As filed with the Securities and Exchange Commission on December 21, 2000
Registration No.333-45390
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 3 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
COMMERCIAL CONCEPTS, INC.
(Exact name of small business issuer as specified in its charter)
Utah 7371 87-0409620
(State or jurisdiction of (Primary Standard Industrial (I.R.S.
incorporation or organization) Classification Code Number) Identification)
324 South 400 West, Suite B
Salt Lake City, UT 84101
(801) 328-0542
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
George E. Richards, Jr.
COMMERCIAL CONCEPTS, INC.
324 South 400 West, Suite B
Salt Lake City, UT 84101
(801) 328-0542
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Gregory E. Lindley
Ray, Quinney & Nebeker
79 South Main, Suite 500
Salt Lake City, UT 84111
(801) 532-1500
Approximate date of proposed As soon as practicable following
sale to the public: effectiveness of the Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following: [X]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
--------------------------- ---------------------- ----------------------- ---------------------- --------------------
Proposed Proposed
Title of Each Maximum Maximum
Class of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered Per Unit Offering Price Registration Fee
--------------------------- ---------------------- ----------------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock1 3,409,091 $.19255 $ 656,250 $ 173.25
Common Stock2 1,700,000 $.4375 $ 743,750 $ 196.35
Common Stock3 20,000,000 $.306 $ 6,000,000 $1,584.00
Common Stock4 2,400,000 $.306 $ 720,000 $ 190.08
Common Stock 360,000 $.306 $ 108,000 $ 28.51
Total 27,869,091 -- $ 8,228,000 $2,172.19
--------------------------- ---------------------- ----------------------- ---------------------- --------------------
</TABLE>
1 Issuable upon the conversion of Convertible Notes. Also registered hereunder
are an indeterminate number of additional shares of Common Stock that may
become issuable by virtue of anti-dilution provisions of the Convertible
Notes.
2 Issuable upon the exercise of warrants issued in connection with the initial
placement of the Convertible Notes at an exercise price of $.4375 per share.
Also registered are an indeterminate amount of additional shares of Common
Stock that may become issuable by virtue of anti-dilution provisions in the
warrants.
3 Issuable pursuant to the terms of a Private Equity Line of Credit Agreement
pursuant to which the registrant can require investors to purchase up to
$6,000,000 of Common Stock. Also registered hereunder are an indeterminate
number of additional shares of Common Stock that may become issuable by
virtue of anti-dilution provisions of the Private Equity Line of Credit
Agreement.
4 Issuable upon the exercise of warrants that may be issued in connection with
the purchase of Common Stock pursuant to the Private Line of Credit Agreement
discussed in paragraph 3 above. Also registered hereunder are an
indeterminate number of additional shares of Common Stock that may become
issuable by virtue of anti-dilution provisions in the warrants.
5 Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(c). The amount is 80% of the last closing price for the
registrant's Common Stock on August 25, 2000.
6 Pursuant to Rule 457, estimated solely for purposes of calculating the
registration fee.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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P R O S P E C T U S
COMMERCIAL CONCEPTS, INC.
27,869,091 Shares
----------------
Investing in Commercial Concepts involves significant
risks. Investors need to read the "Risk Factors"
beginning on page 3.
----------------
Neither the Securities and Exchange Commission nor states
securities regulators have approved or disapproved these
securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
-----------------
o This is an offering of 27,869,091 shares of common stock of Commercial
Concepts, 3,409,091 of which may be sold upon the conversion of convertible
notes, 4,100,000 shares of which may be sold upon exercise of warrants,
360,000 shares of which may be sold by a selling security holder and up to
20,000,000 shares that may be sold by selling security holders who will
purchase shares from Commercial Concepts pursuant to a Private Equity Line
of Credit Agreement. All of the shares are being offered by the selling
security holders named in this Prospectus. We will not receive any of the
proceeds from the sale of 360,000 shares of the shares of the common stock,
although we would receive approximately $6,743,750 if all of the warrants
are exercised and all 20,000,000 shares are purchased under the Private
Equity Line of Credit Agreement.
o Our common stock is traded on the Nasdaq OTC Bulletin Board under the
symbol "CMEC." On December 15, 2000, the last reported sales price of the
common stock was $.12.
The date of this Prospectus is December 21, 2000.
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PROSPECTUS SUMMARY
Commercial Concepts
Commercial Concepts is a Utah corporation that develops software. Its
major products are PictureBase(C), an imaging software program, used to
electronically capture medical images generated by equipment used in medical
produces, and Wavescreen(C), an interactive Screen Saver. Commercial Concepts
has recently begun to generate revenues although it has yet to be profitable.
The Offering
Securities Offered: 27,869,091 shares of common stock.
Use of Proceeds: We will not receive any proceeds from the sale of
the shares of common stock by the selling security
holders, although we will receive approximately
$6,743,750 if all of the warrants underlying
shares of which are being registered in this
offering are exercised and all the shares are
purchased under the Private Equity Line of Credit
Agreement. See "Use of Proceeds."
Risk Factors: An investment in our common stock involves a high
degree of risk and should be made only after
careful consideration of the significant risk
factor that may affect us. Such risks include
special risks concerning us and our business. See
"Risk Factors."
[Please proceed to the next page]
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RISK FACTORS
The Securities offered herein involve a high degree of risk.
Accordingly, before deciding to purchase, investors should carefully consider
the following risk factors along with the other matters discussed herein.
If our products are not accepted by either our customers or distributors
We will not be able to generate sufficient revenues to be profitable.
Our various products compete in highly competitive markets. Our prospects for
success will therefore depend upon our ability to successfully market our
products either directly to customers or through distributors who may be
inhibited from doing business with Commercial Concepts because of their
commitment to other products. As a result, demand and market acceptance for our
products is subject to a high level of uncertainty. We currently have limited
financial, personnel and other resources to undertake the extensive activities
that will be necessary to produce and market our products. There is no assurance
that we will be able to formalize expanded marketing arrangements or that its
marketing efforts will result in substantial additional revenues. See
"Business."
Investors must rely on our current management for the success of their
investment
We are dependent upon members of our current management. The stability
and growth of Commercial Concepts would be significantly compromised if members
of management were unable or unwilling to perform these responsibilities.
We must be able to manage our anticipated rapid growth or investors may lose
their investment
Our ability to manage rapid expansion and to integrate strategic
business alliances and joint ventures has not been tested and may not be
successful. Our PictureBase(C) and Wave Network(C) products will both initiate
national market introductions in late 2000. This is an ambitious schedule and
will strain our administrative, operational and financial resources. To manage
the expected growth, CCI must implement systems and hire, train and manage its
employees. Because we have limited management depth, experienced senior and
middle management personnel may have to be employed. We may not be able to hire
or retain qualified personnel.
If we are unable to generate income, we will be forced to try and raise
additional money
In order for Commercial Concepts to develop, both internally and
through acquisitions, significant additional funding will be required. A failure
by us to generate or raise sufficient funds, may require Commercial Concepts to
delay or abandon some or all of our future expansion plans or expenditures or
reduce the scope of some or all of our present operations,
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which could have a material adverse effect on our financial condition, results
of operations and cash flow. We cannot predict at this time whether any
additional financing will be in the form of equity or debt, or be in another
form. We may not be able to obtain the necessary additional capital on a timely
basis or on acceptable terms, if at all. In any of these events, we may be
unable to implement our current plans.
