As filed with the Securities and Exchange Commission August 18, 2003
File No. 333-75272
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post Effective Amendment 2
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: August 19,
2003. This 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 such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
The effective date of this prospectus is December 24, 2002.
Post Effective Amendment 2, August 18, 2003
2
PROSPECTUS
$60,000
COMMERCIAL EVALUATIONS, INC.
COMMON STOCK
This is Commercial Evaluations, Inc.'s ("CEI"'s) Initial Public Offering. We are
offering 400,000 shares of common stock. The public offering price is $0.15 per
share. No public market currently exists for our shares. We were formed in 1994
and the mortgage activities began February 29, 2000.
SEE RISK FACTORS (RISK FACTORS, PAGE 10) 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 by December 31,
2003, unless extended, 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 Post Effective Amendment 2 Prospectus is August 18, 2003.
3
Table of Contents
- --------------------------------------------------------------------------------
Prospectus Summary 4
Risk Factors 5
Forward Looking Statements 7
Use of Proceeds 8
Determination of Offering Price 9
Dilution 9
Management's Discussion and Analysis of Financial Condition 10
Description of Business 18
General 18
Organizer 18
Nature of Business 18
Employees 22
Legal Proceedings 22
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 35
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 Second Quarter of 2003 and 2002
and the First Six Months of 2003 and 2002
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
Income $317,461 $192,482 $605,456 $360,888
Net Profit (Loss) $11,969 ($16,200) $30,937 ($5,989)
Net Profit (Loss) per Share $0.02 ($0.03) $0.06 ($0.01)
Average Shares Outstanding 500,000 500,000 500,000 500,000
Summary Comparison of Income for the Years Ended 2002 and 2001
Year Ended Year Ended
December 31, 2002 December 31, 2001
Income $797,576 $336,373
Net Profit (Loss) ($12,210) ($10,521)
Net Profit (Loss) per Share ($0.02) ($0.02)
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.
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
6
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
June 30, 2003, the net tangible book value of the company was $41,982, $0.08 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 $0.08
Net tangible book value per share after Offering $0.11*
Increase (Decrease) in net tangible book value per share
to new Shareholders after Offering ($0.04)
Increase to current Shareholders in net tangible
book value per share after the Offering $0.03
*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 June 30, 2003. There
were $25,014,496 in mortgage loans closed in 2001, generating $530,244 in fees
and $35,518,845 mortgage loans closed in 2002, generating $752,839 in fees. The
first six months of 2003 shows that loan closings amounted to $25,388,019,
generating $605,985 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 2,948,98 14,150,373
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
2002 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
155,900 147,000 142,267 111,284 186,200 179,900 108,800 170,905 179,000 179,900 112,800 200,700
15,000 81,900 116,000 137,750 136,314 237,550 114,000 176,000 124,000 108,500 141,300 90,000
147,682 18,500 95,000 93,100 110,000 110,000 110,950 108,550 240,000 166,000 210,000 75,000
93,500 176,130 112,000 124,200 227,800 116,000 75,000 126,350 190,000 146,943 145,162 200,400
89,725 77,624 144,900 297,600 200,000 130,235 144,000 22,000 123,900 228,000 119,000 135,867
