $25,014,496, generating $530,244 in fees.
Loan Closings
2000 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 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
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
10
2002 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
155,900 147,000 142,267 111,284 186,200 179,900 108,800 170,905 179,000
15,000 81,900 116,000 137,750 136,314 237,550 114,000 176,000 124,000
147,682 18,500 95,000 93,100 110,000 110,000 110,950 108,550 240,000
93,500 176,130 112,000 124,200 227,800 116,000 75,000 126,350 190,000
89,725 77,624 144,900 297,600 200,000 130,235 144,000 22,000 123,900
121,099 114,000 300,700 111,200 242,250 154,000 74,000 207,000 198,000
159,000 136,669 75,000 190,000 116,050 115,000 155,200 144,000 84,000
136,300 31,000 132,240 134,900 115,250 142,490 109,200 26,000 180,400
118,146 113,730 177,600 106,400 149,950 154,850 108,800 187,000 99,040
147,630 126,000 72,250 109,120 50,000 69,903 111,200 151,030 300,000
65,450 72,000 92,178 73,500 148,000 111,550 110,850 105,182 198,000
92,801 124,600 246,800 72,450 27,250 124,900 256,000 100,000
127,900 133,200 117,232 75,000 103,010 114,000 107,601 84,720
122,975 95,480 141,750 66,500 137,400 148,500 137,500 144,884
140,816 82,864 65,500 196,000 130,050 38,000
188,000 120,750 61,000 131,100 146,750 89,526
174,800 204,250 65,000 121,050 128,150 44,000
258,500 200,000 137,265 196,600 123,350 150,300
87,300 154,850 137,250 156,750 132,050 116,800
79,750 250,000 50,100 11,900 96,800 126,400
105,300 177,000 95,470 300,700 140,200 240,000
45,000 105,000 139,500 499,250
102,600 107,590 100,000
62,500 67,240 104,400
28,800 131,000
132,914 19,800
187,500 139,765
128,500 100,000
124,020 100,000
129,100 132,800
118,750 157,500
132,900
126,350
178,200
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL 1,593,108 2,482,299 3,365,731 2,314,589 4,630,438 2,945,728 1,723,101 4,043,162 1,916,340
FEES 39,505 56,745 64,983 43,678 95,498 58,134 29,486 99,294 42,921
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, and 2.12% in the first nine months of 2002, for an average
of 2.16% over the total period of activity.
11
Results of Operations
We generated $554,627 in revenues for the nine-month period ended September 30,
2002.
Total operating expenses for the nine months ended September 30, 2002 were
$547,116. Total operating expenses for the period ended September 30, 2002 were
entirely related to general and administrative expenses and depreciation and
amortization expense.
STATEMENT OF INCOME FOR FIRST NINE MONTHS OF 2002 AND 2001
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
(unaudited) (audited) (unaudited) (audited)
INCOME
Revenue $193,739 $ 89,053 $554,627 $197,365
TOTAL INCOME 193,739 89,053 554,627 197,365
EXPENSES
General and Administrative $178,757 $ 89,067 $542,871 $211,997
Depreciation and
Amortization $ 1,481 $ 737 $ 4,245 $ 1,731
TOTAL EXPENSES $180,238 $ 89,804 $547,116 $213,691
NET PROFIT (LOSS) $ 13,501 ($ 751) $ 7,511 ($ 16,363)
======== ======== ======== ========
NET PROFIT (LOSS)
PER SHARE $ 0.03 ($ .01) $ .01 ($ .03)
======== ======== ======== ========
AVERAGE NUMBER OF
SHARES OF COMMON 500,000 500,000 500,000 500,000
STOCK OUTSTANDING ======== ======== ======== ========
12
STATEMENT OF CASH FLOWS COMPARING NINE MONTHS ENDING SEPTEMBER 30, 2002 & 2001
Nine Months Ended
September 30,
2002 2001
(unaudited) (audited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 7,511 ($16,363)
Gain (Loss) on Sale of Equipment -- --
Depreciation 4,245 1,731
Prepaid expenses increase $ 1,500 ($ 2,975)
Other Assets (increase) ($ 2,242) ($ 2,064)
Accounts Payable (dec)inc $ 8,605 ($10,548)
Other Current liabilities inc (dec) ($ 4,300) $ 3,100
CASH FLOWS FROM OPERATING ACTIVITIES $ 15,319 ($27,119)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment ($ 4,690) ($10,192)
CASH FLOWS FROM INVESTING ACTIVITIES ($ 4,690) ($10,192)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable ($ 267) ($ 867)
Issuance of common stock
Additional paid-in capital 0 $ 41,332
CASH FLOWS FROM FINANCING ACTIVITIES ($ 267) $ 40,465
Net increase $ 10,362 $ 3,154
(decrease) in Cash
Cash Beginning of Period $ 12,413 $ 283
Cash End of Period $ 22,775 $ 3,437
13
STATEMENT OF INCOME FOR THE YEAR 2001 & 2000
Jan 1, 2001 Jan 1, 2000
to to
Dec 31, 2001 Dec 31, 2000
INCOME
Revenue $ 336,373 $ 64,119