We have a going-concern qualification in our certifying accountant's financial
statement report
A going-concern qualification indicates an absence of obvious or
reasonably assured sources of future funding that will be required by us to
maintain ongoing operations. To-date we have successfully funded our needs by
attracting additional equity investments and small issues of debt. We believe
that our ongoing efforts will continue to successfully fund operations until
positive cash flow is attained. However, there is no guarantee that our efforts
will be able to attract additional necessary equity and/or debt investors. If we
are unable to obtain this additional funding, we may not be able to continue
operations.
Our common shares are traded on an inefficient trading market.
The common shares of Commercial Concepts are listed for trading on the
NASD Over the Counter Bulletin Board.. The Bulletin Board does not offer
investors the transaction liquidity of more traditional exchanges such as the
New York Stock Exchange or the NASDAQ. To-date we have eleven market makers
working to maintain an orderly market for our shares on the Bulletin Board.
However, the number of participating market makers could change at any time. If
we lost all market makers, our shareholders may have difficulty executing
purchase or sale of our shares.
Commercial Concepts, Inc. has a tangible net worth deficit at the latest balance
sheet date.
We have a net worth deficit as of our latest balance sheet date. This
deficit indicates that we will be unable to meet our future obligations unless
additional funding sources are obtained. To-date we have been able to obtain
funding for our needs and meet our obligations in a timely manner. However, if
in the future we are unsuccessful in attracting new sources of funding then we
will be unable to continue.
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Because the software industry is so volatile, our products may become obsolete
The markets for the technology and products developed by Commercial
Concepts are characterized by rapid changes and evolving industry standards
often resulting in product obsolescence or short product life cycles. As a
result, competing companies may be developing technologies or products of which
we are unaware that may be functionally similar, or superior, to some or all of
those we have developed. These companies may have substantially greater
financial, technical, personnel and other resources than we do and may have
established reputations for success in the development and sales of their
products. Our ability to effectively compete will depend on our ability to
continually enhance and improve our products and technology, to adapt our
products to be compatible with specific products manufactured by others, and to
successfully develop and market new products and technology. There is no
assurance that we will be able to compete successfully, that our competitors or
future competitors will not develop technologies or products that render our
products and technology obsolete or less marketable or that we will be able to
successfully enhance our products or technology or adapt them satisfactorily.
If we are unable to obtain patent protection for our products, we may not be
able to keep our products from being copied or used by others
We have applied for patents on our imaging and screen saver products.
We have patent pending status with our PictureBase(C) and Wavescreens(C)
products. There is no assurance that if final patents are granted that any
patents will afford us commercially significant protection of our technologies,
or that we will have adequate resources to enforce our patents. We also intend
to seek foreign patent protection. With respect to foreign patents, the laws of
other countries may differ significantly from those of the United States as to
the patentability of our products or technology. The degree of protection
afforded by foreign patents may be different than those in the United States.
Patents in the United States are maintained in secrecy until patents issue, and
since the publication of discoveries in the scientific or patent literature
tends to lag behind actual discoveries by several months, we cannot be certain
that we will be the first creator of inventions covered by any patent
applications we make or the first to file patent applications on such
inventions.
DESCRIPTION OF BUSINESS
History and Development of Commercial Concepts
We were incorporated in the State of Utah on March 1, 1984 to engage in
the milling and recovery of precious minerals. In November 1997, our last mining
asset, an option to acquire mining property, expired. As a result, we changed
our business focus by acquiring the rights to certain software products
developed to fix computer date recognition problems associated with the year
2000. We 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 clock is turned on to determine if the date is
correct. We hold a registered copyright for this software which we began
marketing in April 1998. Because of our late entry
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into the market, lack of name recognition and a limited marketing network, our
sales of the Y2K software were insignificant and with the advent of the year
2000 have been discontinued.
The computer equipment acquired and software developers we hired to
develop the Y2K software provided the means for us to become a software
development and technology company. Building on this foundation, Commercial
Concepts hired a new President and Chief Executive Officer in March 1999, a new
Executive Vice President in July 1999 and a new Chief Financial Officer in
February 2000. In June 1999 we acquired 100% of the stock of Advice Productions,
Inc., a graphic design company specializing in customized video marketing and
training tools. From this acquisition, we acquired certain assets that enable us
to create customized compact discs. The acquisition, however, did not provide
all the benefits we anticipated. As a result, effective February 29, 2000 we
dissolved Advice Productions and conveyed certain assets to the previous owners
of Advice Productions in return for reconveyance to us of a portion of the
shares of stock that we paid to these owners in June 1999.
Products and Services
Our primary focus is on the development of proprietary "platforms" that
serve as a base for subsequent development of "canned" software programs. Until
recently our primary source of revenue came from the development of customized
software and products for clients. Our programmers develop customized software
programs to meet specific needs such as data entry and retrieval, multi media
and internet-based information dissemination. We generally retain all rights,
title and interest in the customized software we develop, including source
codes, with the expectation that we may revise and improve such programs so the
programs can be "canned" and sold to other customers. We are currently
developing several proprietary software products. Certain of these products will
be introduced into the general marketplace beginning in late 2000.
No funds were spent by Commercial Concepts on research and development during
the fiscal year ended February 28, 1999. For the fiscal year ended February 29,
2000 we spent approximately $579,000 on the research and development of new
proprietary software products. Of this amount, $543,000 was expended on research
and development of our PictureBase(C) and Wave Screens(C) products, offset in
part by a $12,000 grant to help finance development of PictureBase(C). No
research and development expenditures incurred in the last two fiscal years have
been capitalized.
Imaging Software
We contracted with Intermountain Health Care (IHC) to develop imaging
software to capture medical images generated by equipment used in medical
procedures such as ultra-sound, catheter cameras, MRIs and CAT scans. The
software is designed to store images generated during medical procedures in real
time on a computer network that can be linked to the internet. The software
permits physicians and administrators to access and annotate the images during
or after the procedure from any computer on the network. We believe that the
market for medical applications of PictureBase(C) includes hospitals and clinics
worldwide where surgical or otherwise invasive medical procedures are performed.
Due to the breadth
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and variety of the potential market for PictureBase(C), we do not expect to be
dependent on any one customer or small group of customers.
IHC paid Commercial Concepts a $12,000 fee to help finance the
development, in exchange for up to thirty operating room licenses. We retain all
rights, title and interest to the software and its source code. We have filed a
patent application to protect the source code that is pending.
Beta testing at IHC's Cottonwood Hospital commenced in March 2000 and
was successfully completed in August 2000. As a result, IHC is exercising its
option for thirty CCI Picture Base operating room licenses. In June 2000, IHC
entered into a five-year agreement with Commercial Concepts to purchase up to an
additional 300 units of PictureBase(C) at a discounted price per unit. IHC will
also receive free upgrades to PictureBase(C) during the five-year period. In
exchange, Commercial Concepts will continue to have access to IHC facilities for
ongoing research and development of PictureBase(C).