121,099 114,000 300,700 111,200 242,250 154,000 74,000 207,000 198,000 494,000 115,314 120,000
159,000 136,669 75,000 190,000 116,050 115,000 155,200 144,000 84,000 120,785 152,000 131,271
136,300 31,000 132,240 134,900 115,250 142,490 109,200 26,000 180,400 211,500 82,000 96,600
118,146 113,730 177,600 106,400 149,950 154,850 108,800 187,000 99,040 148,500 101,750 94,674
147,630 126,000 72,250 109,120 50,000 69,903 111,200 151,030 300,000 102,000 79,800 105,000
65,450 72,000 92,178 73,500 148,000 111,550 110,850 105,182 198,000 140,000 111,900 96,000
92,801 124,600 246,800 72,450 27,250 124,900 256,000 100,000 131,200 150,500 80,000
127,900 133,200 117,232 75,000 103,010 114,000 107,601 84,720 150,000 128,800 137,600
122,975 95,480 141,750 66,500 137,400 148,500 137,500 144,884 14,800 144,000 129,871
140,816 82,864 65,500 196,000 130,050 38,000 112,750 94,950 140,900
188,000 120,750 61,000 131,100 146,750 89,526 118,000 106,400 54,150
174,800 204,250 65,000 121,050 128,150 44,000 117,161 100,150 109,500
258,500 200,000 137,265 196,600 123,350 150,300 197,000 161,500 143,000
87,300 154,850 137,250 156,750 132,050 116,800 111,200 144,000 297,250
79,750 250,000 50,100 11,900 96,800 126,400 106,500 139,057
105,300 177,000 95,470 300,700 140,200 240,000 157,600 352,000
45,000 105,000 139,500 499,250 123,390 119,100
10
102,600 107,590 100,000 115,200 206,000
62,500 67,240 104,400 25,600 130,000
28,800 131,000 152,605 164,449
132,914 19,800 300,000 123,500
187,500 139,765 106,400
128,500 100,000 61,600
124,020 100,000 100,000
129,100 132,800 184,000
118,750 157,500
132,900
126,350
178,200
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL 1,593,108 2,482,299 3,365,7312,314,589 4,630,4382,945,728 1,723,101 4,043,1621,916,340 3,979,1344,087,432 2,437,783
FEES 39,505 56,745 64,983 43,678 95,498 58,134 29,486 99,294 42,921 86,630 83,515 52,450
2003 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
204,184 107,950 328,700 283,200 154,850 109,285
101,000 136,000 123,335 279,200 107,500 162,741
194,500 344,000 42,000 172,800 123,150 335,000
441,150 90,000 141,880 127,200 130,272 123,500
134,900 107,950 119,500 186,000 106,750 154,000
144,127 202,000 101,650 220,000 199,000 135,660
95,000 222,700 199,500 120,000 268,800 132,250
355,000 127,000 303,200 127,500 123,150 180,000
169,320 395,000 105,346 97,000 37,000 332,700
124,100 120,300 142,200 148,000 138,000 135,200
261,000 146,500 141,700 148,000 135,800 1,043,423
124,000 23,000 355,000 160,000 155,558 151,500
212,000 131,173 41,350 91,150 385,035 275,500
326,400 335,000 185,000 220,000 141,200 376,600
185,000 157,700 61,762 94,000 151,120 164,869
180,000 151,525 205,000 137,000 116,000 80,550
128,000 196,000 92,720 605,000 127,100 139,400
269,000 148,000 183,800 98,150 185,055 180,500
271,920 80,000 117,150 147,233 140,880
131,929 250,000 57,000 508,000
198,000 147,672 150,400 128,684
175,440 45,000 177,000
104,000 103,500
138,600
148,500
117,986
320,000
145,713
563,200
71,300
140,000
134,500
79,933
119,784
159,600
138,355
106,400
94,000
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL 3,648,681 4,023,087 2,953,6436,455,393 3,316,9734,990,242
FEES 90,505 105,726 89,572 143,312 80,915 95,956
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 2002, and 2.39% for the first six months of
2003, for an average of 2.23% over the total period of activity.
11
Results of Operations
We generated $605,456 in revenues for the six-month period ended June 30, 2003.
Total operating expenses for the six months ended June 30, 2003 were $570,892.
Total operating expenses for the period ended June 30, 2003 were entirely
related to general and administrative expenses and depreciation and amortization
expense.