TOTAL INCOME 336,373 64,119
EXPENSES
General and Administrative ($344,197) ($121,796)
Depreciation and Amortization ($ 2,697) ($ 1,228)
TOTAL EXPENSES $346,894 $123,024
NET PROFIT (LOSS) ($ 10,521) ($ 58,905)
======== ========
NET PROFIT (LOSS)
PER SHARE ($ 0.02) ($ .11)
======== ========
AVERAGE NUMBER OF
SHARES OF COMMON
STOCK OUTSTANDING 500,000 500,000
======== ========
14
STATEMENT OF CASH FLOWS COMPARING 2001 & 2000
Jan 1, 2001 Jan 1, 2000
to Dec 31, 2001 to Dec 31, 2000
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (Loss) ($10,521) ($58,905)
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
Other Current liabilities inc (dec) 6,133 --
CASH FLOWS FROM
OPERATING ACTIVITIES ($11,318) ($49,717)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment ($15,978) --
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 paidin 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 End of Period $ 12,413 $ 283
======== ========
15
Liquidity
Cash at the end of September 30, 2002 was $22,775, which was a net increase of
$22,094 for the three months cash from July 1 to September 30, 2002.. 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 conduct
this initial public offering to raise funds to provide for additional working
capital to hire more loan officers and to expand the marketing program. Failure
to close our offering will not impact current operations. 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.
Management believes that we will be able to fund ongoing fiscal 2002 operations
with cash on hand since we have a positive cash flow of $10,362 for the year as
of September 30, 2002.
Based on the nine months ended September 30, 2002, we believe that trends are
increasing and that contract brokers can be hired without significant additional
funds. For the first nine months ended September 30, 2002, we recorded net
income of $7,511 , equal to net income per share of one cent on revenue of
$554,627 compared with a net loss of $16,363, equal to a net loss per share of
three cents on revenue of $197,365 in the 2001 period. 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). In the first half of 2002, we hired eight brokers. Funds from this
offering will allow for more rapid expansion and an opportunity for increased
mortgage processing, commissions and net income. Funds from this offering are
not required to sustain our company outside of its internally generated cash
flow, but no such performance can be guaranteed. The small net loss for the
first half of 2002 was primarily related to the hiring and support during a
start-up period for these new brokers. As of this filing, their additional
overhead expenses have been absorbed by the new business they have brought in
and we again had a positive cash flow for the nine months ended September 30,
2002 and the through November 15, 2002.
Cash Flow
We generated $554,627 in revenues for the nine-month period ended September 30,
2002.
Total operating expenses for the nine months ended September 30, 2002 were
$547,116. Total operating expenses for the period ended September 30, 2002 were
entirely related to general and administrative expenses and depreciation and
amortization expense.
We incurred general and administrative expenses for the nine-month period ended
September 30, 2002 totaling $54,287. Our general and administrative expenses
were primarily incurred from the cost of operating our office and salaries for
our employees. Depreciation expense for the nine-month period ended September
30, 2002 was $4,245. This represents depreciation on the assets of the Company.
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.
These fees are charged to the customer and are usually rolled into the loan.
Origination fees range from .5% to 1%. The customer pays this fee to our
company. Discount points to buy down the interest rate, range from .25% to 2%.
The customer pays this fee to our company. Fees paid by a lender for servicing
rights to a particular loan range from 0% to 4%. These fees are paid by the
lender to our company. Difficult loans or non-owner occupied loans offer premium
pricing from 0% to 3%. These fees are paid by the customer to our company. The
average brokerage fee ("points") on these loans were: 3.23% in 2000, 2.04% in
2001, and 2.12% in the first nine months of 2002, for an average of 2.16% over
the total period of activity.
