UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 2002
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Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number: 333-75272
Commercial Evaluations, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 88-0477246
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2320 Paseo Del Prado, Building B, Suite 205, Las Vegas 89102
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(Address of principal executive offices) (Zip Code)
(702) 866-6029
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
1
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the issuer's classes of common stock
as of the most recent practicable date: 500,000
Commercial Evaluations, Inc.
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Accountant's Review Report 3
Balance Sheets September 30, 2002 (unaudited) 4
Statements of Income For the Three months Ending September 30,
2002 (unaudited) and 2001 (audited), The Nine months Ending
September 30, 2002 (unaudited) And 2001 (audited), and for the
Period From June 7, 1994 (Inception) to June 30, 2002(unaudited) 5
Statement of Stockholders' Equity 6
Statements of Cash Flows For the Nine months
Ending September 30, 2002 (unaudited) and For the
Period Ending September 30, 2001 (audited) 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Plan of Operation 10
PART II - OTHER INFORMATION
Item 6. Exhibits 12
SIGNATURES 13
2
MARK SHERMAN, CPA
316 SOUTH JONES BOULEVARD
LAS VEGAS, NV 89107
PHONE (702) 645-6318 FAX: (702) 645-1604
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ACCOUNTANT'S REVIEW REPORT
Board of Directors
Commercial Evaluations, Inc.
Las Vegas, Nevada
I have reviewed the accompanying balance sheet of Commercial Evaluations,
Inc. (a Nevada Corporation) as of September 30, 2002, and the related statements
of income for the three and nine months ended and inception to September 30,
2002, stockholders' equity from inception to September 30, 2002 and cash flows
for the nine months ended September 30, 2002 in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Commercial Evaluations,
Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding financial
statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that
should be made to the accompanying September 30, 2002 financial statements in
order for them to be in conformity with generally accepted accounting
principals.
The financial statements for the three months ended September 30, 2001 and
the nine months ended September 30, 2001 were audited by me and I expressed an
unqualified opinion on them in my reports dated October 29, 2001 respectively.
\s\ Mark S. Sherman
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Mark S. Sherman
November 14, 2002
3
COMMERCIAL EVALUATIONS, INC.
BALANCE SHEET
JUNE 30, 2002
ASSETS
CURRENT ASSETS
Cash $ 22,775
TOTAL CURRENT ASSETS 22,775
FIXED ASSETS
Equipment, Furn. & Fixtures, net of accum. depr. of $7,336 $ 15,104
OTHER ASSETS
Deposits $ 4,306
Investment in real estate 43,500
TOTAL OTHER ASSETS $ 47,806
TOTAL ASSETS $ 85,685
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 11,841
Note Payable 718
Current Portion of Long-term debt 134
TOTAL CURRENT LIABILITIES $ 12,693
LONG-TERM LIABILITIES
Note Payable, less current portion $ 42,226
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
Authorized 50,000,000 shares;
Issued and outstanding at
September 30, 2002 500,000 shares $ 500
Additional Paid In Capital $ 92,181
Retained Earnings (Deficit) $(61,915)
--------
TOTAL STOCKHOLDERS' EQUITY $ 30,766
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 85,685
========
See accompanying notes to financial statements.
4
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF INCOME
June 7, 1994
Three Months Ended Nine Months Ended (Inception)
Sep 30, Sep 30, Sep 30, Sep 30, to Sep 30,
2002 2001 2002 2001 2002
(unaudited) (audited) (unaudited) (audited)
INCOME
Revenue $193,739 $ 89,053 $554,627 $197,365 $955,119
---------- ---------- -------- --------- ----------
TOTAL INCOME 193,739 89,053 554,627 197,365 955,119
EXPENSES
Gen and Admin $178,757 $ 89,067 $542,871 $211,997 $1,008,864
---------- ---------- -------- --------- -----------
Depreciation and
Amortization $ 1,481 $ 737 $ 4,245 $ 1,731 $ 8,170
---------- ---------- -------- -------- -----------
TOTAL EXPENSES $180,238 $ 89,804 $547,116 $213,691 $1,017,014
---------- ---------- -------- -------- -----------
NET PROFIT (LOSS) $ 13,501 ($ 751) $ 7,511 ($16,363) ($ 61,915)
========== ========== ======== ======== ===========
NET PROFIT (LOSS)
PER SHARE $ 0.03 ($.01) $(.01) $(.03) ($0.12)
========== ========== ======== ======== ==========
AVERAGE NUMBER OF
SHARES OF COMMON
STOCK OUTSTANDING 500,000 500,000 500,000 500,000 500,000
========== ========== ======== ======== ==========
See accompanying notes to financial statements
5
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Nubmer Additional Retained
of Paid In Earnings
Shares Amount Captial (Deficit)
Inception 6-7-94
To 12-31-99 0 0 0 0
-------- -------- ----------- ----------
March 9, 2000
Issued for cash
Net (Loss), 12-31-00 500,000 $500 $49,500 ($58,905)
-------- -------- ----------- ----------
Balance Dec. 31, 2000 500,000 $500 $49,500 ($58,905)
-------- -------- ----------- ----------
Net (Loss), 3-31-01 ($ 191)
Balance March 31, 2001 500,000 $500 $49,500 ($59,096)
-------- -------- ----------- ----------
Shareholder contributed capital $34,697
Net (Loss), 6-30-01 ($15,347)
-------- -------- ----------- ----------
Balance June 30, 2001 500,000 $500 $84,197 ($74,443)
Shareholder contributed capital 6,635
Net loss, 9-30-01 ($ 825)
-------- -------- ----------- ----------
Balance September 30, 2001 500,000 $500 $90,832 ($75,268)
Shareholder contributed capital $ 1,349
Net income, 12-31-01 5,842
-------- -------- ----------- ----------
Balance, December 31, 2001 500,000 $500 $92,181 ($ 69,426)
Net income, 9-30-02 7,511
-------- -------- ----------- ----------
Balance, September 30, 2002 500,000 $500 $92,181 ($ 61,915)
See accompanying notes to financial statements.
