SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the quarter ended September 30, 2003
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file #: 333-75272
COMMERCIAL EVALUATIONS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-04777246
------------------------------ ----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2610 South Jones Boulevard, Suite No. 3, Las Vegas, NV 89146
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (702) 866-6029
Securities registered pursuant to Section 12(b) of the Act:
Common Stock $0.01 Par Value NONE
-------------- ---------------------
(Title of Class) (Name of Each Exchange
on Which Registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $0.001 Par Value NONE
-------------- ---------------------
(Title of Class) (Name of Each Exchange
on Which Registered)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. (1) Yes X No (2) Yes X No
----- ----- ----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-QSB or any amendment to
this Form 10-QSB.
At September 30, 2003 there were 500,000 shares of common stock outstanding. The
aggregate market value of the common stock held by non-affiliates of the
registrant (i.e., excluding shares held by executive officers, directors and
control persons as defined in rule 405).
Documents incorporated by reference: None.
PART I
Item 1. Business
Our primary business is to arrange mortgage loans for consumers for the purchase
of residential real estate.
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.
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 5% of all of our
loans with the other 95% 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.
2
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.
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
(3) referrals from previous borrowers. We will also market its loan and services
by means of direct mail and newspaper advertising.
We plan to continue to 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 have increased 15% on an
annualized basis in 2002. Statistics are not yet available for 2003.
Employees
The Company is run by three directors and officers. They are assisted by two
clerical workers and a manager. At the end of the third quarter, there were 30
loan brokers.
Competition
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.
3
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity & Related Stockholder Matters
(a) Market Information
(1) (i) None
(ii) Not applicable
(iii)Not applicable
(iv) Not applicable
(v) Not applicable
(2) (a) Not applicable
(b) Holders
(1) Title of Class Number of Record Holders
Common Stock, Approximately 3
$0.01 Par Value
(2) Not applicable
(c) Dividends
(1) There have never been any dividends declared by the Registrant. (2)
Registrant's losses do not currently indicate the ability to pay cash
dividends.
Item 6. Selected Financial Data
4
Three Months Ended September 30,
2003 2002
---- ----
Selected Income Statement Data:
Revenues $309,267 $193,739
Net profit (loss) $ 10,781 $ 13,501
Net profit (loss) per share $ 0.02 $ 0.03
Weighted shares outstanding 500,000 500,000
Nine Months Ended September 30,
2003 2002
---- ----
Selected Income Statement Data:
Revenues $914,723 $554,627
Net profit (loss) $ 41,718 $ 7,511
Net profit (loss) per share $ 0.08 $ 0.01
Weighted shares outstanding 500,000 500,000
Selected Balance Sheet Data:
Total assets $ 81,041
Long-term liabilities $ 0
Total stockholders' equity $ 52,763
5
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
This quarterly report 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 quarterly report, 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.
General
The predecessor company to Commercial Evaluations, Inc., (CEI) was organized as
a Nevada corporation as ZXS, Inc. on June 7, 1994. The name was changed on
February 29, 2000. We operate as a net branch of a mortgage bank operating under
a Nevada exemption, NRS 645E.15(6)(a). Under the net branch agreement with
SkoFed Mortgage Funding Corporation, we pay rent or a fee on each loan closed.
We are responsible for payment of all costs attributed to the operation and
receive a net check at the close of each transaction. Our primary function will
be to arrange mortgage loans for consumers for the purchase of residential real
estate in the short-term (currently and for the next 12 months). In the
long-term, however, wholesale mortgage-banking services, construction lending
brokering services and commercial loan brokering services will also be offered.
6
Third Quarter Ended September 30, 2003
We generated $309,267 in revenues for the three-month period ended Septemberr
30, 2003 compared with $193,739 in the prior year's third quarter. This
continues a trend of generally increasing quarterly mortgage loan closings since
June 1, 2000.
Total operating expenses for the three months ended September 30, 2003 were
$298,486 compared with $180,238 in the third quarter of the prior year and were
entirely related to general and administrative expenses and depreciation and
amortization expense. Operating expenses were almost entirely attributed to
general and administrative expenses for the three-month period ended September
30, 2003 and the similar 2002 period. These expenses were primarily incurred
from the cost of operating our office and salaries for employees and a greatly
increased number of loan brokers compared with the prior year's period.
Depreciation expense for the three-month period ended September 30, 2003 was
$1,544 compared with $1,481 in the prior year's third quarter. This represents
depreciation on the assets of the Company.
Nine Months Ended September 30, 2003
We generated $914,723 in revenues for the nine-month period ended September 30,
2003 compared with $554,627 in the prior year's first three quarters.