16
There is also a range of fees collected out of gross fees by other entities not
affiliated with us. Our company does not collect these fees. They are listed
here to provide an understanding of the entire loan process. The fees that are
charged are: credit report: $15 to $67 charged by a credit reporting agency to a
borrower; appraisal fee up to $300 charged to the seller paid to the appraiser;
an underwriting fee charged to the borrower by the lender from $250 to $450;
documentation fees from $150 to $250 charged to the borrower by the lender;
processing fees from $395 to $650 charged to the borrower by the lender; tax
service fee from $70 to $94 charged to the borrower by the lender; a flood
certification fee of $26 charged to the borrower by the lender; a wire fee of
$50 charged to the borrower by the lender. There may be a "packaged" flat fee
known as an administration fee from $100 to $1,200 charged to the borrower by
the lender which would include many of the before mentioned fees.
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 27 months. This
arrangement was reviewed by the Board and Mr. Barcelon's compensation beginning
in the second quarter starting April 1, 2002 will be $3,300 per month plus
commission which will now be 80%. In 2000 and 2001, Mr. Barcelon wrote
approximately 45% of all loans. During this time he was one of a maximum of
three brokers working at any one time. As of this filing, Mr. Barcelon has 15
brokers working under his direction and has assumed more of an administrative
role. He will continue as a loan officer, but is estimated that his production
will only be at about 10% of all loans written.
Results of Operations
The most recent results for the nine months ending September 30, 2002, saw
mortgage loan closings at the highest rate in the brief history of our company.
This continues a trend of generally increasing mortgage loan closings since June
1, 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. In the first nine months of 2002,
results were favorably increased by the addition of eight new 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.
The first nine months ended September 30, 2002 showed mortgage loans of
$25,014,496 and gross fees of $530,244. This is compared to mortgage loans of
$6,585,058 and gross fees of $125,603 in the same period of 2001. The average
loans fees charged in the first nine months was 2.12% while the average fees for
the same period in 2001 was 2.61%.
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) Revenue for the first nine months of 2002
ending September 30 was $554,627, compared with revenues of $197,365 for the
first nine months of 2001. Net profit for the first nine months of 2002 was
$7,511 equal to $0.01 per share compared with a net loss of $16,363, equal to
$0.03 per share in the first nine months of 2001.. Also, we added eight brokers
during the period. 5) We are a principle in the purchase of a condominium for
$43,500. Mr. Barcelon made an executive decision to add to our revenue by
seizing an exceptional opportunity to purchase a condominium from an
unaffiliated party for only a $1,000 down payment and the assumption of $598 in
monthly mortgage and condominium fees. A party unaffiliated with either our
company or the seller is now paying $600 a month in rent. 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 nine months ended September 30, 2002.
17
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. 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 by a person not affiliated
with any person or entity related to us. Until February 29, 2000 the owner of
ZXS, Inc. researched several business, but did not commence formal operations
due to lack of funding. The name was changed on February 29, 2000 when Robert
Kelly purchased ZXS from its owner. Robert Kelly then suffered health problems
and transferred management and ownership to current directors and officers. 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).
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
General: We receive requests for services from realtors in the Las Vegas area.
We write up applications for potential home buyers (loan origination). We work
with SkoFed and offer them the first right of refusal for funding the loan
either as a loan originator or as finder of a loan originator. If SkoFed
declines for any reason, we approach wholesale lenders from a list of
approximately 50 approved by SkoFed. In either event, SkoFed does not
participate in any commissions. If they are the primary lender, they will
receive the fees according to the schedule described in this document under
Average Loan Fees. If they refuse the loan, and the loan is funded through one
of SkoFed's approved wholesale mortgage lenders, they will receive a flat
processing fee of $395-$650, depending on the loan. To date, SkoFed has been a
loan originator on approximately 30% of all of our loans with the other 70%
brokered through its list of approximately 50 wholesale mortgage lenders. Once a
loan originator is engaged, we commence on the loan closing procedures which
involve drawing up documents, arranging for an escrow company and working with
the escrow company to fund and record the loan for the buyer. However, there are
no forward commitment guarantees for any residential mortgage banking services
or any other of our services. Should SkoFed or any of its wholesalers decline to
fund a loan, we would lose the business. Should SkoFed suffer a material adverse
event, we would have to continue with one of its 50 wholesalers or find a
substitute loan originator. We derive 100% of our income from the relationship
with SkoFed. At present we have no standby affiliations. However, we believe
that a replacement loan originator could be negotiated with in less than 10
business days with minimal disruption of our services.
