U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1 TO
FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934
COMMERCIAL CONCEPTS, INC.
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(Name of Small Business Issuer in Its Charter)
Utah 87- 0409620
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
324 South 400 West, Suite B, Salt Lake City, Utah 84101
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(Address of Principal Executive Offices) (Zip Code)
(801) 328-0540
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
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(Title of Class)
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PART I
ITEM 1. THE BUSINESS OF THE COMPANY.
Commercial Concepts, Inc., (the "Company") has made forward-looking
statements in this Form 10-SB. Forward-looking statements are statements
regarding the Company's "belief," "anticipation," "desire," "plan,"
"expectations," etc. Such statements are subject to risks and uncertainties. The
forward-looking statements include information about future results of the
Company's operation and are made with the understanding that actual future
results and events will vary, perhaps significantly, from the beliefs,
anticipation, plans, desires and expectations of the Company at the present
time.
History and Development of the Company
The Company was incorporated in the State of Utah on March 1, 1984. The
Company was originally organized to engage in the milling and recovery of
precious minerals. In November 1997, the Company's last milling and recovery
asset, an option to acquire mining property, expired. As a result, the Company
changed its business focus by acquiring the rights to certain software developed
to fix computer date recognition problems associated with the year 2000 ("Y2K").
The Company acquired computer equipment and hired software developers to refine
and further develop the program. The software tests the internal clock found in
personal computers each time the computer is turned on to determine if the date
is correct. If the date is incorrect, the software permits the user to correct
the date on a one-time basis or automatically each time the user turns-on the
computer. The Company holds a registered copyright for such software which it
began marketing in April, 1998. The software is sold at Fedco Drug Stores,
Navarro Supermarkets, and through Tiger Direct, a mail order catalog that has a
circulation of over 1,000,000. The software is also marketed on the Company's
web site. There are a number of other software products, including Check It 98,
2000 Tool Box, Year 2000 Now, Norton 2000, and Check 2000 PC, that are marketed
by larger companies with more resources and a better marketing network than the
Company. Because of its late entry into the market and lack of name recognition
and a limited marketing network, the Company's sales of the Y2K software have
been insignificant and are expected to disappear by the end of the year 2000.
Nevertheless, the computer equipment acquired and software developers
hired by the Company to develop the Y2K software provided the means for the
Company to become a software development and technology company. Building on
this foundation, the Company hired a new President and Chief Executive Officer
in February, 1999, a new Executive Vice President in July, 1999 and a new Chief
Financial Officer in August, 1999. In addition, in June, 1999, the Company
acquired 100% of the stock of Advice Productions, Inc. a graphic design company
specializing in customized video marketing and training tools. The assets and
technology of Advice Productions enables the Company to create customized
compact discs.
Products and Services
The Company's primary focus is on the development of "canned" software
programs. The Company's primary source of revenue, however, presently comes from
the development of
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customized software and products for clients. Customized software development
permits the Company to generate revenues from research and development. The
Company's programmers develop customized software programs to meet specific
needs such as data entry and retrieval, multi media, and information
dissemination. The Company generally retains all rights, title and interest in
the customized software it develops, including source codes, with the
expectation that the Company will revise and improve such programs so the
programs can be "canned" and sold to other customers. The Y2K software program
is the only canned software program marketed by the Company at the present time.
The Company, however, is developing several additional software products.
Electronic Brochures. Using photos, logos, advertising and other
information provided by clients, and templates it has designed, the Company
creates customized presentations and advertising on mini-compact discs. The
compact discs are designed to replace traditional printed advertising and
brochures, and even business cards. The compact discs come in a variety of
designs (the most common of which is a disc the size of a business card) and can
be uniquely packaged for each client. Because the Company uses a pre-designed
template, the compact discs can be created at an affordable cost of between
$3,000 and $5,000. The average price of compact discs from the Company's local
competitors is approximately $10,000. The Company's lower production costs give
it a strategic advantage. The Company is currently developing software that will
permit clients to create their own presentations using the software thereby
further reducing production costs. However, there can be no guarantee that the
software will be developed, or if developed, that it will not be obsolete when
complete, or that it will be accepted by the public.
Medical Imaging Software. The Company is presently under contract with
Intermountain Health Care ("IHC") to develop medical imaging software to capture
images generated by equipment used in medical procedures such as ultra-sound,
catheter cameras, MRI's, and CAT scans. The software, which is currently being
beta tested in nine operating rooms at IHC's Cottonwood Hospital, is designed to
store images generated during medical procedures on a computer network. The
software permits physicians and administrators to access and notate the images
during or after the procedure from any computer on the network. The software
also reduces the storage space required to maintain the images. The Company has
by contract with IHC retained all rights, title and interest in and to the
software except that the Company has agreed to license IHC to use the software
in up to 30 operating rooms at no additional cost. The Company has filed a
patent application to protect the source code. The Company expects beta testing
to be completed by January 30, 2000. The Company then expects to market the
software to other hospitals and medical professionals nationwide. The Company is
aware of only one direct competitor, Smith & Nephew Dionics, Inc., which markets
a product that stores medical images on a floppy disk and is not compatible with
many networks. Unlike Smith & Nephew Dionics' program, the Company's software is
a cross-platform system that works on most networks or as a stand-alone product
and stores the data directly on a hard drive.
Screen Saver Technology. The Company has developed technology for an
interactive screen-saver for which a patent is pending. The screen saver
technology permits network administrators to place any image they choose on the
computer screen and to change or update the images as often as they desire. The
screen saver software is also interactive. A link to a web site or a document
can be placed on the screen saver to connect users to the advertised site if the
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user clicks on the link. The screen saver also monitors when the screen saver
appears and who is logged on to the computer when it appears and records the
information for marketing purposes. The Company expects to generate revenues
from one-time licensing, advertising and annual maintenance fees.
The Company believes that there are several uses for this software.
First, businesses can use the screen saver to disseminate information and
control what employees have on their computer screens when they are not in use
since the program records when the screen saver appears. Second, schools and
other organizations can use the program to raise funds from advertising as well
as to disseminate information. Based on initial market research advertisers are
paying 2(cent) per impression per day for banner advertisements. The Company
believes, although it has conducted limited research to determine, that
advertisers will pay at least 1(cent) per impression for screen saver
advertising.
The Company faces competition in the screen saver market from numerous
competitors, some of whom have greater resources than the Company and technology
presently in the market that permits network administrators to place any image
they choose on the computer screen and to change or update the images as often
as they desire. To the knowledge of the Company, none of screen saver software
in the market is interactive. To be exact, none of the existing screen saver
software keeps a record of when the screen saver appears and who is logged on
the computer when the screen saver appears, nor does such software permit links
to be placed on the screen saver. The Company believes the interactive features
of its screen saver software program will give it a competitive advantage.
However, there can be no assurance that the Company will be first to market with
this technology, that its patent application will be approved or that there will
be sufficient public interest to successfully market the software.
Video Conferencing Technology. The Company has developed technology to
compress video images transmitted over telephone lines thus reducing the
bandwidth and therefore the time required for transmission. High-speed
transmission of high-resolution video images presently requires a bandwidth of
approximately 124 Kbs. The video conferencing equipment required to handle such
bandwidth can be expensive, ranging from between $10,000 to $100,000. By
compressing the bandwidth less sophisticated and less costly equipment can be
used for video conferencing. A third party is presently using the Company's
technology to operate video conferencing facilities in Guatemala City and Miami,
Florida. The Company anticipates the opening of additional video conferencing
centers in the year 2000. The Company is continuing to develop its video
conferencing technology in hopes of reducing the cost of video conferencing to
an amount comparable to the cost of a telephone call.
Subsidiaries
Advice Productions. Advice Productions, Inc. is a wholly owned
subsidiary of the Company, which was acquired in June of 1999. Advice
Productions facilitated the production of customized multi-media presentations
by bringing customers and production facilities together. Advice Productions is
dormant at the present time.
Merchanttranders, Inc. Merchanttranders, Inc. is a wholly owned
subsidiary of the Company. Merchanttranders was organized in February 1999, as
an e-commerce business to offer goods and services to the general public and
members on a web site located at www.merchanttranders.com.
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Merchanttranders members are expected to receive discounts on all products and
services sold plus benefits like discounts on hotels, rental cars and airfares.
The general public is not expected to receive discounts or benefits.
Merchanttranders' primary source of revenues is expected to come from selling
memberships. Merchanttranders is negotiating with manufacturers and suppliers to
advertise and sell their products and services on-line and hopes to commence
operations by mid-2000.
Sales and Marketing
The Company has two full-time sales persons, but expects to rely on
wholesale distributors and sales persons with established distribution networks
and contacts to market its products as they are developed. Such persons or
organizations will be paid on a commission basis.