STATEMENT OF INCOME FOR FIRST SIX MONTHS OF 2003 AND 2002
Three Months Six Months
Ended Ended
----- -----
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
INCOME
Revenue $ 317,461 $ 192,482 $ 605,456 $ 360,888
--------- --------- --------- ---------
TOTAL INCOME 317,461 $ 192,482 $ 605,456 $ 360,888
EXPENSES
General and Administrative 303,948 $ 207,300 $ 570,829 $ 364,113
--------- --------- --------- ---------
Depreciation and
Amortization $ 1,544 $ 1,382 $ 3,690 $ 2,764
--------- --------- --------- ---------
TOTAL EXPENSES $ 305,492 $ 208,682 $ 574,519 $ 366,877
NET PROFIT (LOSS) $ 11,969 ($ 16,200) $ 30,937 ($ 5,989)
========= ========= ========= =========
NET PROFIT (LOSS)
PER SHARE $ 0.02 ($ .03) $ .06 $ (.01)
========= ========= ========= =========
AVERAGE NUMBER OF
SHARES OF COMMON
STOCK OUTSTANDING 500,000 500,000 500,000 500,000
========= ========= ========= =========
12
STATEMENT OF CASH FLOWS COMPARING SIX MONTHS ENDING JUNE 30, 2003 & 2002
Six Months Ended June 30,
2003 2002
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 30,937 ($ 5,999)
Gain (Loss) on Sale of Real Estate (999) --
Gain (Loss) on Sale of Equipment (1,846) --
Depreciation 3,690 2,764
Prepaid expenses decrease (increase) (372) (4,692)
Other Assets (increase) (500) (2,242)
Accounts Payable (dec)inc (2,001) 7,484
Other Current liabilities inc (dec) 1,407 (4,318)
CASH FLOWS FROM OPERATING ACTIVITIES (3,234) (6,993)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (1,020) (4,672)
Proceeds from sale of real estate 2,262 --
CASH FLOWS FROM INVESTING ACTIVITIES 1,242 (4,672)
CASH FLOWS FROM FINANCING ACTIVITIES -- --
Principal payments on notes payable (123) (67)
Issuance of common stock
Additional paidin capital -- --
CASH FLOWS FROM FINANCING ACTIVITIES (123) (67)
Net increase (2,115) (11,732)
(decrease) in Cash
Cash Beginning of Period 4,056 12,415
Cash End of Period $ 1,941 $ 681
13
STATEMENT OF INCOME FOR THE YEAR 2002 & 2001
Jan 1, 2002 Jan 1, 2001
to to
Dec 31, 2002 Dec 31, 2001
INCOME
Revenue $796,576 $336,373
TOTAL INCOME 796,576 336,373
EXPENSES
General and Administrative $802,699 $344,197
-------- --------
Depreciation and Amortization 6,087 2,697
-------- --------
TOTAL EXPENSES $808,786 $346,894
NET PROFIT (LOSS) ($12,210) ($10,521)
======== ========
NET PROFIT (LOSS)
PER SHARE ($ 0.02) ($ 0.02)
======== ========
AVERAGE NUMBER OF
SHARES OF COMMON
STOCK OUTSTANDING 500,000 500,000
======== ========
14
STATEMENT OF CASH FLOWS COMPARING 2002 & 2001
Jan 1, 2002 Jan 1, 2001
to December 31, to December 31,
2002 2001
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (Loss) ($12,210) ($10,521)
Gain (Loss) on Sale of Equipment
Depreciation 6,087 2,697
Accounts Receivable dec(inc) ($ 1,400) $ 0
Prepaid expenses increase ($ 3,287) ($ 1,500)
Other Assets increase ($ 1,742) ($ 2,064)
Accounts Payable (dec)inc $ 15,786 ($ 6,063)
Other Current liabilities inc (dec) ($ 4,525) $ 6,133
CASH FLOWS FROM
OPERATING ACTIVITIES ($ 1,291) ($ 11,318)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment ($ 6,406) ($ 15,978)
Purchase of Real Estate -- ( 1,000)
CASH FLOWS FROM
INVESTING ACTIVITIES ($16,978) ($ 16,978)
CASH FLOWS FROM
FINANCING ACTIVITIES
Principal payments on notes payable ($ 660) ($ 2,255)
Issuance of common stock
Additional paid-in capital -- 42,681
CASH FLOWS FROM
FINANCING ACTIVITIES ($ 660) $ 40,426
Net increase
(decrease) in Cash ($ 8,357) $ 12,130
Cash Beginning of Period 12,413 283
Cash End of Period $ 4,056 $ 12,413
======== ========
15
Liquidity
Cash at the end of June 30, 2003 was $1,941, which was a net increase of $1,260
for the same period of 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 2003 operations
with cash on hand since we have a positive cash flow of $1,941 for the year as
of June 30, 2003.
Based on the six months ended June 30, 2003, we believe that trends are
increasing and that contract brokers can be hired without significant additional
funds. For the first six months ended June 30, 2003, we recorded net income of
$30,987, equal to net income per share of six cents on revenue of $605,456
compared with a net gain of $7,511, equal to a net gain per share of one cent on
revenue of $554,627 in the 2002 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 2003, we hired ten brokers, for a total of thirty 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. As of this
filing, the additional overhead expenses for the total of 30 broker on hand have
been absorbed by the new business they have brought in.