Commercial Concepts expects to market and distribute PictureBase(C)
through specialized medical distribution channels. We are in discussions with
representatives of medical distributors but no definitive agreement has been
reached at this time. Until such distribution channels are established, we will
market PictureBase(C) directly to hospitals.
PictureBase(C) 1.0 is the version currently being marketed. We intend
to maintain an ongoing program of research and development to constantly improve
and enhance this product's functionality and marketability. PictureBase(C)
version 2.0 is being developed and will include video streaming and improved
data compression technology. Additional improvements are expected with later
versions.
We perform ongoing research to identify and analyze possible
competition for PictureBase(C). Commercial Concepts has identified certain
products that have similarities to PictureBase(C) and may be considered
competition. However, our research has found no competing products with what we
believe is a material technical advantage compared to PictureBase(C). Competing
products that have been identified appear to us to be substantially more
expensive to own and/or operate than PictureBase(C). Based on our research, we
are confident that PictureBase(C) is competitive both technically and
economically within the current marketplace.
PictureBase(C) is a non-invasive product used to assist and improve the
compilation, storage and dissemination of medical data. Because it has no
diagnostic or treatment capabilities, no Food and Drug Administration approval
is required for the installation and operation of PictureBase(C) in its intended
medical environment. Commercial Concepts is aware that certain medical
distributors require that all products carried by that distributor must be
documented as FDA-compliant, even though FDA compliance may not be required for
a particular application. As a result, we believe that proper documentation of
FDA compliance will enhance the marketability of PictureBase(C). We are
currently investigating the process required to attain and document FDA
compliance.
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Screen Saver Technology
We have developed technology for an interactive screen-saver for which
a patent is pending. This screen saver software "Wavescreens(C)" is interactive
using our "Push-Pull" technology. Wavescreens(C) permits network administrators
of host organizations to place any image or text they choose on the computer
screen and to change or update the images as often as they desire. This is the
"push" portion of our technology. At all times the installed Wavescreens(C)
monitors when it appears on its host screen. When Wavescreens(C) is activated,
two advertisements are located at the top of the screen. Wavescreens(C)
maintains a log of when the screen saver viewer places a cursor on the exhibited
advertisements and/or clicks on an ad for detailed information or the hot link
to the advertiser's website. Each time the individual screen saver's host
computer is connected to the internet, Wavescreens(C) uploads this accumulated
data to our server. This represents the "pull" portion of our technology.
We believe that there are several uses for Wavescreens(C). Schools,
colleges and other organizations can use Wavescreens(C) to raise funds from
advertising as well as to disseminate information. Parents of schoolchildren can
increase their awareness of school activities by downloading the screensaver on
their home or office computer systems. Second, 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.
Commercial Concepts expects to generate revenues from advertising and
placement commissions. The primary revenue source will be advertising. The
Wavescreens(C) that appear on each host network screen will have two boxes at
the top of the screen reserved for advertising. The revenues from one box will
accrue to the host network and the revenue from the second box will accrue to
Commercial Concepts. It is expected that each individual host for Wavescreens(C)
will find their own paying advertisers for the advertising box allocated to the
host. In situations where the host is unwilling or unable to find its own
advertisements, we will place advertisements on behalf of the host, at the
host's written request, in exchange for a 20% advertising placement commission.
Based on our initial market research, advertisers are paying two cents
per impression per day for internet banner advertisements. We believe, although
we have only conducted limited research, that advertisers will pay at least one
cent per impression for Wavescreen(C) advertising, plus additional fees for
documented "hits" to the advertiser's website and/or discount offers. Each
Wavescreen(C) will have ninety five-second advertising slots for each of the two
screen advertising boxes, which will rotate in a loop continuously through the
day. If the advertising slots are completely sold, we expect to have gross
revenue of approximately one dollar per day per operating screen, which
represents the revenue from the advertising box allocated to us.
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We believe that public and private schools as well as colleges and
universities are primary customers for Wavescreens(C). Nationwide, many schools
would like to increase their computer-to-student ratio. Unfortunately, budget
constraints frequently prevent schools from acquiring the desired computers.
Installation of Wavescreens(C) combined with sale of the host school's available
advertising slots could provide the funding for new computers, if desired, as
well as other uses. We have received interest from school districts we have
contacted to use the Wavescreens(C) program as a vehicle to acquire more
computers for student education.
The new computers desired by host schools will have to be purchased
from each school's future Wavescreens(C) advertising revenues. We believe it is
unlikely that independent financing institutions will accept the risk of leasing
computers to public school districts using this revenue stream as collateral.
Also, Commercial Concepts does not intend to take direct ownership of personal
computers in order to lease them to interested school districts, using the
Wavescreens(C) advertising revenue for payment. To facilitate the acquisition of
new computers by Wavescreen(C) host schools and thereby increase the
attractiveness of the Wavescreen(C) program, we plan to establish a
financing/leasing entity independent of Commercial Concepts, to have
responsibility for these transactions.
We face competition in the screen saver market from numerous
competitors, some of which have greater resources than us. There is technology
presently in the market that permits network administrators to place any image
they choose on the computer screen and to update or change the images as often
as they desire. We do not know of any screen saver software in the market that
is interactive in a manner similar to our product. To be exact, none of the
existing screen saver software keeps a record of when the screen saver appears
and the demographics of the viewer logged onto the computer viewing the screen
saver. We believe the interactive features of our Wavescreens(C) program will
give us a competitive advantage.
In March 2000, we commenced a pilot program of Wavescreens(C)
installations with three local schools and other non-profit organizations. The
purpose of this pilot program is to gather detailed, documented data on actual
system performance and the effectiveness of screen saver advertisements in
preparation for our full-scale product introduction in fall 2000. Local and
regional commercial organizations have placed advertisements. All advertising
revenues received during the course of the pilot program are remitted to the
participating schools and non-profit groups.
Electronic Brochures
Using photos, logos, advertising and other information provided by
clients, and the templates we have designed, we create customized presentations
and advertising on 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 we use pre-designed templates, the compact discs can be created at an
affordable cost of between $2,000 and $4,000. Our research has found that the
average price of similar compact discs from our local competitors is
approximately $10,000.
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Sales and Marketing
We have four full-time sales and marketing persons who are compensated
with a combination of salary and commissions, but expect to rely on wholesale
distributors and sales persons with established distribution networks and
contacts to market our products as they are developed. Such persons or
organizations will be paid on a commission basis.
We intend to market our products based on their high value-added
benefits to the user and ongoing service, and not on basis of price. We believe
our products are priced very favorably with competitors that have been
identified.