6
COMMERCIAL EVALUATIONS, INC.
STATEMENT OF CASH FLOWS
Nine Months Ended
September 30,
2002 2001
(unaudited) (audited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (Loss) $ 7,511 ($16,363)
Gain (Loss) on Sale of Equipment - -
Depreciation 4,245 1,731
Prepaid expenses decrease(increase) $ 1,500 ($ 2,975)
Other Assets (increase) ($ 2,242) ($ 2,064)
Accounts Payable increase(decrease) $ 8,605 ($10,548)
Other Current liabilities(dec)inc ($ 4,300) $ 3,100
CASH FLOWS FROM
OPERATING ACTIVITIES $15,319 ($27,119)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment ($ 4,690) ($10,192)
CASH FLOWS FROM
INVESTING ACTIVITIES ($ 4,690) ($10,192)
-0-
CASH FLOWS FROM
FINANCING ACTIVITIES
Principal payments on notes payable ($ 267) ($ 867)
Issuance of common stock
Additional paid-in capital $41,332
CASH FLOWS FROM
FINANCING ACTIVITIES ($ 267) $40,465
Net increase
(decrease) in Cash $10,362 $ 3,154
Cash
Beginning of Period $12,413 $ 283
Cash
------- --------
End of Period $22,775 $ 3,437
======= ========
Supplemental Disclosure of cash flow information:
See accompanying notes to financial statements.
7
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICIES
The Company was incorporated June 7, 1994 under the laws of the State of
Nevada. The Company was organized to engage in any lawful activity. The
corporation was originally organized under the name of ZXS Corporation and on
February 29, 2000 changed its name to Commercial Evaluations, Inc.
The Company's accounting policies and procedures are as follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share are computed using the weighted average number of
shares of common stock outstanding.
3. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
4. The Company depreciates its equipment based on the straight line
method over the applicable useful lives of the assets.
5. The Company's fiscal year end is December 31st.
NOTE 2 - CASH
For the Statements of Cash Flows, all highly liquid investments with
maturity of three months or less are considered to be cash equivalents. There
were no cash equivalents as of September 30, 2002 and September 30, 2001.
NOTE 3 - COMMON STOCK
On March 9, 2000 500,000 shares of $.001 par value stock was issued in
exchange for $50,000.
NOTE 4- BUSINESS AGREEMENT
The Company has an agreement with a Mortgage funding entity whereby the
Company provides mortgage loans to this funding company and the funding company
in turn processes and funds the mortgage loans. Substantially all of the
revenues generated by the Company are derived from this Mortgage funding entity.
Upon the closing of any mortgage loan a loan fee is paid to the Company for the
providing of the loan, usually 1% of the loan but it may vary depending on the
credit worthiness of the customer.
NOTE 5-LEASE AGREEMENTS
The Company entered into a 3 year lease of its facilities beginning
September 1, 2001. The agreement calls for 5 monthly payments starting with
October 1, 2001 at $1,474.40 and then $6,000 to be prorated for the remainder of
the lease with (8%) interest. The rent for months 7-12 calls for base rent of
$2,228.66 plus the prorated amount. The lease calls for annual increases of 5
cents per square foot.
8
8
COMMERCIAL EVALUATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
NOTE 5-LEASE AGREEMENT (CONT'D)
The future minimum lease commitments are as follows:
2001-2002 25,687
2003 30,724
2004 26,391
On January 28, 2002 the Company entered into a 30 month lease of additional
facilities. The agreement calls for 30 monthly payments fixed at $2,242.35 per
month.