Cash Flow
We generated $605,456 in revenues for the six-month period ended June 30, 2003.
Total operating expenses for the six months ended June 30, 2003 were $574,519.
Total operating expenses for the period ended June 30, 2003 were entirely
related to general and administrative expenses and depreciation and amortization
expense.
We incurred general and administrative expenses for the six-month period ended
June 30, 2003 totaling $570,829. Our general and administrative expenses were
primarily incurred from the cost of operating our office and salaries for our
employees. Depreciation expense for the six-month period ended June 30, 2003 was
$3,690. 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 2002, and 2.39% for the first six months of 2003, for an
average of 2.23% over the total period of activity.
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.
16
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. This arrangement was reviewed by the
Board and Mr. Barcelon's compensation beginning in the second quarter starting
July, 2003 will be $8,300 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 30 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 be about 5% of all loans written.
Results of Operations
The most recent results for the six months ending June 30, 2003, 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 six 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, 2002 to $15,428,455 with gross fees of $314,481,
compared with the 12-month period ended December 31, 2001 of similar operations
of mortgage loans of $15,428,455 with gross fees of $314,481. Revenues for the
12-months of 2002 ending December 31 were $795,596 compared with $$336,373 for
the 12-months of 2001. The net loss for 2002 was $12,210 or a net loss of two
cents per share compared with a net loss of $10,521 or a net loss per share of
two cents for 2001.
The first six months ended June 30, 2003 showed mortgage loans of $25,388,019
and gross fees of $605,895. This is compared to mortgage loans of $17,331,893
and gross fees of $358,543 in the same period of 2002. The average loans fees
charged in the first six months was 2.39% while the average fees for the same
period in 2002 was 2.07%.
Material Events
1) This initial public offering of securities was filed after the audited
financial statements were filed for December 31, 2001. 2) A total of 30 new
mortgage brokers were hired and began filing loan applications at various times
from February 2002 through June 2003. 3) Additional office space was leased for
those brokers at a rent increase of approximately $2,200 per month. 4) We have
updated the financials for December 31, 2001 with audited statements for the
year ended December 31, 2002 and unaudited results for the quarter and six
months period ended June 30, 2003. 5) The Board of Directors approved a loan of
$35,000 to President Robert Barcelon. The loan is being repaid in monthly
installments for 24 months and the interest accrued. 6) There have been no other
material events after the CPA review of the results of operations for the first
six months ended June 30, 2003.
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 June 30, 2003,
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 five employees. Three are officers: Robert Barcelon, Heather
Cain and Linda Valez. There are two secretaries supporting 30 loan brokers as
independent contractors. Except for the President, the officers and directors
currently receive no compensation for their duties in corporate capacities.
Robert Barcelon, President, receives $8,300 per month plus commission as a loan
broker. Linda Valez receives compensation from her commissions as a loan broker.
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, 51: 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, 51: 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, 32: 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.
PRINCIPAL ACCOUNTING OFFICER, DIRECTOR, AND TREASURER - LINDA VELEZ, 43: 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, 57: Ms. Dean has been a business consultant to new
businesses from 1990 to the present. For the past 10 years, she has specialized
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
Outside Commissions
Name Services Commissions Salary Payable
Robert Kelly $28,191 -- -- --
Robert Barcelon* -- $20,836 -- --
Heather Cain -- $11,313 -- --
2001
Robert Barcelon* -- $38,125 -- --
Linda Velez -- $ 5,045 -- --
Heather Cain -- $64,764 -- --
2002
Robert Barcelon* -- $ 9,900 $36,550 --
Linda Valez -- -- -- --
Heather Cain -- $13,000 -- --
FIRST SIX MONTHS OF 2003
Robert Barcelon** -- $11,000 $19,800 --
Linda Valez -- -- -- --
Heather Cain -- $ 2,150 -- --
*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.
** Starting July 2003, Mr. Barcelon's compensation switched from straight
commission to a salary of $8,300 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 will receive $8,300 per months and a commission according to the
current schedule on loans that he submits and closes. Linda Velez will continue
to be paid a commission according to the current schedule on loans that she
submits and closes.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Capital Contributions
The principal shareholders have contributed $50,000 in capital contributions for
their 500,000 shares of stock.