Employees
As of December 15, 2000, we had fifteen full- and two part-time
employees. No union or other collective bargaining group represents our
employees. Management believes relations with our employees are good.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Information in this prospectus may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934. This information may involve
known and unknown risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially different from
projected results, performance or achievements expressed or implied by any
forward-looking statements. These factors include the risks described in "Risk
Factors." Forward-looking statements, which involve assumptions and describe our
future plans, strategies and expectations, are generally identifiable by use of
the words "may," "should," "expect," "could," "anticipate," "estimates,"
"believe," "intend," or "project" or the negative of these words or other
variations on these words or comparable terminology.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of
common stock owned by the selling security holders, although we will receive
approximately $6,743,750 if all of the warrants are exercised and all of the
shares are purchased under the Private Equity Line of Credit Agreement. If the
warrants are exercised and the shares purchased under the Private Equity Line of
Credit Agreement, we will use the net proceeds for the funding of potential
acquisitions, working capital and general corporate purposes. All proceeds from
the sales of shares of common stock owned by the selling security holders will
be for their own account. See "Selling Security Holders."
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DESCRIPTION OF PROPERTY
We conduct our business operations at 324 South 400 West, Suite B, Salt
Lake City, Utah, where we have approximately 7,105 square feet of office space
under lease through February 29, 2004. The space we lease represents
approximately 65% of leaseable space in the building. Under the terms of the
lease, we pay $6,143 per month, which amount increases by 4% annually. There is
no renewal option under the terms of this lease.
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, office and age of each officer
and director of Commercial Concepts:
----------------------------- ----------------------------- ----------
Name Title Age
George E. Richards, Jr. Chairman, President & CEO 38
Scott G. Adamson Executive Vice President 44
and Director
Karl A. Hansen CFO, Secretary & Director 47
Lee R. Kunz. Sr. Director 73
Lee Greenberg Director 44
----------------------------- ----------------------------- ----------
George E. Richards
George E. Richards has served as Chief Executive Officer and a director
since March 1, 1999. Since June 1996, Mr. Richards has served as the President
and 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 employed by The Goldenberg Group, Inc., a division of Plygem, Inc.
Mr. Richards attended Cal State Fullerton.
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Scott G. Adamson
Scott G. Adamson has served as Executive Vice President and a director
since July 1999. Since 1986, Mr. Adamson has served as the President and a
director of SGA Financial Group, Inc., a financial company that he founded to
provide project and debt financing, and currency conversion services. From 1981
to 1986, Chase Manhattan employed Mr. Adamson in its Latin American division as
a second 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.
Karl A. Hansen
Karl A. 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 two related mining companies, American Pacific Mining Company and
Jordex Resources, Inc. From 1977 to 1987, Mr. Hansen worked in financial
positions with Ernst & Young, Salomon Brothers and Lever Brothers. Mr. Hansen
received 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 1977.
Lee R. Kunz, Sr.
Lee R. Kunz Sr. has served as a director since April 2000. He is the
retired CEO of Kunz Construction Company. Mr. Kunz served for 19 years on a
hospital Board of Directors and has been associated with the development of
biological and pharmaceutical companies.
Lee Greenberg
Lee Greenberg was President of the west coast subsidiary of Ply Gem
Industries, CEO of the Lion Group in the United States, and a top executive with
TCII. Mr. Greenberg has also served as CEO of the American Israel Chamber of
Commerce in the Western US and as President of The American Israel Economic
Education Foundation in the Western United States. Mr. Greenberg received a
Bachelor's degree from the University of Hartford and a law degree from
Pepperdine University.
If any outside director is requested to perform services for Commercial
Concepts beyond normal service as a director, such director will be compensated
for the performance of such services at rates to be agreed upon by such director
and Commercial Concepts.
There are no family relationships between any directors or executive
officers of Commercial Concepts.
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Compliance With Section 16 Reporting Obligations
The directors and executive officers of Commercial Concepts are
required under the Securities Act of 1934 to file reports with the Securities
and Exchange Commission evidencing their ownership of, and their current
transactions in, Commercial Concepts' equity securities. This is a personal
obligation of the executive officers and directors. Based on information
provided to Commercial Concepts from a review of the SEC EDGAR database, it
appears that all directors and executive officers filed these reports in a
timely manner through the period ending November 30, 2000.
Market for Common Equity and Related Stockholder Matters
Our common stock currently trades on the NASDAQ Bulletin Board where it
has been listed since March 9, 2000. Between October 20, 1999 and March 9, 2000,
the quotation was transferred off the NASDAQ Bulletin Board 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 listings on the NASDAQ Bulletin Board. Subsequent to October 20,
1999, we prepared a complete registration statement that brought our filing
status to current and permitted the March 9, 2000 re-listing to the NASDAQ
Bulletin Board.
The following table sets forth the high and low bid prices for shares
of our common stock for the periods noted, as reported by the National Daily
Quotation Service and the NASDAQ Bulletin Board. Quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not represent
actual transactions. There was no trading of our common stock prior to the
second quarter of the 1999 fiscal year.
15
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------- ------------------------------------ ------------------------------------------
Bid Prices
Fiscal Year Period ------------------------------------------
High Low
-------------------------------------- ------------------------------------ ----------------------- ------------------
<S> <C> <C> <C>
February 28, 2001 Third Quarter 0.43 0.11
Second Quarter 0.94 0.25
First Quarter 1.10 0.28
-------------------------------------- ------------------------------------ ----------------------- ------------------
February 29, 2000 Fourth Quarter 0.31 0.08
Third Quarter 0.20 0.06
Second Quarter 0.54 0.04
First Quarter 1.25 0.13
-------------------------------------- ------------------------------------ ----------------------- ------------------
February 28, 1999 Fourth Quarter 1.40 0.08
-------------------------------------- ------------------------------------ ----------------------- ------------------
</TABLE>
As of November 30, 2000, we had 26,720,988 shares of its common stock
issued and outstanding, and there were 319 record stockholders. As of the date
hereof, we have not paid or declared any cash dividends. 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 our operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
General
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the financial
statements (including the notes thereto), and the other information included
elsewhere herein. Our fiscal year runs from March 1 through the last day of
February.
Effective March 1, 1998, we began earning revenues and were no longer
classified as a development stage company.
RESULTS OF OPERATIONS
Six Months Ended August 31, 2000 vs. Six Months Ended August 31, 1999
Sales decreased by $26,587 to $20,194 for the three months ended August
31, 2000 from $46,781 for the three months ended August 31, 1999, and decreased
by $64,089 to $38,401 for the six months ended August 31, 2000 from $102,490 for
the six months ended August 31, 1999.
16
<PAGE>
The decrease in respective sales is the result of the our decision to
concentrate activity on the development and testing of new products instead of
customizing software and computer products for clients.
Salaries and wages increased $153,785 to $216,865 for the six month
period ended August 31, 2000 from $63,080 for the six month period ended August
31, 1999. The increase was partially offset by a decrease of $72,407 in
consulting fees for the six months ended August 31, 2000 versus the comparable
period in 1999. During the first six months of this fiscal year certain
employees were moved from consultant status to full-time employment with
Commercial Concepts. In addition, additional employees were hired to accommodate
increased demands for software development and preparations for market
introduction of our products.
Legal expenses increased $21,330 to $39,889 for the six months ended
August 31, 2000 from $18,559 for the six months ended August 31, 1999. The
increase resulted primarily from our successful acquisition of a $6.5 million
equity line of credit, as well as the preparation and filing of a SB-2
registration statement with the Securities and Exchange Commission. Other
Expenses increased $43,933 to $44,436 for the six months ended August 31, 2000
from $503 for the comparable period in 1999. The increase was primarily due to
our acquisition of a $6.5 million equity line of credit, and includes various
non-legal fees and expenses directly related to the financing process.