Employees
As of January 31, 2000, the Company had 14 full and part-time
employees. None of the Company's employees are represented by a union or other
collective bargaining group. Management believes its relations with its
employees are good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
General
Effective March 1, 1998, the Company began earning revenues and was no
longer classified as a development stage company.
Results of Operations
Nine Months Ended November 30, 1999 Compared to the Nine Months Ended
November 30, 1998.
Sales increased by $156,269 or 247%, to $219,555 for the nine months
ended November 30, 1999 from $63,286 for the comparable period in 1998. This
increase was primarily a result of sales of customized software and computer
products for clients. Costs of sales increased from $16,926 to $65,483 as the
result of the increased sales.
Marketing and selling expenses decreased by $10,497 or 49%, to $10,771
for the nine months ended November 30, 1999 from $21,268 for the comparable
period in 1998. This decrease was a result of focusing our sales efforts for
Quick Fixx 2000(R) on the domestic market and only paying commissions and
royalties on product that was actually bought and paid for. The Company expects
its marketing and selling expenses to increase as it increases its marketing and
selling efforts as it acquires or develops additional technology products and
services.
General and administrative expenses increased by $304,580 or 172%, to
$481,715 for the nine months ended November 30, 1999 from $177,135 for the
comparable period in 1998. This increase was a result of an increase in the
number of employees and consultants employed by the Company as well as
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legal expenses. The Company expects that such expenses will continue to increase
as the Company's operations expand and continue to develop.
The Company did not incur research and development expenses for the
nine months ended November 30, 1999, nor in the comparable period in 1998. The
Company's practice is to develop future products from the customized software it
develops. Its research and development expenses are therefore substantially paid
for by customers who retain the Company to develop customized software programs.
The Company typically retains all rights to the software it develops.
During the nine months ended November 30, 1999, the Company incurred
$5,512.83 of expenses in connection with the settlement of a lawsuit by Rex
Pitcher, a shareholder, against the Company based upon the sale by a former
officer of the Company of stock of the Company held by that officer to Mr.
Pitcher. The former officer allegedly made promises and incurred obligations
that he could not legally fulfill.
Fiscal Year Ended February 28, 1999 Compared to the Fiscal Year Ended
February 28, 1998.
For the first time in its operating history, the Company generated
revenue from sales in fiscal year 1999. The amount of such revenue was $64,557.
This was a result of sales of Quick Fixx 2000(R) software. Costs of such sales
equaled $31,336.
Although the Company did not generate revenue until fiscal year 1999,
it did incur marketing and selling expenses in the prior fiscal year. Marketing
and selling expenses increased by $35,999 or 720%, to $40,999 for the fiscal
year ended February 28, 1999 from $5,000 for the fiscal year ended February 28,
1998. This increase was the result of increased marketing efforts. The Company
expects to continue to increase its marketing and selling efforts as it acquires
or develops additional technology products and services and as the current
products are taken to market.
General and administrative expenses increased by $313,820, or 671%, to
$360,571 for the 1999 fiscal year end from $46,751 for the 1998 fiscal year end.
This increase was a result of an increase in the number of employees and
consultants employed by the Company as well as legal expenses. The Company
expects that such expenses will continue to increase as the Company's operations
expand, but at a slower rate, as the Company continues to develop.
There were no research and development costs in fiscal year 1999.
Liquidity and Capital Resources
At February 28, 1999, the Company had cash and other current assets of
$94,535 as compared to cash and other current assets of $6,106 at February 28,
1998. The increase of $88,429 was primarily due to a private placement of the
Company's common stock pursuant to Rule 504 of Regulation D promulgated under
the Securities Act of 1933 (the "1933 Act") and an increase in revenues from
sales. The increase was partially offset by increased general and administrative
costs and payments on debt obligations. As of February 28, 1999, the Company had
no long-term debt obligations.
The Company generated $155,000 from the private placement of 700,000
shares of common stock in March of 1999. The Company also borrowed $15,000 from
an individual and an additional
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$10,000 from a second individual, neither of whom are shareholders of the
Corporation, in August of 1999 pursuant to promissory notes, at the rate of 10%
per annum with each note being respectively due and payable on August 12, 2000
and August 16, 2000. From August 26, 1998 to November 28, 1998 the Company
raised a total of $310,000 from a private placement of its common stock.
ITEM 3. PROPERTIES.
The Company conducts its business operations at 324 South 400 West,
Suite B, Salt Lake City, Utah, where it has approximately 7,105 square feet of
office space under lease through February 29, 2004. Under the terms of the
lease, the Company pays $6,051 per month, which amount increases by 4% annually.
There is no renewal option under the terms of this lease. The Company, however,
has an option to purchase the office building in which its offices are located
for $800,000. The option expires on October 31, 2000. Management of the Company
believes that it will either be able to negotiate a new lease on its existing
space or obtain suitable other space in the Salt Lake City area upon the
expiration of the existing lease.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of February 22, 2000 by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Company's common shares; (ii) each of the Company's directors; (iii) each
executive officer of the Company; and (iv) all the directors and executive
officers as a group (4 persons). As of February 22, 2000, the Company had
23,866,330 shares of common stock issued and outstanding.
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES OWNED CLASS
George E. Richards Jr.* 2,147,500(1) 9.00%
1992 S. Chokecherry
Bountiful, Utah 84010
Scott G. Adamson* 2,121,750(2) 8.89%
2485 S. Elaine Dr.
Bountiful, Utah 84010
Ron Poulton Trustee of Tech Trust 2,236,000 9.37%
136 E. South Temple, Suite 1700-A
Salt Lake City, Utah 84111
_____________________________
1 The shares were issued to Richards & Associates, Inc., a Utah
corporation, of which Mr. Richards is the sole shareholder, on May 5,
1999, as described in Item 7 - Related Party Transactions.
2 Shares were acquired by Mr. Adamson on August 9, 1999 as described in
Item 7 - Related Party Transactions.
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Wilfred R. Blum* 1,541,337(3) 6.46%
1756 E. Wasatch Blvd.
Sandy, Utah 84092
Larry D. Rogers* 1,069,300 4.48%
1985 No. 1120 West
Provo, Utah 84604
Lombardi Research Foundation 4,000,000(4) 16.76%
47 East 400 South
Salt Lake City, UT 84111
Karl Hansen* 50,000 .02%
225 W. 300 S. #A308
SLC, UT 84101
*All Officers and Directors as
a Group of 5 persons) 6,929,887 29.04%
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PARTNERS AND CONTROL PERSONS.
The following table sets forth the name, office and age of each officer
and director of the Company:
Name Title Age
---- ----- ---
George E. Richards, Jr. Chairman, President & CEO 37
Wilfred R. Blum Director 46
Scott G. Adamson Executive Vice President and Director 43
Larry D. Rogers Vice President and Director 43
Karl Hansen Chief Financial Officer and Director 46
George E. Richards, Jr. has served as Chief Executive Officer and a
director of the Company since March 1, 1999. Mr. Richards may be elected to
successive terms of office. Since June, 1996 Mr. Richards has served as the
President and a director of Richards & Associates, Inc., a financial consulting
firm of which Mr. Richards is the sole shareholder. From May, 1993 to June,
1996, Mr. Richards was
________________________
3 Consists of 941,337 shares held by Blum, Inc., a Utah corporation, of
which Mr. Blum is a controlling shareholder, 300,000 shares held by
Laura Blum, 100,000 shares held by Amber Blum, 100,000 shares held by
Karli Blum, 100,000 shares held by Kerri Blum (all immediate family of
Mr. Blum) and 500,000 options to purchase common stock of the company
at an exercise price of $ 0.104 per share, which the Company agreed to
issue to Mr. Blum on December 15, 1999.
4 Shares were acquired by Lombardi Research Foundation in September of
1999 as described in Item 7 - Related Party Transactions. 1 Salary paid
in stock. On January 25, 1999, the Company issued 1,600,000 shares of
common stock valued at $.06 per share to Mr.
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employed by The Goldenberg Group, Inc., a division of Plygem, Inc. Mr. Richards
attended Cal State Fullerton.
Scott G. Adamson has served as an Executive Vice President and a
director of the Company since July, 1999. Mr. Adamson may be elected to
successive terms of office. Since 1986, Mr. Adamson has served as the President
and a director of SGA Financial Group, Inc, a financial company which he founded
to provide project and debt financing, and currency conversion services. From
1981 to 1986, Chase Manhattan Bank employed Mr. Adamson in its Latin America
division as a 2nd Vice President. Mr. Adamson received a Bachelors of Science in
Business Administration from Weber State University in 1979 and a Masters of
International Management from the American Graduate School of International
Management in 1981.