25
Loans Guaranteed By Principal Stockholder
There are no current or anticipated corporate loans guaranteed by the principal
Shareholders.
Security Ownership of Management
The following table sets forth, as of the date of this offering, the outstanding
shares of common stock of Commercial Evaluations, Inc., owned of record or
beneficially by each person who owned of record, or was known by us to own
beneficially, more than 5% of the our Common Stock, and the name and
shareholdings of each officer and director and all officers and directors as a
group:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Class Owner Owned Before Owned After
COMMON DESERT PROFESSIONAL
SERVICES, INC.* 450,000 90% 450,000 50.00%
4160 S. Pecos Rd, #20
Las Vegas, NV 89121
COMMON LINDA VELEZ 50,000 10% 50,000 5.56%
300 E. Coast Hwy, #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 for $0.10 per share. 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
26
and there are no redemption or sinking fund applicable thereto; and (iv) are
entitled to one non-cumulative vote per share, on all matters which shareholders
may vote on at all meetings of shareholders.
Non-Cumulative Voting
The holders of shares of common stock of CEI do not have cumulative voting
rights which means that the holders of more than 50% of such outstanding shares,
voting for the election of directors, can elect all of the directors to be
elected, if they so choose, and, in such event, the holders of the remaining
shares will not be able to elect any of CEI's directors. After the present
offering is completed, if all of the shares offered are sold, the public
shareholders will own approximately 44.44% of the outstanding shares of CEI. The
present shareholder may, however, purchase more than fifty percent (50%) of the
shares being offered, which would increase their percentage and decrease that of
new shareholders. The present shareholders do not plan to purchase shares in the
offering.
Dividends
The payment by CEI of dividends, if any, in the future, rests within the
discretion of our Board of Directors and will depend, among other things, upon
CEI's earnings, its capital requirements and its financial condition, as well as
other relevant factors. CEI has not paid or declared any dividends to date due
to its present financial status, but anticipates paying dividends upon its
common stock in the future, provided it has sufficient earnings for that
purpose. (See Risk Factors - No Dividend)
Reports
CEI intends to file annual reports to shareholders with the Securities and
Exchange Commission within 90 days of the end of the fiscal year, certified by
its independent auditors, and will file unaudited quarterly reports, reviewed by
its independent auditors, within 45 days of the end of each quarter.
Escrow Agent/Transfer Agent
Transfer Agent: Silverado Stock Transfer, Inc.
8170 Eastern Avenue
Suite 4-602
Las Vegas, NV 89123
(702) 263-0920
Trustee: Thomas C. Cook and Associates, Ltd.
Client Trust Account
4955 South Durango Drive
Suite 214
Las Vegas, NV 89113
(702) 952-8519
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
27
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.
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 by December 31, 2003, unless extended by us,
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,
supplemented this information in this Post-Effective Amendment No. 2, August 18,
2003. 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
JUNE 30, 2003
i
COMMERCIAL EVALUATIONS, INC.
JUNE 30, 2003
CONTENTS
Page
----
Accountant's Review Report F-2
Financial Statements
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
ii
MARK SHERMAN CPA PROFESSIONAL CORP.
601 SOUTH RANCHO DRIVE SUITE D-32
LAS VEGAS, NV 89106-4827
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 June 30, 2003 and the related statements of
income for the three and six months ended and inception to June 30, 2003,
stockholders' equity from inception to June 30, 2003, and cash flows for the six
months ended June 30, 2003 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 June 30,2003 financial statements in order for them to
be in conformity with generally accepted accounting principals.
/s/ Mark S. Sherman
- -----------------------------
Mark S. Sherman
July 30, 2003
F-2
COMMERCIAL EVALUATIONS, INC.
BALANCE SHEET
June 30, 2003
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 1,941
Accounts Receivable 1,950
Note Receivable 33,000
Prepaid Expenses 5,159
--------
TOTAL CURRENT ASSETS 42,050
FIXED ASSETS
Equipment., Furn. & Fixtures, net of accum. depr.of $9,889 $ 10,461
OTHER ASSETS
Deposits 4,306
TOTAL OTHER ASSETS 4,306
TOTAL ASSETS $ 56,817
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 12,926
Other accrued liabilities 1,909
TOTAL CURRENT LIABILITIES 14,835
LONG-TERM LIABILITIES 0
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
Authorized 50,000,000 shares;
Issued and outstanding at
June 30,2003 500,000 shares 500
Additional Paid In Capital 92,181
Retained Earnings (Deficit) (50,699)
--------
TOTAL STOCKHOLDERS' EQUITY 41,982
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 56,817
========
See accompanying notes to financial statements.