18
As an example:
A prospective borrower contacts a loan officer at our company stating a desire
to buy a particular home or refinance their current home. The prospective
borrower fills out an application and pays our company a $15 fee. Then the loan
officer will begin a process known as "qualifying the loan." We research the
prospective borrower's credit history. Our loan officer evaluates the facts and
determines how much the prospective borrower may qualify for in loan proceeds
and what the range of down payments could be. The lower the down payment, the
higher the mortgage. Should the prospective borrower wish to proceed, our loan
officer requests verification of stated income (by recent payment stubs or tax
returns, for example), verification of employment history, verification of
timely payments from current landlord (if renter) or mortgage holder (if current
homeowner). The next step in the loan process is for our loan officer to format
this information for the SkoFed, the underwriter. Using its own criteria, SkoFed
decides whether it will underwrite the loan or request that we contact a list of
referrals prepared by SkoFed. If SkoFed or none of the referred underwriters
will process the loan, the prospective borrower is turned down for conventional
financing. The loan officer will refer to standard charts to determine the
amount of a grant available for the down payment and closing costs. The loan is
processed by FHA and, if approved, the loan closes. We receive approximately
2.15% for our services. If the SkoFed or a referred underwriter approves the
application for conventional financing, the terms are set and the loan is closed
if accepted by the prospective borrower. Although there are slight variances in
fees depending on the degree of service to process the loan, we receive
approximately 1% of the loan as a an origination fee and approximately 1% as a
service release premium in addition to an approximate $395 loan processing
completion fee and an approximate $400 administration fee.
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 experience in the construction and commercial
lending field. 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. There can be no guarantee that we will be able to expand our
business into this area.
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.
19
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. If we engage
in this area of lending, we will transact business for construction loans
through SkoFed, using the same wholesale mortgage lenders provided by Skofed for
the residential loans. 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 September 30,
2002, residential brokers handled less than 1% of the total loan business
(representing three loans) as construction loans to individuals who were
building their own private residences. These were approved as a courtesy to
close contacts of our loan brokers and were not construction loans to
construction companies. This type of loan is not expected to be part of any
short-term marketing plan and a recurrence, if any, would be an immaterial part
of our business. There can be no guarantee that we will be able to expand our
business into this area. We currently do not have nor are we seeking any
construction loans. As such we have not received any forward commitments that
the majority of the residential loans are to be placed through our residential
banking services area, with respect to those loans.
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. If we engage in this area of
lending, we will transact business for commercial loans through SkoFed, using
the same wholesale mortgage lenders provided by Skofed for the residential
loans. The amount of the fee is determined by the dollar size of the
transaction, prevailing competition, and market conditions. As of September 30,
2002, no commercial lending has been recorded. There can be no guarantee that we
will be able to expand our business into this area.
Marketing: To date, our mortgage loan applicants have been obtained by (1) the
actions of 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.
20
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.
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.
21
Employees
We currently have four 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.
Net Branch Agreement
Our company's agreement with SkoFed is contained in a November 16, 2001 Net
Branch Officer Letter of Agreement (see Exhibit 10 "Material Contracts"). Our
company has agreed to deal exclusively with SkoFed and its referral list of
underwriters. We have agreed to originate and process loans, comply with all
Federal and State laws and SkoFed's policies and procedures. We will keep
accurate books and records for SkoFed's review. We have agreed to the fees as
scheduled: $350 per loan application plus .50% for each loan funded directly by
SkoFed. For brokered loans, there will be a $650 fee on each loan, including
processing fee. Other fees are flood certificate, $26; wire fee, $50; tax
services fee, $79 and a processing fee of $395. All of these fees are paid
directly to SkoFed by the loan applicant. Direct expenses include rent,
telephone, commissions, salaries and repurchasing costs. These expenses will be
deducted by Skofed out of fees due to our company each month. This agreement can
be cancelled by either party within 30 days. Settlement of all fees due our
company and expenses due Skofed are to be settled within 60 days after
termination of this agreement.