Larry D. Rogers has served as a Vice President and a director of the
Company since June, 1999. Mr. Rogers may be elected to successive terms of
office. From 1986 to June, 1999, Mr. Rogers served as the President and a
director of Advice Productions, Inc., a production company developing video and
multimedia marketing and training tools, which he founded and which was acquired
by the Company in June 1999. From 1984 to 1986, Mr. Rogers was employed as an
advertising account executive by Barenz & Associates, a Salt Lake City based
advertising agency, where he produced video and graphical marketing products for
clients. From 1980 to 1984, Mr. Rogers was employed first as the sales manager
and then as the general manager of KEYY Radio. Mr. Rogers received a Bachelors
of Arts in communications with emphasis in marketing and advertising from
Brigham Young University in 1980.
Wilfred R. Blum has served as a director since November, 1997. From May
1998 through February, 1999, Mr. Blum served as President and Chief Executive
Officer of the Company. Mr. Blum is a licensed real estate agent and has been
employed by Butch Johnson Reality as a land developer since 1996. Mr. Blum
attended the Northern Alberta Institute of Technology.
Karl Hansen has served as Chief Financial Officer and Director since
February, 2000. He is a Certified Public Accountant. From June 1999 to February
2000 Mr. Hansen served as a consultant with RHI Management Resources, providing
financial consulting services to an Internet related company. From December 1997
to May 1999, Mr. Hansen served as CFO of East European Imports, Inc., a
Miami-based importation company. From December 1987 to 1997, Mr. Hansen served
as CFO of American Pacific Mining Company and Jordex Resources, Inc., which were
related international mining corporations. Mr. Hansen received in 1975 a
Bachelor of Science degree in Management from Rensselaer Polytechnic Institute
and a Bachelor of Science degree in Accounting from the Rochester Institute of
Technology, awarded in 1977.
During the past five years, none of the officers and/or directors of
the Company, nor any of the affiliates or promoters of the Company filed any
bankruptcy petition (except for Karl Hansen, who filed a bankruptcy petition in
January, 1998), have been convicted in or been the subject of any pending
criminal proceedings, or the subject of any order, judgment or decree involving
the violation of any state or federal securities laws. There is no unresolved
significant litigation outstanding against the Company or its officers and/or
directors
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ITEM 6. EXECUTIVE COMPENSATION.
The Company does not have a bonus, profit sharing, or deferred
compensation plan. The following sets forth a summary of cash and non-cash
compensation for each of the last three fiscal years ended February 28, 1999,
1998 and 1997, with respect to the Company's former and current Chief Executive
Officer. No executive officer of the Company has earned a salary greater than
$100,000 annually for any of the periods depicted.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
======================== ===============================
Annual Compensation long-term Compensation
Awards
- ------------------------------------ ----------- ---------- ------------- ----------------- ------------- --------------------
Name and Fiscal Salary Bonus Restricted Options/ All Other
Principal Position Year ($) ($) Stock SARs Compensation
Award(s) (#) ($)
($)
- ------------------------------------ ----------- ---------- ------------- ----------------- ------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Wilfred Blum 1999 96,000(1) -0- -0- -0- -0-
Former Chief Exec. Officer 1998 -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0-
- ------------------------------------ ----------- ---------- ------------- ----------------- ------------- --------------------
George E. Richards, Jr. 1999 $10,000(2) -0- -0- -0- -0-
Current Chief Exec. Officer 1998 -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0-
==================================== =========== ========== ============= ================= ============= ====================
</TABLE>
OPTION GRANTS TO CERTAIN EXECUTIVE OFFICERS
The Company did not issue any stock options during the last completed
fiscal year ended February 28, 1999.
ITEM 7. RELATED PARTY TRANSACTIONS.
The information set forth herein describes certain transactions between
the Company and certain affiliated parties. Future transactions, if any, will be
approved by a majority of the disinterested members of the Company's Board of
Directors and will be on terms no less favorable to the Company than those that
could be obtained from unaffiliated parties.
Ron Poulton, the trustee of Tech Trust, a shareholder owning more than
five percent of the outstanding shares of stock of the Company, rendered legal
services to the Company from 1985 to November, 1999. Legal fees and expenses
paid or payable to Mr. Poulton in the nine month period ended
____________________________
1 Salary paid in stock. On January 25, 1999, the Company issued 1,600,000
shares of common stock valued at $.06 per share to Mr. Blum.
2 Salary paid in stock. On February 3, 1999, the Company issued 50,000
shares of comon stock to Mr. Richards valued at $.20 per share.
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November 30, 1999 totaled $28,988 and totaled $57,862 and $5,700 for the fiscal
years ended February 28, 1999 and 1998, respectively.
On January 27, 1999, the Company reached an agreement with Mr. Wilfred
Blum a director of the Company to repay to Mr. Blum $52,000 of reimbursements
and other expenses allegedly owed him by the Company and to recover certain
stock which Mr. Blum caused the Company to issue without board approval.
Pursuant to the terms of the agreement, Mr. Blum conveyed 315,000 shares of
common stock to the Company and the Company permitted Mr. Blum to retain 500,000
shares of common stock in return for the release of any and all his claims
against the Company, including the $52,000 reimbursement claim.
On December 23, 1999, the Company issued 147,500 shares of common stock
to Richards & Associates, Inc., a Utah corporation, of which Mr. George E.
Richards, Jr., the President and Chief Executive Officer of the Company, is the
sole shareholder, 123,750 shares to Scott Adamson, its Executive Vice President,
69,300 shares to Larry D. Rogers, its Vice President, and an aggregate of
134,500 shares to all other employees as year-end employment bonuses.
In August of 1999 the Company reached an oral agreement with
Cybercenters International, Inc. ("Cybercenters"), a principal shareholder of
which is Scott Adamson, an Executive Vice President of the Company, to acquire
all of the issued and outstanding stock of Cybercenters after February 28, 2000.
As part of the transaction, the Company issued 342,000 shares of stock to three
shareholders of Cybercenters in consideration for an oral agreement by such
persons to pay an aggregate of $18,642 to the company. Mr. Adamson was issued
2,198,000 shares of common stock in consideration of an oral agreement to pay
$131,880 to the Company. The foregoing obligations are not due and payable until
the stock is sold. The Company has agreed to accept all the issued and
outstanding shares of Cybercenters in lieu of the oral obligations after
February 28, 2000. No interest accrues on the obligations.
In July of 1999, Richards & Associates, Inc., a Utah corporation, of
which Mr. Richards is the sole shareholder, and Wilfred Blum, a director of the
Company, each pledged 2,000,000 shares of stock personally held by them (for an
aggregate amount of 4,000,000 shares) to Lombardi Research Foundation to secure
a short-term loan to the Company in the amount of $30,000. The proceeds of the
loan were used to finance a business development trip to China and to purchase
assets for the Company. The loan was to be repaid on or before August, 1999.
When the loan was not repaid by August, 1999, Lombardi Research Foundation
caused all 4,000,000 shares to be transferred to it pursuant to a security
agreement. The shares pledged by Richards & Associates to secure the loan were
issued to it on May 5, 1999 as described below. The shares pledged by Mr. Blum,
however, were issued to Mr. Blum by the Company's transfer agent at Mr. Blum's
request without the approval of the Company's Board of Directors. Since all of
the proceeds of the loan were used for the Company's benefit, on December 23,
1999, the Company issued 2,000,000 shares of common stock to Richards &
Associates to replace the shares that were transferred to Lombardi. The Company
did not issue replacement shares to Mr. Blum. The Company has also implemented
certain procedures to prevent the issuance of stock without the approval of the
Company's Board of Directors.
On May 5, 1999, the Company issued 2,000,000 shares of common stock to
Richards & Associates, Inc., a Utah corporation, of which the current Chief
Executive Officer and President, George E. Richards, Jr., is the sole
shareholder, in consideration of an oral agreement to pay the Company
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$120,000. The obligation is not payable until the shares of stock are sold and
no interest accrues on the obligation.
The Company paid Albert Fretz, who at the time of the transaction was
an officer of the Company, a royalty fee of $6,750 for the year ended February
28, 1999 to purchase the proprietary rights to the Quick Fixx 2000 software.
On January 25, 1999, the Company issued 2,000,000 shares of restricted
common stock valued at $.06 per share, for a total amount of $120,000 to Wilfred
Blum, a director of the Company and its former Chief Executive Officer and
President. Of the shares issued, 1.6 million shares or $96,000 worth of stock
was issued for services rendered to the Company during the fiscal year ended
February 28, 1999, and 400,000 shares or $24,000 worth of stock was issued to
repay cash advances to the Company. On or about July, 1999, the Company loaned
$12,340 to Mr. Blum. No note has been executed for this advance. The loan does
not bear interest. The Company's management expects the loan to be repaid in
calendar year 2000.