The future minimum lease commitments are as follows:
2002 22,423
2003 26,908
2004 17,938
NOTE 6-NOTE PAYABLE-REAL ESTATE
On November 15, 2001 the Company purchased a condominium for $1,000 and assumed
the existing first and second deed of trust on this property. The purchase price
was $43,500 and the notes totaled $43,500 of which the $1,000 was used as a down
payment. The first deed of trust assumed was for $35,598.82 at 13% with payments
of $400.49 per month until paid in full. The second deed of trust assumed was
for $7,901.18 at 13% with payments of $85.60 per month until paid in full. The
current portion of long-term debt on this note is $134. On November 20, 2001 the
Company entered into an agreement to rent out this property for $600.00 per
month. Rental income included in revenues for the nine months ended September
30, 2002 and for the year ended December 31, 2001 of $2,647.00 and $800.00
respectively.
On November 26, 2001 the Company entered into a sale agreement with the existing
renter for above said property contingent upon the buyer securing adequate
financing. The sale price was $65,500 with an escrow closing date on or before
July 31, 2002. As of May 2002 the tenant waived his right to exercise the
purchase of the property.
NOTE 7-RECOGNITION OF REVENUE/COMMISSIONS EXPENSE-
An Officer of the Company in his capacity as one of the sales representatives
has an agreement with the Company to receive 100% of his commissions related to
the loans that he personally closes. Included in revenues for the year ended
December 31, 2001 were $146,709 of sales that were also accrued as commissions
payable to the Officer.
9
Item 2. Management's Discussion and Plan of Operation
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.
Results of Operations
We generated $554,627 in revenues for the nine-month period ended September
30, 2002. This continues a trend of generally increasing quarterly mortgage loan
closings since June 1, 2000.
Total operating expenses for the nine months ended September 30, 2002 were
$547,116. Total operating expenses for the period ended September 30, 2002 were
entirely related to general and administrative expenses and depreciation and
amortization expense.
We incurred total general and administrative expenses for the nine-month
period ended September 30, 2002 totaling $542,871. Our general and
administrative expenses were primarily incurred from the cost of operating our
office and salaries for our employees. Depreciation expense for the nine-month
period ended September 30, 2002 was $4,245. This represents depreciation on the
assets of the Company.
10
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.
Liquidity and Capital Resources
Cash at the end of September 30, 2002 was $22,775, which was $22,094 more
than cash at the beginning of the period. Minimal office equipment was purchased
for new loan officers added during the period. Liquidity is expected to be
sufficient to provide for additional equipment. No major expenditures are
anticipated. The Board of Directors elected to conduct a secondary 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.
As of September 30, 2002, we recognized $554,627 in revenue with an
operating gain of $7,511. Management believes that we will be able to fund
ongoing fiscal 2002 operations with cash on hand, however, we will need to begin
to generate increasing revenues or raise additional capital to fund our
operations to provide for our working capital needs within the next 12 to 24
months.
11
PART II - OTHER INFORMATION
Item 6. Exhibits
Exhibit
Number Name and/or Identification of Exhibit
3 Articles of Incorporation & By-Laws
(a) Articles of Incorporation of the Company filed June 7,
1994. Incorporated by reference to the exhibits to the
Company's General Form For Registration Of Securities Of
Small Business Issuers on Form SB-2, previously filed with
the Commission.
(b) By-Laws of the Company adopted February 29, 2000.
Incorporated by reference to the exhibits to the Company's
General Form For Registration Of Securities Of Small
Business Issuers on Form SB-2, previously filed with the
Commission.
99 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
12
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Commercial Evaluations, Inc.
----------------------------
(Registrant)
Date: November 14, 2002
By: /s/ Robert Barcelon
--------------------------------
Robert Barcelon, President
13
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report of Commercial Evaluations, Inc. (the
"Company") on Form 10-QSB for the period ending September 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Robert Barcelon, President of the Company, certify to the best of our
knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Robert Barcelon
-----------------------------------
Robert Barcelon, President
November 14, 2002
14
Exhibit 99.2
MARK SHERMAN, CPA
316 SOUTH JONES BLVD.,
LAS VEGAS, NV 89107
Phone (702) 645-6318 Fax: (702) 645-1604
Email: MarkSSherman@MSN.com
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November 14, 2002
I consent to the use of my report dated November 14, 2002, in the Form 10-QSB,
on the financial statements of Commercial Evaluations, Inc., dated September 30,
2002, included herein and to the reference made to me.
Sincerely,
/s/ Mark Sherman
- -------------------------------
Mark Sherman
15