Affiliations
Commercial Evalutation's affiliation with SkoFed is by contract and a fee
agreement (see Exhibit 10). SkoFed employs Heather Cain, our Chief Financial
Officer, as a part-time loan processor, thus creating an "affiliate"
relationship. As a part-time loan processor, she inputs the application
information into SkoFed's computer for evaluation. There is no decision-making
in this process and therefore there are no conflicts of interest. She mails our
verifications of employment to match the employer's facts with the applicant's
facts. She also verifies the prospective borrower's banking history with the
facts by contacting the applicant's lending institutions. She will verify the
applicant's rent paying history with the landlord, if a renter, or the mortgage
paying history with the mortgage lender, if the applicant is a current
homeowner. She also contacts credit-reporting agencies for other credit history.
Then, she will consolidate information on income, account balances and debt to
reconcile with information on the prospective borrower's application. Once the
loan package is assembled, she will submit it to SkoFed. If SkoFed declines to
underwrite, she submits the loan package to SkoFed's list of referral
underwriters. If no underwriter elects to fund the loan, the package is sent
back to our company for rejection to the customer. If an underwriter does decide
to proceed, she orders an appraisal, a preliminary title report, additional
credit updates if required by the underwriter. She will also list any additional
conditions required by the underwriter, if any, and request us to secure the
information or agreement to additional terms from the prospective borrower. The
loan is then closed. 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
us 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.
22
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 business retained by the new-hire brokers as a prerequisite of
their hiring. This prerequisite shall be four or more customers with pending
loans. We will be able to satisfy its cash requirements from revenues generated
from our business for the next twelve months. Therefore, we will not need to
raise additional revenues over the next twelve months.
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 could grow to 20 brokers in the
current location before moving to branch offices. A key to expanding our
business is the selection of loan officers who have the contacts to bring in new
loan business. Mr. Barcelon maintains a list of real estate industry
professionals and former employees who are account representatives of banks or
retail realtors. Prospects that have a proven record of obtaining new business
through their own referrals, advertising or direct mail then have their previous
employment history reviewed. They also are required to have four our more
customers with pending loans. Those that appear to have the ability to bring in
appreciably more business than the office overhead required to support them are
hired. Such a move would 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 outside cash is required to sustain the company. We can proceed
with internally generated funds from operations. We have no further plans for
expansion outside of the short-term goals and milestones listed above.
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.
23
MANAGEMENT
Directors are elected for one-year terms in June of each year.
CHAIRMAN OF THE BOARD, DIRECTOR, CHIEF EXECUTIVE OFFICER, AND PRESIDENT - 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.
CHIEF OPERATING OFFICER, 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.
CHIEF FINANCIAL OFFICER, PRINCIPAL ACCOUNTING OFFICER, DIRECTOR, AND TREASURER -
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 DEAN, 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.
24
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
Name Outside Services Commissions Salary Commissions 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 -- --
First Nine Months of 2002
Robert Barcelon* -- -- $23,650 --
Heather Cain -- $ 8,800 -- --
*Starting April 1, 2002, Mr. Barcelon's compensation switched from straight
commission to a salary of $3,300 per month and 80% commission on loans booked.
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 for
their 500,000 shares of stock.
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:
25
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, #93
Newport Beach, CA 92660
TOTAL OWNED BY THE DIRECTORS AND
OFFICERS AS A GROUP 500,000 100% 500,000 55.56%
* Desert Professional Services is owned by Anne Dean, Director of CEI and Robert
Barcelon President and Director of CEI.
Recent Transfers of Unregistered Securities
On March 3, 2000, the four original founders of Commercial Evaluations, Inc.
purchased a total of 500,000 shares of Commercial Evaluations, Inc.'s common
stock. Of that 500,000 shares, 300,000 were purchased by Robert Kelly, 100,000
shares were purchased by Robert Barcelon, 50,000 shares were purchased by Linda
Velez, and 50,000 shares were purchased by Anne Dean. These stock issuances were
made in accordance with Section 4(2) of the Securities Act of 1933, as amended,
which expets from registration transactions by an issuer not involving a "public
offering." These purchases were financed by a promissory note issued by Karlton
Management, Inc., a Nevada corporation. Mr. Kelly, our original president and
CEO, became ill in June of 2000, and by November 27, 2000 Mr Kelly resigned, as
he was unable to continue serving Commercial Evaluations, Inc. in any capacity.