On February 3, 1999, the Company issued 50,000 shares of restricted
common stock valued at $.20 per share, for a total amount of $10,000 to Richards
& Associates, Inc., a Utah corporation, of which Mr. George E. Richards, Jr.,
the current Chief Executive Officer and President of the Company, is the sole
shareholder, for services rendered by Mr. Richards to the Company during the
fiscal year ended February 28, 1999.
On November 25 and December 2, 1998, the Company issued a total of
234,100 shares of restricted common stock valued at $.22 per share to D. Welker,
who at the time of the transaction was an officer of the Company, to repay
previous net unpaid cash advances to the Company of $51,500.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000
shares of common stock, $.001 par value per share. The holders of common stock
are entitled to one vote for each share held of record on all matters to be
voted on by stockholders. The holders of common stock are entitled to receive
such dividends, if any, as may be declared from time to time by the Board of
Directors in its discretion from funds legally available therefore. Upon
liquidation or dissolution of the Company, the holders of common stock are
entitled to receive, pro rata, assets remaining available for distribution to
stockholders. The common stock has no cumulative voting, preemptive or
subscription rights and is not subject to any future calls. There are no
conversion rights or redemption or sinking fund provisions applicable to the
shares of common stock. All outstanding shares of common stock are fully paid
and nonassessable.
12
<PAGE>
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock was traded on the NASDAQ Bulletin Board
until October 20, 1999, when quotation was transferred to the National Quotation
Bureau's "Pink Sheets" pursuant to NASD Eligibility Rule 6530 issued on January
4, 1999, which provides that issuers who do not make current filings pursuant to
Sections 13 and 15(d) of the Securities and Exchange Act of 1934 are ineligible
for listing on the NASDAQ Bulletin Board. Accordingly, there is currently a
limited market for the Company's shares. The Company expects to apply to be
listed on the NASDAQ Bulletin Board again upon the effectiveness of this
registration statement.
The following table sets forth the high and low bid prices for shares
of the Company's common stock for the periods noted, as reported by the National
Daily Quotation Service and the NASDAQ Bulletin Board. Quotations reflected
inter-dealer prices, without mark-up, markdown or commission and may not
represent actual transactions. There was no trading of the Company's common
stock prior to the second quarter of the 1999 fiscal year, which commenced.
Bid Prices
Fiscal Year Period High Low
----------- ------ ---- ---
Feb. 28, 2000 Current Period 0.445 0.15
Third Quarter 0.20 0.06
Second Quarter 0.54 0.04
First Quarter 1.25 0.13
Feb. 28, 1999 Fourth Quarter 1.40 0.08
Third Quarter 2.98 1.25
Second Quarter 3.00 2.50
As of February 15, 2000, the Company had 23,866,330 shares of its
common stock issued and outstanding, and there were 313 record stockholders. As
of the date hereof, the Company has not paid or declared any cash dividends. The
Company can give no assurance that it will generate future earnings from which
cash dividends can be paid. Future payment of dividends by the Company, if any,
is at the discretion of the Board of Directors and will depend, among other
criteria, upon the Company's earnings, capital requirements, and its financial
condition as well as other relative factors. Management has followed the policy
of retaining any and all earnings to finance the development of the business.
Such a policy is likely to be maintained as long as necessary to provide working
capital for the Company's operations.
ITEM 2. LEGAL PROCEEDINGS
The Company knows of no litigation now pending or threatened against it
or involving any of its properties or contract rights.
13
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On August 31, 1999, Commercial Concepts, Inc. (the "Company")
terminated its independent auditor relationship with David T. Thomson, P.C.
("Thomson").
Thomson's report on the financial statements of the Company for the
fiscal year ended February 28, 1998, did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. The Thomson report for the fiscal year
ended February 28, 1998, contained a statement as to the ability of the Company
to continue as a going concern. Other than the foregoing, there were no adverse
opinions or disclaimers of opinion, or qualifications or modifications as to
uncertainty, audit scope or accounting principles.
During the fiscal years ended February 28, 1997, 1998 and 1999, and the
period March 1, 1999 through August 31, 1999, there were no disagreements with
Thomson on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures or any reportable events.
On September 5, 1999 the Company engaged Fitzgerald Sanders, LLC
("Fitzgerald") as its independent auditors to audit and report on the financial
statements of the Company for the fiscal year ended February 28, 1999, which had
not yet been audited.
The decision to change accountants was approved by the Company's Board
of Directors. The Company authorized Thomson to respond fully to Fitzgerald's
inquiries concerning the Company.
Prior to engaging Fitzgerald, neither the Company nor anyone acting on
its behalf consulted with Fitzgerald regarding the application of accounting
principles to any specified transaction or the type of audit opinion that might
be rendered on the Company's financial statements. In addition, during the
Company's fiscal years ended February 28, 1999 and 1998, and during the period
March 1, 1999 through August 31, 1999, neither the Company nor anyone acting on
its behalf consulted with Fitzgerald with respect to any matters that were the
subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K)
or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On or about February 3, 2000, the Company reached an agreement with a
private investor to issue 500,000 restricted common shares for $75,000, payable
in three installments of $25,000 each. To-date the Company has received $50,000.
The 500,000 restricted common shares will be issued upon receipt of the
remaining $25,000 installment. The shares were issued in reliance on Section
4(2) of the 1933 Act.
On or about December 28, 1999, the Company issued 475,050 shares of
common stock to its employees, including each of its officers, as a year-end
bonus for their services. The shares were issued in reliance on Section 4(2) of
the 1933 Act.
On or about October 10, 1999, the Company issued 400,000 shares to
Manoj Associates, LLC, a Colorado limited liability company for $12,000. The
shares were issued in reliance on Rule 504 of Regulation D promulgated under the
1933 Act.
14
<PAGE>
On or about July 19, 1999, the Company issued 370,000 shares to four
persons it hired as employees or consultants as bonuses. The shares were issued
in reliance on Section 4(2) of the 1933 Act.
On or about June 15, 1999, the Company issued 1,000,000 shares to
acquire the stock of Advice Productions, Inc. The shares were issued in reliance
on Section 4(2) of the 1933 Act.
On or about May 1, 1999, the Company sold 2,000,000 shares of common
stock to an officer of the Company for $120,000. The transaction was exempt from
Registration pursuant to Section 4(2) of the 1933 Act.
From March 1, 1999 to date, the Company has sold 1,500,000 shares to
unaffiliated investors in reliance on Rule 504 of Regulation D promulgated under
the 1933 Act for $191,000.
From August 26, 1998 to October 31, 1998 the Company sold a total of
1,221,000 shares to unaffiliated investors for $310,800 in reliance on Rule 504
of Regulation D promulgated under the 1933 Act. Proceeds were used to fund
Company operations.
On or about August 31, 1997 the Company issued 400,000 shares of its
common stock to an unaffiliated third party to acquire sand and gravel rights in
200 acres of property located in Tooele, Utah. The stock was issued pursuant to
Rule 504 of Regulation D promulgated under the 1933 Act.
During fiscal years 1998 & 1997 certain officers, directors and
stockholders of the Company contributed capital to the Company in the amount of
$16,000 and $24,058 respectively no stock was issued in return for this
contribution.
In February 1998, the Company sold 2,500 shares of common stock for
$5,000 and issued 100,000 shares valued at par value ($100) in conjunction with
obtaining a software marketing rights for the original version of Quick Fixx
2000. The stock was issued in reliance on Rule 504 of Regulation D promulgated
under the 1933 Act.
During February 1997, the Company issued 200,000 shares of its common
stock to an individual at par value for payment of services rendered to the
Company. The shares were issued in reliance on Section 4(2) of the 1933 Act.
During February 1997, 98,000 shares of common stock of the Company were
issued in exchange for $197,705. The stock was issued in reliance on Rule 504 of
Regulation D promulgated under the 1933 Act.
Commencing on May 1, 1996 for a period of approximately sixty days, the
Company issued 92,050 shares of common stock to unaffiliated third parties for
$460,250 under Regulation D and similar exemptions from registration under the
laws of various states.
On or about April 29, 1996 the Company issued 4,000,000 common shares
at par value to persons who had performed services for the Company. The shares
were issued in reliance on Section 4(2) of the 1933 Act.
15
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is required pursuant to the Utah Revised Business
Corporation Act to indemnify its officers and directors from liability to the
extent that such officer or director is successful in defense of any
proceedings. The Articles of Incorporation and Bylaws of the Company do not
alter this statutory protection or provide any additional protection from
liability. Under the Utah Revised Business Corporation Act the Company may
purchase and maintain insurance on behalf of any director of officer against any
liability asserted against him and incurred by him in any capacity.