Total operating expenses for the nine months ended September 30, 2003 were
$873,005 compared with $547,116 in the first nine months of the prior year and
were entirely related to general and administrative expenses and depreciation
and amortization expense. Operating expenses were almost entirely attributed to
general and administrative expenses for the nine-month period ended September
30, 2003 and the similar 2002 period. These expenses were primarily incurred
from the cost of operating our office and salaries for employees and agreatly
increased number of loan brokers compared with the prior year's period.
Depreciation expense for the nine-month period ended September 30, 2003 was
$5,234 compared with $4,245 in the prior year's first nine months. This
represents depreciation on the assets of the Company.
Item 8. Financial Statements
Financial statements are filed with this report as pages F-1 through F-6.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There were no changes or disagreements with accountants on accounting and
financial disclosures.
7
PART III
Item 10. Directors and Executive Officers
The following sets forth the name, age and position held of each director and
officer of Commercial Evaluations, Inc.:
Pursuant to the Bylaws, each director shall serve until the annual meeting of
the shareholders, or until his or her successor is elected and qualified. The
Company's basic philosophy mandates the inclusion of directors who will be
representative of management, employees and the minority shareholders of the
Company. Directors may only be removed for "cause". The term of office of each
officer of the Company is at the pleasure of the Company's board.
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
8
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.
Item 11. Executive Compensation
All compensation received by Officers of our company is 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 80%
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.
Robert Barcelon earned $16,847 in salary and commissions in the third quarter of
2003 compared with $12,900 in salary in the third quarter of 2002. As of the
July 1, 2003, Mr. Barcelon's salary was increased to $8,300 per month. Heather
Cain earned $3,200 in commissions in the third quarter of 2003 and $0 in
commissions in the third quarter of 2002. Linda Velez earned $0 commissions in
the third quarter of 2003 and $0 commissions in the third quarter of 2002.
Heather Cain is compensated for loan processing services for us. Heather Cain is
also an employee of SkoFed Mortgage as a Loan Processor. She receives and income
from SkoFed, independent of that from Commercial Evaluations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Capital Contributions
The principal shareholders have contributed $50,000 in capital contributions for
their 500,000 shares of stock.
Loans Guaranteed by Principals
None.
Related Party Transactions
On April 7, 2003 the Board of Directors approved a $35,000 loan to President
Robert Barcelon. The 24-month loan bears an interest rate of 6%. As of September
30, 2003, $27,000 was owed with accrued interest of $1,072.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of September 30, 2003, 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:
9
Table I - Common Stock
----------------------
Name and Address Number of Shares of Percentage
of Beneficial Owner Common Stock Owned(1)(2) of Ownership
- - -------------------- ------------------------- ------------
Class Owner
COMMON DESERT PROFESSIONAL
SERVICES, INC. (1) 450,000 90%
4160 S. Pecos Rd, #20
Las Vegas, NV 89121
COMMON LINDA VELEZ 50,000 10%
300 E. Coast Hwy, #93
Newport Beach, CA 92660
TOTAL OWNED BY THE DIRECTORS AND
OFFICERS AS A GROUP 500,000 100%
(1) Desert Professional Services is owned by Anne Dean, Director of Commercial
and Robert Barcelon President and Director of Commercial Evaluations.
(2) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition) with
respect to a security whether through a contract, arrangement, understanding,
relationship or otherwise. Unless otherwise indicated, each person indicated
above has sole power to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable community property laws.
PART IV
Item 14. Exhibits, Financial Statements and Reports on Form 8-K
(a) Financial statements are filed with this report as pages F-1 through F-6.
(b) Reports on form 8-K
None
(c) Exhibits
31.1 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
31.2 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
32.1 Certifications Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certifications Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
10
SIGNATURES
Commercial Evaluations, Inc.
NAME & POSITION
By: /s/ Robert Barcelon Date: November 14, 2003
------------------------------- -----------------------
Robert Barcelon
Chief Executive Officer, President
And as Acting Chief Financial Officer
11
COMMERCIAL EVALUATIONS, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
COMMERCIAL EVALUATIONS, INC.
SEPTEMBER 30, 2003
CONTENTS
Page
Accountant's Review Report F-1
Financial Statements
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
MARK SHERMAN CPA 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 September 30, 2003 and the related statements
of income for the three and nine months ended and inception to September 30,
2003, stockholders' equity from inception to September 30, 2003, and cash flows
for the nine months ended September 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 September 30,2003 financial statements in order for
them to be in conformity with generally accepted accounting principals.
/s/ Mark S. Sherman
- -----------------------------
Mark S. Sherman
November 14, 2003
F-1
COMMERCIAL EVALUATIONS, INC.