Mr. Kelly's resignation prompted Karlton Management, Inc. to declare the
promissory note in default on November 28, 2000. Current management renegotiated
the promissory notes with Karlton. On November 29, 2000, Desert Professional
Services, Inc., a Nevada corporation owned in equal share by Robert Barcelon and
Anne Dean, purchased the 300,000 shares of common stock of Commercial
Evaluations, Inc. held by Robert Kelly, as well as the 100,000 shares held by
Robert Barcelon and the 50,000 shares held by Anne Dean. This purchase was
financed by a promissory note in the amount of $45,000 from Karlton Management,
Inc., which was due and payable within one year of the date of issuance, along
with interest at the rate of 6.15%, secured by the 450,000 shares held by Desert
Professional Services, Inc. Further, Linda Velez entered into a new promissory
note with Karlton Management in the amount of $5,000, which was due and payable
within one year of the date of issuance, along with interest at the rate of
6.15%, secured by the 50,000 shares held by Linda Velez. The promissory notes
issued to Desert Professional Services, Inc. and Linda Velez on November 29,
2000 were paid in full as of September 24, 2001.
There are no affiliations between Karlton Management, Inc., its officers,
directors or shareholders and Commercial Evaluations, Inc., its officers,
directors or shareholders.
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
26
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
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 a national exchange 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.
27
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.
28
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.
29
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.
30
COMMERCIAL EVALUATIONS, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
COMMERCIAL EVALUATIONS, INC.
SEPTEMBER 30, 2002
CONTENTS
Page
Accountant's Review Report F-1
Financial Statements
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
MARK SHERMAN, CPA
316 SOUTH JONES BOULEVARD
LAS VEGAS, NV 89107
PHONE (702) 645-6318 FAX: (702) 645-1604
ACCOUNTANT'S REVIEW REPORT
Board of Directors
Commercial Evaluations, Inc.
Las Vegas, Nevada
I have reviewed the accompanying balance sheet of Commercial Evaluations,
Inc. (a Nevada Corporation) as of September 30, 2002 and the related statements
of income for the three and nine months ended and inception to September 30,
2002, stockholders' equity from inception to September 30, 2002, and cash flows
for the nine months ended September 30, 2002 in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Commercial Evaluations,
Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding financial statements taken as a
whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying September 30, 2002 financial statements in order for
them to be in conformity with generally accepted accounting principals.
The financial statements for the three months ended September 30, 2001 and the
nine months ended September 30, 2001 were audited by me and I expressed an
unqualified opinion on them in my reports dated October 29, 2001 respectively.
/s/ Mark S. Sherman
- -----------------------------
Mark S. Sherman
November 14, 2002
F-1
COMMERCIAL EVALUATIONS, INC.
BALANCE SHEET
SEPTEMBER 30, 2002
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 22,775
TOTAL CURRENT ASSETS 22,775
FIXED ASSETS
Equipment., Furn. & Fixtures, net of accum
depr. of $7,336 $ 15,104
OTHER ASSETS
Deposits $ 4,306
Investment in real estate 43,500
TOTAL OTHER ASSETS $ 47,806
TOTAL ASSETS $ 85,685
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 11,841
Note payable 718
Current Portion of Long-term debt 134
TOTAL CURRENT LIABILITIES $ 12,693
LONG-TERM LIABILITIES
Note Payable, less current portion $ 42,226
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
Authorized 50,000,000 shares;
Issued and outstanding at
September 30,2002 500,000 shares $ 500
Additional Paid In Capital $ 92,181
Retained Earnings (Deficit) ($61,915)
--------
TOTAL STOCKHOLDERS' EQUITY $ 30,766
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 85,685
========
See accompanying notes to financial statements
F-2
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF INCOME
Three Months Ended Nine Months Ended June 7,1994
------------------------ ------------------------ (Inception)
Sep 30, Sep 30, Sep 30, Sep 30, to Sep 30,
2002 2001 2002 2001 2002
(unaudited) (audited) (unaudited) (audited)
INCOME
Revenue $ 193,739 $ 89,053 $ 554,627 $ 197,365 $ 955,119
---------- ---------- ---------- ---------- ----------
TOTAL INCOME 193,739 89,053 554,627 197,365 955,119
EXPENSES
Gen and Admin $ 178,757 $ 89,067 $ 542,871 $ 211,997 $1,008,864
---------- ---------- ---------- ---------- ----------
Depreciation and
Amortization $ 1,481 $ 737 $ 4,245 $ 1,731 $ 8,170
---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES $ 180,238 $ 89,804 $ 547,116 $ 213,691 $1,017,014
---------- ---------- ---------- ---------- ----------
NET PROFIT (LOSS) $ 13,501 ($ 751) $ 7,511 ($ 16,363) ($ 61,915)
========== ========== ========== ========== ==========
NET PROFIT (LOSS)
PER SHARE $ 0.03 ($ .01) $ .01 $ (.03) ($ 0.12)
========== ========== ========== ========== ==========
AVERAGE NUMBER OF
SHARES OF COMMON
STOCK OUTSTANDING 500,000 500,000 500,000 500,000 500,000
========== ========== ========== ========== ==========
See accompanying notes to financial statements
F-3
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
Net (Loss), 12-31-00 500,000 $ 500 $ 49,500 ($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)
Net income, 9-30-02 7,511
-------- -------- -------- --------
Balance, September 30, 2002 500,000 $ 500 $ 92,181 ($61,915)
See accompanying notes to financial statements.