PART F/S
The Company's financial statements for the years ended February 28,
1999 and 1998 and for the nine months ended November 30, 1999 (unaudited) are
attached to this Registration Statement.
PART III
ITEMS 1 AND 2. INDEX AND DESCRIPTION OF EXHIBITS
2.1 Articles of Incorporation*
2.2 Bylaws*
6.1 Lease Agreement, dated November 10, 1999*
6.2 Office Building Lease, dated February 18, 1999*
6.3 First Amendment to Office Building Lease, dated October 5,
1999*
6.4 Agreement to Develop Software, dated 7/27/99*
10.1 Consent of Fitzgerald Sanders, LLC
10.2 Consent of David T. Thomson, P.C.
* Incorporated by reference from Registration Statement on Form 10-SB,
as filed on January 13, 2000.
16
<PAGE>
SIGNATURES
In accordance with the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
COMMERCIAL CONCEPTS, INC.
Date: February 23, 2000 By: /s/George E. Richards
---------------------
Name: George Richards, Jr.
Title: President and Chief
Executive Officer
17
<PAGE>
COMMERCIAL CONCEPTS, INC.
FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
FEBRUARY 28, 1999, 1998 AND 1997
WITH ACCOUNTANTS' REPORT THEREON
F-1
<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders
of Commercial Concepts, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheet of Commercial Concepts, Inc. (a
Utah corporation) as of February 28, 1999 and the related statements of
operations, stockholders' equity, and cash flows for the year then ended. 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. The financial statements and supplementary information of Commercial
Concepts, Inc. as of February 28, 1998 and 1997, were audited by other auditors
whose report dated March 11, 1998, on those statements included an explanatory
paragraph that described a substantial doubt about the Company's ability to
continue as a going concern due to losses from operations and limited working
capital discussed on Note 4 to the financial statements.
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 examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also 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 financial statements referred to above present fairly, in
all material respects, the financial position of Commercial Concepts, Inc. as of
February 28, 1999, and the results of their operations and their cash flows for
the year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements as of February 28, 1999, have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 4 to the financial statements, the Company has suffered
recurring losses from operations and has limited working capital. The factors
raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 4. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Fitzgerald Sanders
Salt Lake City, Utah
December 21, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
BALANCE SHEETS
February 28, 1999 and 1998
ASSETS 1999 1998
-------------- --------------
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 77,695 $ 721
Deposits - 5,385
Due from officer 12,340 -
Inventory 4,500 -
-------------- --------------
Total current assets 94,535 6,106
-------------- --------------
EQUIPMENT
Equipment 38,033 26,202
Less: accumulated depreciation (7,213) (1,010)
-------------- --------------
Net property and equipment 30,820 25,192
-------------- --------------
OTHER ASSETS
Software marketing rights 100 100
-------------- --------------
TOTAL ASSETS $ 125,455 $ 31,398
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 55,661 $ 9,100
Franchise taxes payable - 905
Stockholders' loans payable - 2,975
-------------- --------------
Total Current Liabilities 55,661 12,980
-------------- --------------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value, 50,000,000 shares
authorized, 9,136,280, and 4,803,403 shares issued and
outstanding, respectively 9,136 4,803
Additional paid-in capital 1,231,580 727,338
Accumulated Deficit (1,170,922) (713,723)
-------------- --------------
Total Stockholders' Equity 69,794 18,418
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 125,455 $ 31,398
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF OPERATIONS
Years Ended February 28, 1999, and 1998 and 1997
1999 1998 1997
------------ ------------ -------------
REVENUES:
<S> <C> <C> <C>
Sales $ 64,657 - -
------------ ------------ -------------
Total Revenues 64,657 - -
Less cost of goods sold 31,336 - -
------------ ------------ -------------
Gross Profit 33,321 - -
------------ ------------ -------------
EXPENSES
General and Administrative expenses 360,571 46,751 204,617
African project-funds transferred
to other members of venture - 43,357 35,025
Services provided for common stock 121,275 - -
Bad Debts - - 198,000
Depreciation 6,203 24,421 9,333
Loss on building reconveyance and
equipment abandonment - 83,600 -
------------ ------------ -------------
Total Expenses 488,049 198,129 446,975
------------ ------------ -------------
NET LOSS FROM OPERATIONS (454,728) (198,129) (446,975)
------------ ------------ -------------
OTHER INCOME (EXPENSE)
Miscellaneous income - 1,244 2,010
Interest income 159 19 806
Interest expense (2,630) - (75)
------------ ------------ -------------
NET LOSS $ (457,199) (196,866) (444,234)
============ ============ =============
LOSS PER SHARE $ (.08) (0.04) (.12)
============ ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended February 28, 1999, and 1998 and 1997
Common Stock Capital in
------------ Excess of Accumulated
Shares Amount Par Value Deficit
------ ------ --------- -------
<S> <C> <C> <C> <C>
BALANCE, February 28, 1996 310,880 $ 311 63,936 (72,623)
Contributed Capital, August 31, 1996 - - 15 -
Issuance of common stock for services at
$.001 per share, April 1996 4,000,000 4,000 - -
Issuance of common stock for cash at
$5.00 per share at various dates
during the period 92,050 92 460,158 -
Contributed capital, September and
October and January, 1997 - - 24,043 -
Issuance of common stock for services at
par value $.001 per share, February, 1997 200,000 200 - -
Issuance of common stocks for cash at
approximately $2.02 per share, February 1997 98,000 98 197,607 -
Direct Costs of common stock offering
and common stock issuance - - (39,419) -
Net loss for the year ended,
February 28, 1997 - - - (444,234)
--------- ------ ------- --------
Balance, February 28, 1997 4,700,930 $4,701 706,340 (516,857)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY Years
Ended February 28, 1999, and 1998 and 1997 (Continued)
Common Stock Capital in
------------ Excess of Accumulated
Shares Amount Par Value Deficit
------ ------ --------- -------
<S> <C> <C> <C> <C>
BALANCE, February 28, 1997 4,700,930 $4,701 706,340 (516,857)
Issuance of shares for software and
documentation at par value ($.001)
February 1998 100,000 100 - -
Contributed capital, January and
February, 1998 - - 16,000 -
Issuance of common stock for cash at
$2.00 per share, February, 1998 2,500 2 4,998 -
Net loss for the year ended
February 28, 1998 - - - (196,866)
--------- ------ --------- -----------
BALANCE, February 28, 1998 4,803,430 $4,803 727,338 (713,723)
Issuance of common stock for cash at
various dates during the year 1,221,000 1,671 315,500 -
Issuance of common stock for services at
various dates during the year 2,475,000 2,000 114,150 -
Issuance of common stock for
repayment of officer advances at
various dates during the year 639,000 662 74,592 -
Net loss for the year ended
February 28, 1999 - - - (457,199)
--------- ------ --------- ------------
Balance, February 28, 1999 9,138,430 $9,136 1,231,580 (1,170,922)
========= ====== ========= ===========
</TABLE>
The Accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC
STATEMENT OF CASH FLOWS
Years Ended February 28, 1999 and 1998
1999 1998 1997
------------- ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) from current operations $ (457,199) $ (196,866) $ (444,234)
Items not requiring current cash flows: - - -
Services paid in stock 121,275 - 4,200 -
Decrease in officer loans paid in stock 28,929 - -
Depreciation 6,203 24,421 9,333
Loss on building reconveyance - 83,600 -
Assets conveyed to individuals as
compensation - 21,092 -
Changes in assets and liabilities
(Increase) in deposits 5,385 (5,385) -
(Increase) in due to officer - - (1,750)
(Increase) in receivable - - (175,000)
Increase in bad debt allowance - - 175,000
(Increase) in inventory (4,500) - -
(Increase) in receivable bad debt
allowance - - -
(Increase) in promissory note - - (20,000)
Increase in promissory note bad debt
allowance - - 20,000
(Increase) decrease in stock sales
receivable - 30,023 (30,023)
(Decrease) increase in accounts payable 46,561 8,382 (7,098)
(Decrease) increase in accrued liabilities - (7,488) 7,488
Increase (decrease) in franchise taxes (905) 100 245
------------- ------------- --------------
Net Cash Flows used in Operating Activities (254,251) (42,121) (461,839)
------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of building and equipment (11,831) (7,850) (405,788)
------------- ------------- --------------
Net Cash Flows used in Investing (11,831) (7,850) (405,788)
------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from sale of stock and capital
contributions 311,800 21,000 682,013
Cost of stock sales and stock offerings - - (39,419)
Stockholder loans 31,256 4,725 250,000
------------- ------------- --------------
Net Cash Flows from Financing Activities 343,056 25,725 892,594
------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF CASH FLOWS (Continued)
Years Ended February 28, 1999, and 1998 and 1997
1999 1998 1997
------------- ------------- --------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH $ 76,974 (24,246) 24,967
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 721 24,967 -
------------- ------------- --------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 77,695 721 24,967
============= ============= ==============
SUPPLEMENTAL INFORMATION:
CASH PAID FOR:
Interest $ 2,630 - 75
============= ============= ==============
Income taxes $ 100 100 100
============= ============= ==============
NON CASH TRANSACTIONS
Shares issued to pay for services $ 121,275 - 4,200
============= ============= ==============
Shares conveyed to officers for loan
repayments $ 28,929 21,092 -
============= ============= ==============
Shares issued for software and documentation $ - 100 -
============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-8
<PAGE>
AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
Our report on our audit of the basic financial statements of Commercial
Concepts, Inc. for 1999 appears on page 2. That audit was conducted for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The supplementary Schedule of General and Administrative Expenses is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
statements taken as a whole. The supplementary information of Commercial
Concepts, Inc. as of February 28, 1998, was audited by other auditors whose
report dated March 11, 1998, expressed an unqualified opinion on that
supplementary information.