Our expenditures for services paid for with restricted common stock
increased $294,096 to $363,388 for the six months ended August 31, 2000 from
$69,292 for the six months ended August 31, 1999, with most of the shares issued
in the second fiscal quarter ended August 31, 2000. These expenditures using
restricted common stock recognized the efforts of certain programmers and
management in the development of our products and systems.
We capitalized $401,267 in product development expenditures in the six
months ended August 31, 2000. Two of our proprietary software products were in
active beta testing throughout this period as a final step before commercial
release. In accordance with Generally Accepted Accounting Principles, all costs
related to this testing period have been capitalized. There were no product
development expenditures capitalized in the comparable period for 1999.
Commercial Concepts has two proprietary products - Wave Screens and
PictureBase - that entered beta testing in early fiscal year 2001. Beta testing
commenced when each product's technological feasibility was confirmed to
management's satisfaction. Through August 31, 2000 $195,759 and $205,508 have
been capitalized for PictureBase and Wave Screens, respectively. Development of
both products was initiated in the spring of 1999. Costs associated with the
development of each product prior to inception of beta testing approximated
$271,500, or $543,000 combined. We received $12,000 from a customer towards the
development of our PictureBase product.
Management concluded that technological feasibility was established for
both products at the beginning of this fiscal year based on several criteria.
These criteria included: successful in-house testing, the incorporation of and
improvement on current technology, the presence of a
17
<PAGE>
clearly identified commercial market for the completed product, and concurrence
of the beta host technical personnel that beta testing is appropriate.
Commercial product release for PictureBase occurred during our third
fiscal quarter ending November 30, 2000. Full commercial release of Wave Screens
is anticipated in the fourth fiscal quarter.
Liquidity and Capital Resources
At August 31, 2000, we had cash and other current assets of $44,923
compared to cash and other current assets of $70,617 at August 31, 1999. The
decrease of $25,694 results primarily from the revaluation by us of certain
outstanding receivables. During the previous twelve months Commercial Concept's
expenditures and cash requirements were met using a combination of sales, equity
placements and debt.
We borrowed $15,000 from an individual and an additional $10,000 from a
second individual, neither of which 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 February 12, 2000 and February
16, 2000. Both promissory notes remained outstanding at year-end and both were
converted into restricted common shares of Commercial Concepts, Inc. in April of
2000. During the six months ended August 31, 2000, we borrowed a total of
$96,987 from various individuals, some of which are shareholders of the
Corporation, at interest rates from 10% to 15% per annum. The various loan
details are explained at Note 5 of our financial statements.
In July, 2000, we completed negotiations with a private investment
group for a $6.5 million equity line of credit. This equity line of credit is
open for a three-year period. The terms of the agreement allows Commercial
Concepts to request funds on a monthly basis. The funds available to us each
month from this line equals ten percent of the trading value of Commercial
Concept's shares that were traded during the thirty trading days prior to our
request for funds. There is a funding limit of $1.0 million in any one month.
We will issue common shares to the investors in exchange for each
month's credit line draw down. These common shares will be issued at 84% of the
average daily price of the Commercial Concept's shares that are traded during
the ten trading days following the date we requests the funds. The execution of
the line of credit is dependent upon an approval by the Securities and Exchange
Commission of a SB-2 registration statement. The SB-2 registration was duly
prepared by us and filed with the Securities and Exchange Commission in
September 2000.
On or about July 18, 2000, a $250,000, 6% convertible note due July 20,
2003 was issued by us to the above-mentioned private investment group. In
addition, 850,000 five-year warrants were issued for shares of common stock at a
price not to exceed $0.4375. The funds received by us from the convertible note
are a part of the $6.5 million equity line of credit and helped meet our working
capital requirements prior to filing of the SB-2 registration statement.
18
<PAGE>
During the six months ended August 31, 2000, we generated $310,500 from
the sale of 900,000 restricted common shares, primarily in March and April. Of
this amount, $305,500 was received as cash with the remainder as notes or
subscriptions receivable. We issued 2,152,358 shares of restricted common stock
in lieu of cash for various services through the six months ending August 31,
2000, with the majority of these shares issued in the second fiscal quarter
ending August 31, 2000.
Fiscal Year Ended February 28, 1999
Compared to the Fiscal Year Ended February 28, 1998
For the first time in its operating history, we generated revenue from
sales in fiscal year 1999. The amount of such revenue was $64,657. This was the
result of sales of Quick Fixx 2000 software. Costs of such sales equaled
$31,336.
Although we did not generate revenue until fiscal year 1999, we 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. We expect to
continue to increase our marketing and selling efforts as we acquire or develop
additional technology products and services and as the current products are
taken to market.
General and administrative expenses other than marketing expenses
increased by $277,821 or 665% to $319,572 for the 1999 fiscal year end from
$41,751 for the 1998 fiscal year end. This increase was a result of an increase
in the number of employees and consultants employed by Commercial Concepts as
well as legal expenses. We expect that such expenses will continue to increase
as our operations expand, but at a slower rate as we continue to develop.
There were no research and development costs in fiscal year 1999.
LIQUIDITY AND CAPITAL RESOURCES
At February 29, 2000, Commercial Concepts had cash and other current
assets of $75,973 as compared to cash and other current assets of $94,535 at
February 28, 1999. The decrease of $18,562 results primarily from greater
product development efforts not fully offset by revenue from sales and various
private placements of our common stock. The decrease was also caused in part by
increased general and administrative costs and payments on debt obligations.
During the year ended February 29, 2000, we acquired various equipment through
the use of capital leases. As of February 29, 2000, we had $17,432 in long-term
obligations resulting from capital leases.
We borrowed $20,000 from an individual who is not a Commercial Concepts
shareholder in December 1999, pursuant to a promissory note at the rate of 10%
per annum being due and payable December 9, 2000.
19
<PAGE>
We generated $155,000 from the private placement of 700,000 shares of
common stock in March 1999. Additional private placements through the remainder
of the year totaling 1,700,000 shares yielded $178,000. We issued 10,987,350
shares of common stock in lieu of cash for various services through the year
ending February 29, 2000 totaling $384,564. From August 26, 1998 to November 28,
1998, we raised a total of $310,000 from a private placement of our common
stock.
Financial Statements
The response to this Item is submitted in a separate section to this
report. See F-1.
Changes in and Disagreements with Accountants
On August 31, 1999, Commercial Concepts terminated its independent
auditor relationship with David T. Thomson, P.C.
Thomson's report on the financial statements of Commercial Concepts for
the fiscal year ended February 28, 1998, did not contain an adverse opinion or a
disclaimer of opinion, and was 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 Commercial
Concepts to continue as a going concern. Other than the foregoing, there were no
adverse opinions or disclaimers of opinions, 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, we engaged Fitzgerald Sanders, LLC ("Fitzgerald")
as our independent auditors to audit and report on the financial statements for
the fiscal year ended February 28, 1999.
The decision to change accountants was approved by the Board of
Directors. We authorized Thomson to respond fully to Fitzgerald's inquiries
concerning Commercial Concepts.