F-3
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF INCOME
Three Months Ended Six Months Ended June 7, 1994
----------------------- ------------------------ (Inception)
June 30, June 30, June 30, June 30, to June 30,
2003 2002 2003 2002 2003
INCOME
Revenue $ 317,461 $ 192,482 $ 605,456 $ 360,888 $1,802,524
---------- ---------- ---------- ---------- ----------
TOTAL INCOME 317,461 192,482 605,456 360,888 1,802,524
EXPENSES
Gen and Admin $ 303,948 $ 207,300 $ 570,829 $ 364,113 $1,839,521
---------- ---------- ---------- ---------- ----------
Depreciation and
Amortization $ 1,544 $ 1,382 $ 3,690 $ 2,764 $ 13,702
---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES $ 305,492 $ 208,682 $ 574,519 $ 366,877 $1,853,223
---------- ---------- ---------- ---------- ----------
NET PROFIT (LOSS) $ 11,969 ($ 16,200) $ 30,937 ($ 5,989) ($ 50,699)
========== ========== ========== ========== ==========
NET PROFIT (LOSS)
PER SHARE $ 0.02 ($ .03) $ .06 $ (.01) ($ 0.10)
========== ========== ========== ========== ==========
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-4
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)
Net loss, 12-31-02 -- -- -- ($ 12,210)
--------- --------- --------- ---------
Balance, December 31, 2002 500,000 $ 500 $ 92,181 $ 81,636)
Net income, 6-30-03 -- -- -- $ 30,937
--------- --------- --------- ---------
Balance, June 30, 2003 500,000 $ 500 $ 92,181 ($ 50,699)
See accompanying notes to financial statements.
F-5
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF CASH FLOWS
Six Months Ended June 30,
2003 2002
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income $ 30,937 ($ 5,989)
Gain (Loss) on Sale of Real Estate ( 999) --
Gain (Loss) on Disposal of Equipment (1,846)
Depreciation 3,690 2,764
Accounts Receivable dec (inc) ( 550) 0
Notes Receivable (33,000) 0
Prepaid expenses decrease(increase) ( 372) ( 4,692)
Other Assets (increase) ( 500) ( 2,242)
Accounts Payable increase(decrease) ( 2001) 7,484
Other Current
liabilities(dec)inc 1,407 ( 4,318)
CASH FLOWS FROM
OPERATING ACTIVITIES ( 3,234) ( 6,993)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment (1,020) ( 4,672)
Proceeds from sale of real estate 2,262 --
CASH FLOWS FROM
INVESTING ACTIVITIES 1,242 ( 4,672)
CASH FLOWS FROM
FINANCING ACTIVITIES
Principal payments on notes payable ( 123) ( 67)
CASH FLOWS FROM
FINANCING ACTIVITIES ( 123) ( 67)
Net increase
(decrease) in Cash ( 2,115) ( 11,732)
Cash
Beginning of Period 4,056 $ 12,413
Cash
-------- --------
End of Period $ 1,941 $ 681
======== ========
Supplemental Disclosure of cash flow information:
See accompanying notes to financial statements.
F-6
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
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 June 30, 2003
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-7
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2003
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. In January of 2003, the Company sold the property at a loss of
999.
NOTE 7 - RELATED PARTY TRANSACTIONS
On April 7, 2003 the board of directors approved up to a $35,000 loan to
the President of the Company to be paid back within 24 months and carrying an
interest rate of 6%. As of June 30, 2003, $33,000 was owed with accrued interest
of $249.00.
F-8
COMMERCIAL EVALUATIONS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2002
iii
COMMERCIAL EVALUATIONS, INC.