Salt Lake City, Utah
December 21, 1999
F-9
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS INC.
Schedule of General and Administrative Expense
Years Ended February 28, 1999, and 1998 and 1997
1999 1998 1997
---------- --------- ----------
<S> <C> <C> <C>
Accounting $ 6,353 4,880 1,445
Bank Charges 2,091 622 1,074
Taxes and licenses 1,798 - 210
Consulting fees 16,090 26,211 78,183
Education and seminars - 64 747
Postage and deliveries 1,058 - 227
Salaries and wages 131,765 - 23,000
Insurance - - 850
Investor relations - 1,292 7,491
Janitorial - - 933
Laboratory supplies - - 6,216
Legal 57,862 5,700 -
Maintenance and repairs 3,385 81 208
Marketing 40,999 5,000 -
Meals and entertainment - - 1,711
Office lease - 1,340 -
Office supplies 8,346 78 5,016
Rental equipment - - 1,063
Subcontractors - - 3,160
Tools 1,755 424 233
Telephone 21,348 105 9,468
Travel 24,751 594 -
Rent 31,247 - 3,622
Utilities 859 250 2,758
Other Expenses 10,864 10 914
State franchise tax 100 100
African Project
Travel - - 21,281
Supplies and equipment - - 28,750
Shipping and freight - - 5,957
---------- --------- ----------
Total general and administrative expense $ 360,571 46,751 204,617
========== ========= ==========
</TABLE>
F-10
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999 AND 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Business Operations The Company develops, markets and supports multimedia
software, information technology for customers' computer based applications, and
development of telecommunications retail locations for the general public.
Development Stage Classification - Commercial Concepts, Inc. was incorporated in
the state of Utah on March 1, 1984. Until February 28, 1998, the Company has
been defined as a development stage company because it had not commenced planned
principal operations and did not have operational revenues, but only sold its
common stock to the public. In November 1997, the Company experienced a change
in its Board of Directors and management. Under the new management the Company
has been engaged in the purchasing of computer software products and in
marketing and distributing them, and effective March 1, 1998, has been an
operating company not subject to development stage company disclosures.
Revenue Recognition - Revenue consists primarily of sales of software and
information technology for customers' computer based applications. Revenue is
recognized upon sale. The Company provides technical support at no charge to
customers, generally no technical assistance beyond installation support is
required.
Provision for income taxes - No provision for income taxes has been made in the
financial statements due to operating losses. The State of Utah franchise taxes
have been included in operating expenses in the statements of operations. Income
tax expense includes federal and state taxes currently payable and deferred
income taxes arising from temporary differences between income for financial
reporting and income tax purposes. These differences result principally from
depreciable assets where different methods of depreciation are used and the
allowances for bad debt which is not deductible for income tax purposes.
Due to operating losses no provision for deferred income taxes has been made.
Cash Equivalents - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Inventories - Inventories are stated at the lower of cost or market on a
first-in, first-out basis and consist of packaged software and related packaging
supplies.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-11
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FEBRUARY 28, 1999 AND 1998
Equipment - The cost of equipment is depreciated over the estimated useful lives
of the related assets. The cost of leasehold improvements is depreciated
(amortized) over the lesser of the length of the related leases or the estimated
useful lives of the assets. Depreciation is computed on the straight-line method
for financial reporting purposes and on the MACRS method for income tax
purposes.
Income Taxes - Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
lialilities.
Concentrations of Credit Risk - The Company develops and markets multimedia
software, information technology for computer based applications. In the course
of such activities, the Company will extend credit to customers located
principally in the Intermountain West. However, the Company is involved in E
commerce with potentially national and global markets and customers.
NOTE 2 - PUBLIC OFFERING OF COMMON STOCK
At inception, the Company offered and sold 1,000,000 shares of its authorized
but unissued stock to the public. An offering price of $.10 per share was
determined by the Company. There are no options or warrants outstanding to
acquire the stock of the Company as of February 28, 1999.
In May 1996, the Company commenced a private offering of common stock pursuant
to an exemption from registration under Regulation D of the Security and
Exchange Commission. 92,050 shares were sold and a total of $460,205 in capital
was raised.
Since inception the Company has privately sold for cash and exchanged common
stock for services and property at various times.
NOTE 3 - SOFTWARE DEVELOPMENT COSTS
The Company has capitalized the acquisition cost of Quick Fix 2000, a Y2K fix,
but no other software costs have been capitalized. The Company's policy is to
expense research and development costs until technological feasibility is
reached and all related research and development activities are completed,
subsequent production expenses to bring the product to market are then
capitalized. Capitalization of software costs is discontinued when the product
is available for general release to customers. No amortization of capitalized
software costs has been included in the accompanying statements of operations.
NOTE 4 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained substantial
losses. In addition, the Company has used almost all of its working capital and
has stockholders' deficits from inception, which raise substantial doubt as to
the Company's ability to continue as a going concern.
F-12
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FEBRUARY 28, 1999 AND 1998
NOTE 4 - GOING CONCERN, CONTINUED
In view of these matters, continued existence of the Company is dependent upon
its ability to develop working capital and to attract equity investment, in
order to meet current and future creditors' demands and to attain future
profitable operations. In order to develop additional working capital and
attract continued equity investment the Company has reorganized management,
formulated a new business plan, and developed and marketed new business
products. Management believes that the actions presently being taken will
provide the opportunity for the Company to continue as a going concern.
NOTE 5 - INCOME TAXES
During the year ended February 28, 1998, temporary differences giving rise to
deferred tax assets and liabilities consisted of bad debt allowance reported
differently for tax purposes and financial reporting and excess of depreciation
for tax purposes over the amount for financial reporting purposes.
Deferred tax assets and deferred tax liability comprise the following at
February 28, 1998:
1999 1998
---- ----
Deferred tax asset:
Bad debt allowance $ - 66,300
Net operating loss carryforwards
340,550 85,102
------- ------
340,550 251,402
Deferred tax liability
Excess tax depreciation - (1,305)
------- ------
Net deferred tax benefit before allowance 340,550 250,097
Valuation (340,550) (250,097)
------- -------
Federal and state net deferred tax benefit $ 0 0
========= =======
For federal and state purposes the Company has unused not operating loss carry
forwards to offset future taxable income which expire as follows:
Year Ending
February 28 Federal State
----------- ------- -----
2000 $43,418 3,763
2001 8,617 1,364
2001 14,355 249,924
2007 548 221,790
2008 115 457,099
2009 123 -
2010 3,863 -
2011 1,464 -
2012 250,024 -
2013 221,890 -
2019 457,199 -
------- -------
$1,001,616 933,940
========== =======
F-13
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FEBRUARY 28, 1999 AND 1998
NOTE 6 - SUBSEQUENT EVENTS
On June 10, 1999, the Company acquired all the outstanding stock of Advice
Productions, Inc. The acquisition has been accounted for as a purchase. The
total purchase price was $200,000, paid in 1,000,000 shares of restricted
Company common stock valued at $.20 per share. The Company received accounts
receivable, equipment, and liabilities, but the purchase price exceeded the fair
value of net assets received by $200,000, which excess will be recorded as
goodwill in the financial statements. Simultaneous with the acquisition, the
Company entered into a five year employment contract with the principal of the
seller, which set forth, among other matters, the manner in which compensation
will be computed, and also allowed for bonuses and profit sharing. Advice
Productions, Inc. was previously operated as a sole proprietorship, but
incorporated immediately prior to the acquisition, and therefore had no
corporate operations to be combined with Company operations. The operations of
Advice Productions, Inc. from the date of the acquisition will be included with
subsequent Company operations in any subsequent financial statements of the
Company.