Prior to engaging Fitzgerald, neither Commercial Concepts 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 our financial statements. In addition, during our
fiscal years ended February 29, 2000 and February 28,1999 and 1998, neither
Commercial Concepts nor anyone acting on its behalf consulted with Fitzgerald
with respect to any matters that were the subject of a disagreement or a
reportable event.
Fitzgerald Sanders has served as the independent accountants of
COMMERCIAL CONCEPTS, INC. since August 1999 and has advised us on accounting and
tax matters.
20
<PAGE>
Subsequent to the filing of Commercial Concept's May 31, 2000
quarterly financial statements, Fitzgerald Sanders, LLC dissolved and as a
consequence resigned as our independent accountants. The report of Fitzgerald
Sanders on our financial statements for the past fiscal year contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to audit scope or accounting principles.
During our most recent fiscal year and through the date of this
Report, we have had no disagreements with Fitzgerald Sanders on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Fitzgerald Sanders have caused it to make reference thereto in its report on our
financial statements for such year.
On October 10, 2000, our Board of Directors approved the change in
independent accountants and the appointment of Christensen & Duncan CPA's LC as
the new principal independent accountant of Registrant. The Board noted that
audit personnel previously with Fitzgerald Sanders, LLC will continue to serve
Commercial Concept's Inc. as auditors with Christensen & Duncan CPA's LLC.
Executive Compensation
We have no 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 29, 2000 and February 28, 1999 and 1998. Beginning in
fiscal year 2001, we have instituted a performance-based bonus plan for
management.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
----------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation Awards
---------------------------------- ---------- ------------------------- --------------------------- ------------------
Restricted
Name and Fiscal Salary Bonus Stock Options/ All Other
Principal Position Year $ $ Awards $ SARs # Compensation
---------------------------------- ---------- ------------ ------------ -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
George E. Richards, Jr. 2000 $120,0001 $11,8002 -- -- --
Chief Executive Officer 1999 $10,0003 -- -- -- --
1998 -- -- -- -- --
---------------------------------- ---------- ------------ ------------ -------------- ------------ ------------------
Scott G. Adamson 2000 $73,2334 $34,9005 -- -- --
Executive Vice President 1999 -- -- -- -- --
1998 -- -- -- -- --
---------------------------------- ---------- ------------ ------------ -------------- ------------ ------------------
</TABLE>
1 $72,000 paid in cash and $48,000 deferred. Deferred compensation payable by
Commercial Concepts to Mr. Richards in fiscal year 2001. Payment of deferred
wages will be with cash or, at the option of Mr. Richards, in common stock
valued at the average closing price of the common shares of Commercial
Concepts during the periods in which Mr. Richard's compensation was deferred.
21
<PAGE>
2 Bonus paid in stock. On December 23, 1999 we issued 147,500 restricted shares
to Mr. Richards, valued at $.08 per share as reported at "Certain
Relationships and Related Transactions."
3 Salary paid in stock. On February 3, 1999 we issued 50,000 shares, valued at
$.20 per share as reported at "Certain Relationships and Related
Transactions."
4 $25,305 paid in cash and $47,928 deferred. Deferred compensation is payable
by Commercial Concepts to Mr. Adamson in fiscal year 2001 under the same
conditions as described for Mr. Richards in paragraph 1 above.
5 Bonus amount consists of $9,900 paid in stock and $25,000 deferred. On
December 23, 1999 Commercial Concepts issued 123,750 shares of restricted
common stock to Mr. Adamson, valued at $.08 per share as reported at Item
"Certain Relationships and Related Transactions." The deferred bonus
compensation is payable by Commercial Concepts to Mr. Adamson in fiscal year
2001 under the same conditions as described for Mr. Richards in paragraph 1
above.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of November 30, 2000 by (a) each
person known to us to be the beneficial owner of more than 5% of our common
shares; (b) each of our directors; (c) each executive officer; and (iv) all the
directors and executive officers as a group (5 persons). As of November 30,
2000, we had 26,720,988 shares of common stock issued and outstanding.
<TABLE>
<CAPTION>
Security Ownership of Beneficial Owners
---------------------------------------- --------------------------------------- --------------------- ---------------
Number of Percent
Name Address Shares Owned of Class
---------------------------------------- --------------------------------------- --------------------- ---------------
<S> <C> <C> <C>
George E. Richards, Jr. 1992 S. Chokecherry 2,184,867 8.2%
Bountiful, UT 84010
---------------------------------------- --------------------------------------- --------------------- ---------------
Scott G. Adamson 2485 S. Elaine Dr. 1,538,000 5.8%
Bountiful, UT 84010
---------------------------------------- --------------------------------------- --------------------- ---------------
Karl A. Hansen 225 South 200 West 1,110,686(2) 4.2%
Salt Lake City, UT 84101
---------------------------------------- --------------------------------------- --------------------- ---------------
22
<PAGE>
---------------------------------------- --------------------------------------- --------------------- ---------------
Lee Kunz Denver, CO 1,500,000 5.6%
---------------------------------------- --------------------------------------- --------------------- ---------------
Vince C. Lombardi 755 East Gregg St. #25 1,750,000 6.6%
Sparks, NV 89431
---------------------------------------- --------------------------------------- --------------------- ---------------
Michael Angelo 47 East 400 South 1,850,000 6.9%
SLC, UT 84111
---------------------------------------- --------------------------------------- --------------------- ---------------
The Keshet Fund L.P., Keshet L.P., Ragnall House, 18 Peel Road 2,148,700 8.4%
Nesher Ltd., and Talbiya B. Douglas, Isle of Man
Investments Ltd3, 4 1M1 4L2 United Kingdom
---------------------------------------- --------------------------------------- --------------------- ---------------
All officers and directors
as a group (5 persons) 6,333,553 23.7
---------------------------------------- --------------------------------------- --------------------- ---------------
</TABLE>
1 [INTENTIONALLY OMITTED]
2 Mr. Hansen will return 300,000 shares if his employment with Commercial
Concepts is terminated prior to January 1, 2001.
3 May be considered as a single person for purposes of determining beneficial
ownership. Keshet Management L.P., an Isle of Man Limited Partnership, is the
general partner of The Keshet Fund L.P. and Keshet L.P, and makes all
investment decisions for those beneficial owners. John Clarke, is a director
of Nesher Ltd. And Talbiya Ltd., and makes all investment decisions for those
beneficial owners.
4 This selling shareholder may not be required to purchase more than 9.9% of
the issued and outstanding shares of Commercial Concepts pursuant to the
terms of their agreements with Commercial Concepts.
DESCRIPTION OF SECURITIES
We are authorized to issue 75,000,000 shares of common stock with $.001
par value. The holders of the common stock are entitled to one vote per each
share held and have the sole right and power to vote on all matters on which a
vote of stockholders is taken. Voting rights are non-cumulative. The holders of
shares of common stock are entitled to receive dividends when, as and if
declared by the Board of Directors, out of funds legally available therefore and
to share pro-rata in any distribution to shareholders. We anticipate that any
earnings will be retained for use in our business for the foreseeable future.