F-4
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF CASH FLOWS
Nine Months Ended
September 30,
2002 2001
(unaudited) (audited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (Loss) $ 7,511 ($16,363)
Gain (Loss) on Sale of Equipment -- --
Depreciation 4,245 1,731
Prepaid expenses decrease(increase) $ 1,500 ($ 2,975)
Other Assets (increase) ($ 2,242) ($ 2,064)
Accounts Payable increase(decrease) $ 8,605 ($10,548)
Other Current liabilities(dec)inc ($ 4,300) $ 3,100
CASH FLOWS FROM
OPERATING ACTIVITIES $ 15,319 ($27,119)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment ($ 4,690) ($10,192)
CASH FLOWS FROM
INVESTING ACTIVITIES ($ 4,690) ($10,192)
CASH FLOWS FROM
FINANCING ACTIVITIES
Principal payments on notes payable ($ 267) ($ 867)
Issuance of common stock
Additional paid-in capital -0- $ 41,332
CASH FLOWS FROM
FINANCING ACTIVITIES ($ 267) $ 40,465
Net increase
(decrease) in Cash $ 10,362 $ 3,154
Cash
Beginning of Period $ 12,413 $ 283
Cash
-------- --------
End of Period $ 22,775 $ 3,437
======== ========
Supplemental Disclosure of cash flow information:
See accompanying notes to financial statements.
F-5
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
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 September 30, 2002 and September 30, 2001.
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-6
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
September 30, 2002
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 $134. On November 20, 2001 the Company
entered into an agreement to rent out this property for $600.00 per
month. Rental income included in revenues for the nine months ended
September 30, 2002 and for the year ended December 31, 2001 of
$2,647.00 and $800.00 respectively.
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 was $65,500 with an escrow
closing date on or before July 31, 2002. As of May 2002 the tenant
waived his right to exercise the purchase of the property.
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-7
COMMERCIAL EVALUATIONS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Audited)
COMMERCIAL EVALUATIONS, INC.
DECEMBER 31, 2001
CONTENTS
Page
Independent Auditor's Report F-1
Financial Statements
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
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, December 31, 2001; and the results of
operations and their cash flows for the period ended December 31, 1999, December
31, 2000, December 31, 2001 and inception to December 31, 2001 in conformity
with generally accepted accounting principles.
/s/ Mark S. Sherman
- ------------------------
Mark S. Sherman
February 6, 2002
F-1
COMMERCIAL EVALUATIONS, INC.