BALANCE SHEET
September 30, 2003
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 30,008
Accounts Receivable 4,200
Note Receivable 28,072
Prepaid Expenses 5,159
TOTAL CURRENT ASSETS 67,439
FIXED ASSETS
Equipment., Furn. & Fixtures, net of accum. depr.of $11,433 $ 9,296
OTHER ASSETS
Deposits 4,306
TOTAL OTHER ASSETS 4,306
TOTAL ASSETS $ 81,041
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 20,098
Other accrued liabilities 8,180
TOTAL CURRENT LIABILITIES 28,278
LONG-TERM LIABILITIES 0
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
Authorized 50,000,000 shares;
Issued and outstanding at
September 30,2003 500,000 shares 500
Additional Paid In Capital 92,181
Retained Earnings (Deficit) (39,918)
--------
TOTAL STOCKHOLDERS' EQUITY 52,763
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 81,041
========
See accompanying notes to financial statements
F-2
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF INCOME
Three Months Ended NineMonths Ended June 7, 1994
------------------------- ------------------------- (Inception)
Sept 30, Sept 30, Sept 30, Sept 30, to Sept 30,
2003 2002 2003 2002 2003
INCOME
Revenue $ 309,267 $ 193,739 $ 914,723 $ 554,627 $ 2,111,791
----------- ----------- ----------- ----------- -----------
TOTAL INCOME 309,267 193,739 914,723 554,627 2,111,791
EXPENSES
Gen and Admin $ 296,942 $ 178,757 $ 867,771 $ 542,871 $ 2,136,463
----------- ----------- ----------- ----------- -----------
Depreciation and
Amortization $ 1,544 $ 1,481 $ 5,234 $ 4,245 $ 15,246
----------- ----------- ----------- ----------- -----------
TOTAL EXPENSES $ 298,486 $ 180,238 $ 873,005 $ 547,116 $ 2,151,709
----------- ----------- ----------- ----------- -----------
NET PROFIT (LOSS) $ 10,781 $ 13,501 $ 41,718 $ 7,511 ($ 39,918)
=========== =========== =========== =========== ===========
NET PROFIT (LOSS)
PER SHARE $ 0.02 $ .03 $ .08 $ .01 ($ 0.08)
=========== =========== =========== =========== ===========
AVERAGE NUMBER OF
SHARES OF COMMON
STOCK OUTSTANDING 500,000 500,000 500,000 500,000 500,000
=========== =========== =========== =========== ===========
See accompanying notes to financial statements
F-3
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock
--------------
Number Additional Retained
of Paid In Earnings
Shares Amount Capital (Deficit)
-------- -------- -------- --------
Inception 6-7-94
To 12-31-99 0 0 0 0
-------- -------- -------- --------
March 9, 2000
Issued for cash 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, 9-30-03 -- -- -- $ 41,718
-------- -------- -------- --------
Balance, September 30, 2003 500,000 $ 500 $ 92,181 ($39,918)
See accompanying notes to financial statements.
F-4
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF CASH FLOWS
Nine Months Ended September 30,
2003 2002
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income $ 41,718 $ 7,511
Gain (Loss) on Sale of Real Estate ( 999) --
Gain (Loss) on Disposal of Equipment (1,846) --
Depreciation 5,234 4,245
Accounts Receivable dec (inc) (2,800) 0
Notes Receivable (27,000) 0
Prepaid expenses decrease(increase) ( 372) 1,500
Other Assets (increase) ( 500) ( 2,242)
Accounts Payable increase(decrease) 5,171 8,605
Other Current liabilities inc(dec) 6,605 ( 4,300)
CASH FLOWS FROM
OPERATING ACTIVITIES 25,211 15,319
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment (1,398) ( 4,690)
Proceeds from sale of real estate 2,262 --
CASH FLOWS FROM
INVESTING ACTIVITIES 864 ( 4,690)
CASH FLOWS FROM
FINANCING ACTIVITIES
Principal payments on notes payable ( 123) ( 267)
CASH FLOWS FROM
FINANCING ACTIVITIES ( 123) ( 267)
Net increase
(decrease) in Cash 25,952 10,362
Cash
Beginning of Period 4,056 $ 12,413
Cash -------- --------
End of Period $ 30,008 $ 22,775
======== ========
Supplemental Disclosure of cash flow information:
See accompanying notes to financial statements.
F-5
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
September 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-6
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
September 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 September 30, 2003, $27,000 was owed with accrued
interest of $1072.50.
NOTE 8 - SUBSEQUENT EVENT
On October 31, 2003 the company moved its facilities and is in the process of
terminating its other two facility leases. The landlord has verbally agreed to
release the company from any liability associated with those leases as the new
facilities are being occupied under the same landlord. As of the date of this
report the landlord and the Company are in negotiations as to the terms of the
new lease. Until the terms are finalized the company is leasing on a month to
month basis 2,900 square feet at $1.65/square foot or $4,785/month.
F-7