Upon liquidation, dissolution, or winding up of Commercial Concepts, the holders
of the common stock are entitled to receive the net assets after distributions
to the creditors. The holders of common stock do not have any pre-emptive right
to
23
<PAGE>
subscribe for or purchase any shares of any class of stock. The outstanding
shares of common stock and the shares offered hereby will not be subject to
further call or redemption and will be fully paid and non-assessable.
Indemnification of Directors and Officers
Our articles of incorporation provide that we will indemnify any
officer, director or former officer or director, to the full extent permitted by
law. This could include indemnification for liabilities under securities laws
enacted for shareholder protection. Even though our articles of incorporation
permit us to indemnify our directors and officers for liabilities arising under
the Securities Act of 1933, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
and is, therefore, unenforceable.
We are required pursuant to the Utah Revised Business Corporation Act
to indemnify our officers and directors from liability to the extent that an
officer or director is successful in defense of any proceedings. Our articles of
incorporation and by-laws do not change this statutory protection or provide any
additional protection from liability. Under the Utah Revised Business
Corporation Act, we may purchase and maintain director's and officer's insurance
for the benefit of our directors or officers.
Certain Relationships and Related Transactions
On October 21, 1999, Karl Hansen accepted an offer to become the Chief
Financial Officer of Commercial Concepts. Our offer included a bonus of 500,000
restricted common shares. The bonus was increased by an additional 500,000
shares on May 31, 2000. If Mr. Hansen's employment is terminated prior to
January 1, 2001, 300,000 shares will be returned. Between October 21, 1999 and
September 30, 2000, Mr. Hansen purchased 85,000 common shares of Commercial
Concepts.
Lee Kunz, a director since April 2000, purchased 300,000 common shares
for $24,000 in November 1999, on behalf of L&B Charitable Trust, a Colorado
trust. Mr. Kunz, on behalf of L & B Charitable Trust, on or about February 2000
also purchased 500,000 restricted common shares for $75,000. On or about January
2000, Mr. Kunz on behalf of L & B Charitable Trust purchased 200,000 restricted
common shares for $20,000. The 200,000 shares acquired by L & B Charitable Trust
were a part of the 2,198,000 shares issued to Scott G. Adamson, the Executive
Vice President, in August 1999. The shares were endorsed to L & B Charitable
Trust in March 2000.
On or about April 18, 2000, L&B Charitable Trust purchased 500,000
restricted common shares for $100,000. The funds will be remitted to Commercial
Concepts at the rate of $20,000 per month over five months. The purchase price
also included two-year warrants to purchase an additional 500,000 common shares
of Commercial Concepts at a price of $0.50 in the first year and $0.75 in the
second year.
Ron Poulton, the trustee of Tech Trust, a shareholder owning more than
5% of the outstanding shares of stock, rendered legal services to Commercial
Concepts from 1985 to
24
<PAGE>
November 1999. Legal fees and expenses paid or payable to Mr. Poulton in the
twelve-month period ended February 29, 2000 totaled $28,988 and totaled $57,862
and $5,700 for the fiscal years ended February 28, 1999 and 1998, respectively.
On December 23, 1999, we issued 147,500 shares of common stock to
Richards & Associates, Inc., a Utah corporation, of which George E. Richards,
Jr., President and Chief Executive Officer, is the sole shareholder; 123,750
shares to Scott Adamson, Executive Vice President; 69,300 shares to Larry D.
Rogers, Vice President; and an aggregate of 134,500 shares to all other
employees as year-end employment bonuses.
On December 15, 1999, we agreed to issue an option to purchase 500,000
shares of common stock, at an exercise price of $0.104 per share, to Wilfred
Blum, then a director, as repayment of $52,000 of reimbursements and other
expenses allegedly owed by us to Mr. Blum. We have negotiated a written
agreement regarding the same with Mr. Blum.
In August of 1999, we reached an oral agreement with Cybercenters
International, Inc., a principal shareholder of which is Scott Adamson, an
Executive Vice President, to acquire all of the issued and outstanding stock of
Cybercenters after February 28, 2000. As part of the transaction, we issued
342,000 shares of stock to three shareholders of Cybercenters in consideration
of an oral agreement by such persons to pay an aggregate of $18,642. Mr. Adamson
was issued 2,198,000 shares of common stock in consideration of an oral
agreement to pay $131,880. At December 8, 2000, $80,880 of the obligation
remains outstanding. The foregoing obligations are not due and payable until the
stock is sold. Mr. Adamson subsequently endorsed 800,000 of the 2,198,000 common
shares issued to him to other investors for the benefit of Commercial Concepts.
All funds realized by such sales were remitted directly to us and partially
offset Mr. Adamson's indebtedness to us. 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, then a director,
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 Commercial Concepts 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. 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 our transfer agent at Mr. Blum's request without the
approval of the Board of Directors. Since all of the proceeds of the loan were
used for our benefit, on December 23, 1999, we issued 2,000,000 shares of common
stock to Richards & Associates to replace the shares that were transferred to
Lombardi. We did not issue replacement shares to Mr. Blum. We have also
implemented certain procedures to prevent the issuance of stock without the
approval of the Board of Directors.
On May 5, 1999, we issued 2,000,000 shares of common stock to Richards
& Associates, Inc., a Utah corporation, of which our current Chief Executive
Officer and President, George E.
25
<PAGE>
Richards, Jr., is the sole shareholder, in consideration of an oral agreement to
pay Commercial Concepts $120,000. The obligation is not payable until the shares
of stock are sold and no interest accrues on the obligation. The obligation is
still outstanding as of December 8, 2000.
On January 25, 1999, we issued 2,000,000 shares of restricted common
stock valued at $.06 per share, for a total amount of $120,000 to Wilfred Blum,
then a director and the Chief Executive Officer and President. Of the shares
issued, 1,600,000 shares or $96,000 worth of stock was issued for services
rendered 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 Commercial Concepts.
On or about July 1999, we loaned $12,340 to Mr. Blum. No note was executed for
this advance. The loan did not bear interest. The loan was repaid in calendar
year 2000.
On February 3, 1999, we 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, is the sole shareholder, for
services rendered by Mr. Richards to Commercial Concepts during the fiscal year
ended February 29, 1999.
Selling Security Holders
The table below sets forth certain information regarding the beneficial
ownership of the common stock by the selling security holders and as adjusted to
give affect to the sale of the shares offered in this prospectus.
---------------------------- -------------------- ------------ -----------------
Selling Shares Owned Shares Shares Owned
Security Holder Before Offering Offered After Offering
---------------------------- -------------------- ------------ -----------------
Rex Pitcher 360,000 360,000 -0-
The Keshet Fund L.P.(1) 246,753 246,753 -0-
Keshet L.P.(1) 272,727 272,727 -0-
Nesher Ltd.(1) 389,610 389,610 -0-
Talbiya B. Investments
Ltd.(1) (2)1,239,610 1,239,610 -0-
---------------------------- -------------------- ------------ -----------------
1 This selling shareholdermay not be required to purchase more than 9.9% of the
issued and outstanding shares of Commercial Concepts pursuant to the terms of
their agreements with Commercial Concepts.