DECEMBER 31, 2002
CONTENTS
Page
----
Independent Auditor's Report F-9
Financial Statements
Balance Sheet F-10
Statement of Operations F-11
Statement of Stockholders' Equity F-12
Statement of Cash Flows F-13
Notes to Financial Statements F-14
iv
MARK SHERMAN, CPA PROFESSIONAL CORPORATION
601 SOUTH RANCHO DRIVE SUITE D-32
LAS VEGAS, NV 89106-4827
PHONE (702) 645-6318 FAX: (702) 645-1604
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Commercial Evaluations, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Commercial Evaluations,
Inc. as of inception, December 31, 1999, December 31, 2000, December 31, 2001
and December 31, 2002; and the related statement of operations, stockholders'
equity and cash flows from inception through December 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 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 December 31, 2002;
and the results of operations and their cash flows for the period ended December
31, 1999, December 31, 2000, December 31, 2001, December 31, 2002 and inception
to December 31, 2002 in conformity with generally accepted accounting
principles.
/s/ MARK SHERMAN, CPA
----------------------------------
MARK SHERMAN, CPA
PROFESSIONAL CORPORATION
March 11, 2003
F-9
COMMERCIAL EVALUATIONS, INC.
BALANCE SHEET
ASSETS
As of As of As of
12/31/02 12/31/01 12/31/00
CURRENT ASSETS
Cash $ 4,056 $ 12,413 $ 283
Other receivables $ 1,400 $ 0 $ 0
Prepaid Expenses $ 4,787 $ 1,500 -0-
-------- -------- --------
TOTAL CURRENT ASSETS 10,243 $ 13,913 283
FIXED ASSETS
Equipment., Furn. & Fixtures,
net of accum. depr. of $9,178 $ 14,977 -- --
net of accum. depr. of $3,091 -- $ 14,659 --
net of accum. depr. of $1,228 -- -- $ 1,378
OTHER ASSETS
Deposits $ 3,806 $ 2,064 $ -0-
Investment in real estate 43,500 43,500 --
TOTAL OTHER ASSETS $ 47,306 45,564 $ -0-
TOTAL ASSETS $ 72,526 $ 74,136 $ 1,661
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 19,022 $ 3,236 $ 5,836
Commissions Payable 100 4,300 -0-
Note payable 0 1,833 4,730
Current Portion of Lterm debt 400 305 -0-
-------- -------- --------
TOTAL CURRENT LIABILITIES $ 19,522 $ 9,674 $ 10,566
LONG-TERM LIABILITIES
Note Pay, less curr. portion $ 41,959 $ 41,207 -0-
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
Authorized 50,000,000 shares;
Issued and outstanding at
Dec 31, 2000, 2001 and 2002,
500,000 Shares $ 500 $ 500 $ 500
Additional Paid In Capital $ 92,181 $ 92,181 $ 49,500
Retained Earnings (Deficit) ($ 81,636) ($ 69,426) ($ 58,905)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY $ 11,045 $ 23,255 ($ 8,905)
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 72,526 $ 74,136 $ 1,661
======== ======== ========
See accompanying notes to financial statements.
F-10
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF OPERATIONS
June 7, 1994
Jan 1, 2002 Jan 1,2001 Jan 1, 2000 (Inception)
to to to to December
Dec 31, 2002 Dec 31,2001 Dec 31,2000 31, 2002
INCOME
Revenue $ 796,576 $ 336,373 $ 64,119 $ 1,197,068
----------- ----------- ----------- -----------
TOTAL INCOME 796,576 336,373 64,119 1,197,068
EXPENSES
General and Administrative $ 802,699 $ 344,197 $ 121,796 $ 1,268,692
----------- ----------- ----------- -----------
Depreciation and Amortization $ 6,087 $ 2,697 $ 1,228 $ 10,012
----------- ----------- ----------- -----------
TOTAL EXPENSES $ 808,786 $ 346,894 $ 123,024 $ 1,278,704
----------- ----------- ----------- -----------
NET PROFIT (LOSS) ($ 12,210) ($ 10,521) ($ 58,905) ($ 81,636)
=========== =========== =========== ===========
NET PROFIT (LOSS)
PER SHARE ($ 0.02) ($ .02) ($ .12) ($ 0.16)
=========== =========== =========== ===========
AVERAGE NUMBER OF
SHARES OF COMMON
STOCK OUTSTANDING 500,000 500,000 500,000 500,000
=========== =========== =========== ===========
See accompanying notes to financial statements
F-11
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)
Net loss, 12-31-02 -- -- -- ($ 12,210)
-------- -------- -------- --------
Balance, December 31, 2002 500,000 $ 500 $ 92,181 ($ 81,636)
See accompanying notes to financial statements.