BALANCE SHEET
DECEMBER 31, 2001
ASSETS
------
As of As of As of
12/31/01 12/31/00 12/31/99
CURRENT ASSETS
Cash $ 12,413 $ 283 $ -0-
Prepaid Expenses 1,500 0 -0-
-------- -------- --------
TOTAL CURRENT ASSETS 13,913 283 -0-
FIXED ASSETS
------------
Equipment., Furn. & Fixtures,
net of accum. depr. of $ 3,091 $ 14,659 -- --
net of accum. depr. of $ 1,228 $ 1,378 --
net of accum. depr. of $ 0 -- -- -0-
OTHER ASSETS
------------
Deposits $ 2,064 $ -0- $ -0-
Investment in real estate 43,500 -- --
TOTAL OTHER ASSETS $ 45,564 $ -0- $ -0-
TOTAL ASSETS $ 74,136 $ 1,661 $ -0-
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts Payable $ 3,236 $ 5,836 $ -0-
Commissions Payable 4,300 $ -0- $ -0-
Note payable 1,833 4,730 $ -0-
Current Portion of Long-term debt 305 $ -0- $ -0-
-------- -------- --------
TOTAL CURRENT LIABILITIES $ 9,674 $ 10,566 $ -0-
LONG-TERM LIABILITIES
Note Payable, less current portion $ 41,207 $ -0- $ -0-
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
Authorized 50,000,000 shares;
Issued and outstanding at
December 31, 2001 500,000 shares $ 500 $ 500 $ -0-
Additional Paid In Capital $ 92,181 $ 49,500 $ -0-
Retained Earnings (Deficit) ($69,426) ($58,905) $ -0-
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY $ 23,255 ($ 8,905) $ -0-
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 74,136 $ 1,661 $ -0-
======== ======== =========
See accompanying notes to financial statements.
F-2
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-3
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-4
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 --
Other 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-5
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-6
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-7
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
31
RECENT SALES OF UNREGISTERED SECURITIES
On March 3, 2000, the four original founders of Commercial Evaluations, Inc.
purchased a total of 500,000 shares of Commercial Evaluations, Inc.'s common
stock. Of that 500,000 shares, 300,000 were purchased by Robert Kelly, 100,000
shares were purchased by Robert Barcelon, 50,000 shares were purchased by Linda
Velez, and 50,000 shares were purchased by Anne Dean. These stock issuances were
made in accordance with Section 4(2) of the Securities Act of 1933, as amended,
which expets from registration transactions by an issuer not involving a "public
offering." These purchases were financed by a promissory note issued by Karlton
Management, Inc., a Nevada corporation. Mr. Kelly, our original president and
CEO, became ill in June of 2000, and by November 27, 2000 Mr Kelly resigned, as
he was unable to continue serving Commercial Evaluations, Inc. in any capacity.
Mr. Kelly's resignation prompted Karlton Management, Inc. to declare the
promissory note in default on November 28, 2000. Current management renegotiated
the promissory notes with Karlton. On November 29, 2000, Desert Professional
Services, Inc., a Nevada corporation owned in equal share by Robert Barcelon and
Anne Dean, purchased the 300,000 shares of common stock of Commercial
Evaluations, Inc. held by Robert Kelly, as well as the 100,000 shares held by
Robert Barcelon and the 50,000 shares held by Anne Dean. This purchase was
financed by a promissory note in the amount of $45,000 from Karlton Management,
Inc., which was due and payable within one year of the date of issuance, along
with interest at the rate of 6.15%, secured by the 450,000 shares held by Desert
Professional Services, Inc. Further, Linda Velez entered into a new promissory
note with Karlton Management in the amount of $5,000, which was due and payable
within one year of the date of issuance, along with interest at the rate of
6.15%, secured by the 50,000 shares held by Linda Velez. The promissory notes
issued to Desert Professional Services, Inc. and Linda Velez on November 29,
2000 were paid in full as of September 24, 2001.
There are no affiliations between Karlton Management, Inc., its officers,
directors or shareholders and Commercial Evaluations, Inc., its officers,
directors or shareholders.
EXHIBITS.
Exhibits Title of Document
3.1 Articles of Incorporation
3.2 By-laws
5 Legal Opinion
10 Material Contracts
Net Branch Agreement with addendum
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;
32
(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 Notwithstanding the forgoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospects
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(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.
33
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 November 20, 2002.
Dated: November 20, 2002 COMMERCIAL EVALUATIONS, INC.
By: /s/ Robert Barcelon
--------------------------------
Robert Barcelon
Chairman of the Board,
Director,
Chief Executive Officer,
and President
Dated: November 20, 2002 By: /s/ Heather Cain
--------------------------------
Heather Cain
Chief Operating Officer
Secretary
Dated: November 20, 2002 By: /s/ Linda Valez
--------------------------------
Linda Valez
Chief Financial Officer,
Treasurer, Director, and
Principal Accounting
Officer
Dated: November 20, 2002 By: /s/ Anne Dean
--------------------------------
Anne Dean
Director
34