Effective March 1, 1999, the Company accepted the resignations of Wilfred R.
Blum as President, David Welcker as Vice President, and Albert E.S. Fretz as
Vice President. The Board of Directors appointed George Richards as the new
President, and appointed Wilfred. S. Blum as Secretary Treasurer. On September
14, 1999, the Board accepted the resignation of Wilfred R. Blum as Secretary
Treasurer, and appointed V. Kelly Randal as Secretary Treasurer. Wilfred R. Blum
will continue as a member of the Board of Directors.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has transactions with certain stockholders and officers who receive
compensation paid in the form of wages, royalties and consulting fees.
The Company paid an officer a royalty fee of $6,750 for the year ended February
28, 1999.
On January 25, 1999, the Company issued 2,000,000 shares of restricted common
stock to an officer valued at $.06 per share, for a total amount of $120,000.
$96,000 was recorded as services for the year ended February 28, 1999, and
$24,000 was a repayment for previous cash advances to the Company. As of
February 28, 1999, the officer owed the Company $12,340. No note has been
executed for this advance. Company management expects this will be repaid in the
following fiscal year.
On February 3, 1999, the Company issued 50,000 shares of restricted common stock
to a Company officer valued at $.20 per share, for a total amount of $10,000,
which was recorded as services for the year ended February 28, 1999.
On November 25 and December 2, 1998, the Company issued a total of 234,100
shares of restricted common stock valued at $.22 per share to repay previous net
unpaid cash advances to the Company of $51,500, from a former Company officer.
F-14
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FEBRUARY 28, 1999 AND 1998
NOTE 8 - OPERATING LEASES
As of February 28, 1999 the Company leased office space under a five year
operating lease commencing March 1, 1999. The agreement provides for an annual
base rent of $27,720.
Net future minimum rental payments required under the operating lease for office
facilities as of February 28, 1999, are as follows:
Year ended February 28, 2000 $27,720
2001 $27,720
2002 $27,720
2003 $27,720
2004 $27,720
As of February 28, 1998, the Company leased office space for $2,885 per month
for 12 months and had an option to purchase the leased space for $225,000 with a
down payment of $22,500. The Company has since moved from this office space, and
the purchase option as of February 28, 1998, has expired.
NOTE 9 - LITIGATION
The Company was a defendant in litigation wherein the plaintiff sought
rescission and monetary damages in connection with the purchase of 50,000 shares
of company common stock directly from a former officer of the Company. Without
authorization from the Board of Directors, the former officer made certain
promises and incurred certain obligations in connection with the stock sale,
which the Company subsequently determined it could not legally fulfill.
On December 21, 1999, this lawsuit was mutually settled and dismissed. All
parties have waived all claims, liabilities and demands. As a part of the
settlement, the Company has agreed to issue 360,000 shares of restricted common
stock to the plaintiff.
NOTE 10 - NON COMPLIANCE WITH NASD REPORTING REQUIREMENTS
Effective April 1999, the NASD enacted new rules requiring all OTC: BB listed
companies to be "fully reporting", as defined by the Securities and Exchange
Commission. Under the new reporting requirements, the Company was delinquent in
filing financial information and was "delisted" on October 20, 1999. Steps have
been taken to cure the deficiency, including completion of the audited
financials for the current year. Upon completion and filing of the current year
audited financials, interim financials statements, and SEC Form 10, the Company
expects the deficiency to be satisfied, and anticipates reinstatement with NASD.
F-15
<PAGE>
COMMERCIAL CONCEPTS, INC.
FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
NOVEMBER 30, 1999 AND 1998
WITH ACCOUNTANTS' REPORT THEREON
F-16
<PAGE>
To the Board of Directors of
Commercial Concepts, Inc.
Salt Lake City, Utah
We have compiled the accompanying balance sheets of Commercial Concepts, Inc. as
of November 30, 1999 and 1998, the related statements of operations and cash
flows, and the schedules of general and administrative expenses for the nine
months then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other from of assurance on them.
Salt Lake City, Utah
February 10, 2000
F-17
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
BALANCE SHEETS
November 30, 1999 and 1998
ASSETS 1999 1998
------------- --------------
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 1,450 2,323
Accounts receivable 77,112
Inventory 4,500
Prepaid expenses 9,725 -
------------- --------------
Total current assets 92,787
EQUIPMENT
Equipment 67,815 38,033
Less: accumulated depreciation (17,407) (1,010)
------------- --------------
Property and equipment, net 50,408 37,023
------------- --------------
OTHER ASSETS
Investment in Advice Productions, Inc. 200,000
Software marketing rights 100 100
Officer and shareholder loans 5,490 -
TOTAL ASSETS $ 348,785 39,446
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 84,013 872
Shareholder advances payable 36,000 52,331
------------- --------------
Total Current Liabilities 92,976 53,203
STOCKHOLDERS EQUITY
Common Stock, $.001 par value, 50,000,000 shares
authorized,20,686,280, and 5,193,403 shares issued
and outstanding, respectively 20,686 5,193
Stock subscriptions receivable (270,522) -
------------- --------------
Additional paid-in capital 2,049,493 825,564
Accumulated Deficit (1,570,885) (844,514)
------------- --------------
Total Stockholders' Equity 228,772 (13,757)
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 348,785 $ 39,446
============= ==============
</TABLE>
See accompanying notes and accountants' report.
F-18
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF OPERATIONS
Nine Months Ended November 30, 1999 and 1998
1999 1998
------------- --------------
REVENUES:
<S> <C> <C>
Sales $ 219,555 63,286
Less cost of goods sold (65,483) (16,926)
------------- --------------
Gross Profit 154,072 46,360
EXPENSES
General and Administrative Expenses 481,715 177,135
Services provided for common stock 58,995 -
Depreciation 10,194 -
------------- --------------
Total Expenses 550,906 177,135
------------- --------------
NET LOSS FROM OPERATIONS (396,832) (130,775)
------------- --------------
OTHER INCOME (EXPENSE)
Interest 3,131 16
------------- --------------
NET LOSS $ (399,963) (130,791)
============= ==============
NET LOSS PER SHARE $ (.03) (.03)
============= ==============
</TABLE>
See accompanying notes and accountants' report.
F-19
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended November 30, 1999 and 1998
1999 1998
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) from current operations $ (399,963) (130,791)
Items not requiring current cash flows:
Services paid in stock 58,995 -
Depreciation 10,194 -
Changes in assets and liabilities:
(Increase) in prepaid expenses (9,725) 5,385
(Increase) in accounts receivable (77,112) -
(Decrease) increase in accounts payable 28,352 (8,228)
Increase (decrease) in franchise taxes - (905)
------------- --------------
Net Cash Flows used in Operating Activities (389,259) (134,539)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (29,782) (11,831)
------------- --------------
Net Cash flows used in Investing Activities (29,782) (11,831)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from sale of stock 300,928 98,616
Stockholder loans, net 41,868 49,356
------------- --------------
Net Cash Flows from Financing Activities 342,796 149,792
------------- --------------
NET INCREASE (DECREASE) IN CASH (76,245) 1,602
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 77,695 721
------------- --------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 1,450 2,323
============= ==============
SUPPLEMENTAL INFORMATION:
CASH PAID DURING THE YEAR FOR INTEREST $ 3,131 16
============= ==============
NON CASH TRANSACTIONS
Shares issued to pay for services $ - -
============= ==============
Shares issued for investment in
Advice Productions, Inc. $ - -
============= ==============
</TABLE>
See accompanying notes and accountants' report.
F-20
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
Schedules of General and Administrative Expenses
Nine Months Ended November 30, 1999 and 1998
1999 1998
------------- --------------
<S> <C> <C>
Accounting $ 7,785 $ 6,353
Taxes and licenses 114 350
Consulting fees 210,902 13,600
Postage and deliveries 3,228 700
Salaries and wages 114,400 61,634
Insurance 583 -
Investor relations 1,709 -
Legal 20,300 5,455
Maintenance and repairs 1,431 3,385
Marketing 10,771 21,268
Meals and entertainment 578 -
Office Supplies 4,672 9,529
Rental equipment 5,941 -
Tools 3,978 1,755
Telephone 28,489 12,940
Travel 51,653 18,471
Rent 13,374 16,618
Utilities 138 2,974
Other Expenses 1,669 5,077
------------- --------------
Total general and administrative expenses $ 481,715 $ 177,135
============= ==============
</TABLE>
See accompanying notes and accountants' report.
F-21
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Business Operations The Company develops, markets and supports multimedia
software, information technology for customers' computer based applications, and
development of telecommunications retail locations for the general public.