F-12
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF CASH FLOWS
Jan 1, 2001 Jan 1, 2001 Jan 1, 2000
to Dec 31, to Dec 31, to Dec 31,
2002 2001 2000
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (Loss) ($12,210) ($10,521) ($58,905)
Gain (Loss) on Sale of Equipment -- -- ( 2,669)
Depreciation 6,087 2,697 1,228
Accounts Receivable dec(inc) ($ 1,400) 0 0
Prepaid expenses increase ($ 3,287) ($ 1,500) 0
Other Assets increase ($ 1,742) ($ 2,064) 0
Accounts Payable (dec)inc $ 15,786 ($ 6,063) 10,566
Other Current liabilies inc (dec) ( 4,525) 6,133 63
CASH FLOWS FROM
OPERATING ACTIVITIES ($ 1,291) ($11,318) ($49,717)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment ($ 6,406) ($15,978) 0
Purchase of Real Estate ( 1,000)
CASH FLOWS FROM
INVESTING ACTIVITIES ($ 6,406) ($16,978) 0
CASH FLOWS FROM
FINANCING ACTIVITIES
Principal payments on notes payable ($ 660) ($ 2,255) 0
Issuance of common stock 500
Additional paid-in capital 0 $42,681 $ 49,500
CASH FLOWS FROM
FINANCING ACTIVITIES ($ 660) $40,426 $ 50,000
Net increase
(decrease) in Cash ($ 8,357) $12,130 $ 283
Cash
Beginning of Period $ 12,413 $ 283 $ 0
Cash
End of Period $ 4,056 $ 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-13
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 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:
6. The Company uses the accrual method of accounting.
7. Earnings per share are computed using the weighted average number of
shares of common stock outstanding.
8. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
9. The Company depreciates its equipment based on the straight line
method over the applicable useful lives of the assets.
10. 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, 2002, December 31, 2001 and December
31, 2000.
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-14
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 for $0.10 per share. 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
32 Section 906 Certification of CEO
32.1 Section 906 Certification of CFO
99.1 Subscription Agreement
99.2 Escrow Agreement
99.3 Nevada Waiver Order
* Contained in ehibit 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.
32
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and 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 August 18, 2003.
Dated: August 18, 2003 COMMERCIAL EVALUATIONS, INC.
By: /s/ Robert Barcelon
--------------------------------
Robert Barcelon
Chairman of the Board,
Director, President,
Chief Executive Officer
and Acting Chief Financial
Officer
Dated: August 18, 2003 By: /s/ Heather Cain
--------------------------------
Heather Cain
Chief Operating Officer
Secretary
Dated: August 18, 2003 By: /s/ Linda Valez
--------------------------------
Linda Valez
Treasurer, Director and
Principal Accounting
Officer
Dated: August 18, 2003 By: /s/ Anne Dean
--------------------------------
Anne Dean
Director
34
Certifications
Certification Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act
of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002:
I, Robert Barcelon, Chief Executive Officer of Commercial Evaluations, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Commercial
Evaluations, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I, as the registrant's other certifying officer, and as Chief Executive
Officer, am in a position responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to me by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report conclusions, as holder of both
positions, about the effectiveness of the disclosure controls and
procedures based on my evaluation, as holder of both positions, as of the
Evaluation Date;
5. As the registrant's other certifying officer, I have disclosed, based on my
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I, as the registrant's other certifying officer, have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of my most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: August 12, 2003
/s/ Robert Barcelon
----------------------------------
Robert Barcelon
Chief Executive Officer and
President
35
Certification Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange
Act*of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002:
I, Robert Barcelon, temporarily acting as Chief Financial Officer of Commercial
*Evaluations, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Commercial
Evaluations, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I, as the registrant's other certifying officer, am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report the conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I, acting as the registrant's other certifying officer, have disclosed, based
on my most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. Acting as the registrant's other certifying officer, I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of the most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: August 12, 2003 /s/ Robert Barcelon
----------------------------------
Robet Barcelon
Acting Chief Financial Officer