Development Stage Classification - Commercial Concepts, Inc. was incorporated in
the state of Utah on March 1, 1984. Until February 28, 1998, the Company has
been defined as a development stage company because it had not commenced planned
principal operations and did not have operational revenues, but only sold its
common stock to the public. In November 1997, the Company experienced a change
in its Board of Directors and management. Under the new management the Company
has been engaged in the purchasing of computer software products and in
marketing and distributing them, and effective March 1, 1998, has been an
operating company not subject to development stage company disclosures.
The Company has elected a February 28 fiscal year end for accounting and
reporting purposes.
Provision for income taxes - No provision for income taxes has been made in the
financial statements due to operating losses. The State of Utah franchise taxes
have been included in operating expenses in the statements of operations. Income
tax expense includes federal and state taxes currently payable and deferred
income taxes arising from temporary differences between income for financial
reporting and income tax purposes. These differences result principally from
depreciable assets where different methods of depreciation are used and the
allowances for bad debt which is not deductible for income tax purposes.
Inventories - Inventories are stated at the lower of cost or market on a
first-in, first-out basis, and consist of packaged software and related
packaging supplies.
Cash Equivalents - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Equipment - The cost of equipment is depreciated over the estimated useful lives
of the related assets. The cost of leasehold improvements is depreciated
(amortized) over the lesser of the length of the related leases or the estimated
useful lives of the assets. Depreciation is computed on the straight-line method
for financial reporting purposes and on the MACRS method for income tax
purposes.
Income Taxes - Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
lialilities.
F-22
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND 1998, CONTINUED
NOTE 2 - PUBLIC OFFERING OF COMMON STOCK
At inception, the Company offered and sold 1,000,000 shares of its authorized
but unissued stock to the public. An offering price of $.10 per share was
determined by the Company. There are no options or warrants outstanding to
acquire the stock of the Company as of November 30, 1999.
In May 1996, the Company commenced a private offering of common stock pursuant
to an exemption from registration under Regulation D of the Security and
Exchange Commission. 92,050 shares were sold and a total of $460,205 in capital
was raised.
Since inception the Company has privately sold for cash and exchanged common
stock for services and property at various times.
NOTE 3 - SOFTWARE DEVELOPMENT COSTS
The Company has capitalized the acquisition cost of Quick Fix 2000, a Y2K fix,
but no other software costs have been capitalized. The Company's policy is to
expense research and development costs until technological feasibility is
reached and all related research and development activities are completed,
subsequent production expenses to bring the product to market are then
capitalized. Capitalization of software costs is discontinued when the product
is available for general release to customers. No amortization of capitalized
software costs has been included in the accompanying statements of operations.
NOTE 4 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained substantial
losses. In addition, the Company has used almost all of its working capital and
has stockholders' deficits from inception, which raise substantial doubt as to
the Company's ability to continue as a going concern.
In view of these matters, continued existence of the Company is dependent upon
its ability to develop working capital and to attract equity investment, in
order to meet current and future creditors' demands and to attain future
profitable operations. In order to develop additional working capital and
attract continued equity investment the Company has reorganized management,
formulated a new business plan, and developed and marketed new business
products. Management believes that the actions presently being taken will
provide the opportunity for the Company to continue as a going concern.
F-23
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND 1998, CONTINUED
NOTE 5 - INCOME TAXES
For federal and state purposes the Company has unused net operating loss carry
forwards to offset future taxable income which expire as follows:
Year Ending
February 28 Federal State
----------- ------- -----
2000 $43,418 3,763
2001 8,617 1,364
2001 14,355 249,924
2007 548 221,790
2008 115 457,099
2009 123 -
2010 3,863 -
2011 1,464 -
2012 250,024 -
2013 221,890 -
2019 457,199 -
------- -------
$1,001,616 933,940
========== =======
NOTE 6 - Purchase of Advice Productions, Inc.
On June 10, 1999, the Company acquired all the outstanding stock of Advice
Productions, Inc. The acquisition has been accounted for as a purchase. The
total purchase price was $200,000, paid in 1,000,000 shares of restricted
Company common stock valued at $.20 per share. The Company received accounts
receivable, equipment, and liabilities, but the purchase price exceeded the fair
value of net assets received by $200,000, which excess will be recorded as
goodwill in the financial statements. Simultaneous with the acquisition, the
Company entered into a five year employment contract with the principal of the
seller, which set forth, among other matters, the manner in which compensation
will be computed and allowed for bonuses and profit sharing. Advice Productions,
Inc. was previously operated as a sole proprietorship, but incorporated
immediately prior to the acquisition, and therefore had no corporate operations
to be combined with Company operations. The operations of Advice Productions,
Inc. from the date of the acquisition will be included with Company operations
in any subsequent financial statements of the Company.
NOTE 7 - SUBSEQUENT EVENTS
Effective March 1, 1999, the Company accepted the resignations of Wilfred R.
Blum as President, David Welcker as Vice President, and Albert E.S. Fretz as
Vice President. The Board of Directors appointed George Richards as the new
President, and appointed Wilfred. S. Blum as Secretary Treasurer. On September
14, 1999, the Board accepted the resignation of Wilfred R. Blum as Secretary
Treasurer, and appointed V. Kelly Randal as Secretary Treasurer. Wilfred R. Blum
will continue as a member of the Board of Directors.
F-24
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND 1998, CONTINUED
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company has transactions with certain stockholders and officers who receive
compensation paid in the form of wages, royalties and consulting fees.
On May 5, 1999, 2,000,000 shares of restricted common stock were issued to a
Company officer valued at $.06 per share, for a total amount of $120,000,
recorded as a loan to the officer. The terms of the loan provide for repayment
in the form of future compensation. On August 9, 1999, 2,198,000 shares of
restricted common stock were issued to a second Company officer valued at $.06
per share, for a total amount of $131, 880, recorded as a loan to the officer.
The terms of the loan provide for repayment in the form of future compensation.
Also on August 9, 1999, 352,000 shares of restricted common stock were issued to
three shareholders valued at $.06 per share, for a total amount of $18,642,
recorded as loans to them. The terms of the loans also provide for repayment in
the form of future compensation. These receivable amounts are included as
officer and shareholders receivables in the accompanying balance sheets.
NOTE 9 - OPERATING LEASES
As of August 31, 1999 ,the Company leases office space under a five year
operating lease commencing March 1, 1999. The agreement provides for an annual
base rent of $27,720. Net future minimum rental payments required under the
operating lease for office facilities are as follows:
Year ended February 28,: 2000 $27,720
2001 $27,720
2002 $27,720
2003 $27,720
2004 $27,720
NOTE 9 - LITIGATION
The Company was a defendant in litigation wherein the plaintiff sought
rescission and monetary damages in connection with the purchase of 50,000 shares
of Company common stock directly from a former officer of the Company. Without
authorization from the Board of Directors, the former officer made certain
promises and incurred obligations in connection with the stock sale, which the
Company subsequently determined it could not legally fulfill.
On December 21, 1999, this lawsuit was mutually settled and dismissed. All
parties have waived all claims, liabilities and demands. As a part of the
settlement, the Company has agreed to issue 360,000 shares of restricted common
stock to the plaintiff.
NOTE 10 - NON COMPLIANCE WITH NASD REPORTING REQUIREMENTS
Effective April 1999, the NASD enacted new rules requiring all OTC: BB listed
companies to be "fully reporting", as defined by regulations of the Securities
and Exchange Commission. Under the new reporting requirements, the Company was
delinquent in filing certain financial information and was "delisted" on October
20, 1999. Steps have been taken to cure the deficiency, including completion of
the audited financial statements for the year ended February 28, 1999. Upon
completion and filing of the prior year audited financials, current year interim
financial statements, and SEC Form 10, the Company expects the reporting
deficiency to be satisfied, and anticipates reinstatement with NASD.
F-25
[Fitzgerald Sanders letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form 10-SB of our
report, dated February 10, 2000, on our compilation of financial statements of
Commercial Concepts, Inc. for the nine months ended November 30, 1999 and 1998.
Fitzgerald Sanders, LLC
/s/ Fitzgerald Sanders, LLC
Salt Lake City, Utah
February 22, 2000
[David T. Thomson P.C. letterhead]
CONSENT OF INDEPENDENT ACCOUNTANT
I consent to the inclusion in this registration statement on Form 10-SB of my
report, which includes an explanatory paragraph which discusses the Company's
ability to continue as a going concern, dated March 11, 1998, on my audit of the
financial statements of Commercial Concepts, Inc. for the year ended February
28, 1998.
David T. Thomson, P.C.
/s/ David T. Thomson, P.C.
Salt Lake City, Utah
February 22, 2000