2 Includes warrants to purchase 850,000 shares.
26
<PAGE>
Plan of Distribution
The shares of common stock offered hereby by the selling security
holders may be sold from time to time by the selling security holders, or by the
pledges, donees, transferees and other successors in interest. These pledges,
donees, transferees and other successors in interest will be deemed "selling
security holders" for the purposes of this prospectus. The shares of common
stock may be sold on one or more exchanges or in the over-the-counter market
(including the OTC Bulletin Board); or in privately negotiated transactions.
The shares of common stock may be sold to or through brokers or
dealers, who may act as agent or principal, or in direct transactions between
the selling security holders and purchasers. In addition, the selling security
holder may, from time to time, sell short the common stock, and in these
instances, this prospectus may be delivered in connection with the short sale
and the common stock offered hereby may be used to cover the short sale.
Transactions involving brokers or dealers may include, without
limitation, the following:
o ordinary brokerage transactions;
o transactions in which the broker or dealer solicits purchasers;
o block trades in which the broker or dealer will attempt to sell the
shares of common stock as agent but may position and resell a
portion of the block as principal to facilitate the transaction; and
o purchases by a broker or dealer as a principal and resale by such
broker or dealer for its account.
In effecting sales, brokers and dealers engaged by the selling security
holders or the purchasers of the shares of common stock may arrange for other
brokers or dealers to participate. These brokers or dealers may receive
discounts, concessions or commissions from the selling security holders and/or
the purchasers of the shares of common stock for whom the broker or dealer may
act as agent or to whom they may sell as principal, or both (which compensation
as to a particular broker or dealer may be in excess of customary commissions).
Commercial Concepts is bearing all of the costs relating to the
registration of the shares of common stock other than certain fees and expenses,
if any, of counsel and other advisors to the selling security holders. These
costs are expected to include the following:
Legal $ 22,500
Accounting $ 3,000
Misc., including filing fees $ 2,880
Total $ 28,380
27
<PAGE>
Any commissions, discounts or other fees payable to brokers or dealers
in connection with any sale of the shares of common stock will be borne by the
selling security holders, the purchasers participating in the transaction, or
both.
Any shares covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act of 1933, as amended, may be sold under Rule
144 rather than pursuant to this prospectus.
The selling security holders and broker-dealers, if any, acting to sell
the selling security holders' shares may be deemed to be underwriters within the
meaning of Section 2(11) of the Securities Act of 1933, and any commission they
receive and any profit on resale of the shares may be deemed to underwriting
discounts and commissions under the Securities Act.
EXPERTS
The balance sheet of Commercial Concepts, Inc. as of February 29, 2000
and the related statements of operations, stockholders' deficit and cash flows
for the year ended February 29, 2000, included in this prospectus, have been
included herein in reliance on the report of Fitzgerald Sanders, LLC,
independent certified public accountants, given on the authority of that firm as
experts in accounting and auditing.
LEGAL MATTERS
Ray Quinney & Nebeker PC has passed on certain legal matters for
Commercial Concepts in connection with this offering. No attorney at Ray Quinney
& Nebeker is related by blood or otherwise to any affiliate of Commercial
Concepts, nor does any attorney at Ray Quinney & Nebeker beneficially own any of
the securities of Commercial Concepts.
WHERE CAN YOU FIND ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto,
relating to the units offered hereby has been filed with the Securities and
Exchange Commission. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules thereto.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by such reference. For further information with respect to
Commercial Concepts and the shares offered hereby, reference is made to such
registration statement, exhibits and schedules. A copy of the registration
statement may be inspected by anyone without charge at the commission's
principal office located at:
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
28
<PAGE>
Northeast Regional Office: Securities and Exchange Commission
7 World Trade Center, 13th Floor
New York, NY 10048
Midwest Regional Office: Securities and Exchange Commission
Northwest Atrium Center,
500 West Madison Street,
Chicago, IL 60661-2511
Copies of all or any part thereof may be obtained from the public
reference branch of the commission upon the payment of certain fees prescribed
by the commission. The commission also maintains a site on the worldwide web at
http://www.sec.gov that contains information regarding registrants that file
electronically with the commission.
Exhibits and Reports on Form SB-2
The following Exhibits are filed herewith pursuant to Rule 601 of
regulation S-B or are incorporated by reference to previous filings.
Exhibit No. SEC Reference Document
----------- ----------------------
2.1 Articles of Incorporation*
2.2 Bylaws*
5.1 Opinion and Consent of Ray, Quinney & Nebeker
10.1 Lease Agreement, dated November 10, 1999*
10.2 Office Building Lease, dated February 18, 1999*
10.3 First Amendment to Office Building Lease, dated October 5, 1999*
10.4 Agreement to Develop Software, dated June 27, 1999*
10.5 Settlement Agreement and General Release with Larry Rogers**
24.1 Consent of Fitzgerald Sanders, LLC
24.2 Consent of Ray, Quinney & Nebeker is contained in Exhibit 5.1
24.3 Equity Line Agreement
24.4 Commercial Concepts, Inc. Bonus Plan
24.5 Intermountain Health Care Agreement
24.6 Consent of David T. Thomson, P.C.
24.7 Consent of Christensen & Duncan, CPA's LC
* Incorporated by reference from Registration Statement
on Form 10, as filed on March 6, 2000
** Incorporated by reference from Form 10-KSB, as filed on
May 30, 2000
29
<PAGE>
Financial Statements and
Supplementary Information
Commercial Concepts, Inc.
As of August 31, 2000 (unaudited) and February 29,
2000 and for the (unaudited) three and six months ended
August 31, 2000 and 1999
With Accountants' Review Report
Commercial Concepts, Inc.
Financial Statements and
Supplementary Information
As of August 31, 2000 (unaudited) and February 29, 2000
and for the (unaudited) Three and Six Months Ended
August 31, 2000 and 1999
Contents
Accountants' Review Report..................................................F-2
Financial Statements:
Balance Sheets as of August 31, 2000 (unaudited) and February 29,
2000....................................................................F-3
Unaudited Statements of Operations for the three and six
months ended August 31, 2000 and 1999...................................F-4
Unaudited Statements of Cash Flows for the six months ended
August 31, 2000 and 1999................................................F-5
Unaudited Statement of Stockholders' Equity for the six
months ended August 31, 2000............................................F-6
Unaudited Schedules of General and Administrative Expenses
for the three and six months ended August 31, 2000 and 1999.............F-7
Notes to Reviewed Financial
Statements..............................................................F-8
F-1
<PAGE>
Accountants' Review Report
Board of Directors
Commercial Concepts, Inc.
Salt Lake City, Utah
We have reviewed the accompanying balance sheet of Commercial Concepts, Inc. as
of August 31, 2000 and the related statements of operations for the three and
six months ended August 31, 2000 and statement of cash flows for the six months
ended August 31, 2000 and statement of stockholders' equity for the six months
ended August 31, 2000 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 Concepts, Inc. The balance sheet
of the Company as of February 29, 2000 was audited by other auditors whose
report dated May 17, 2000 expressed an unqualified opinion on those statements
and included an explanatory paragraph concerning the Company's ability to
continue as a going concern.
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 the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Our review was made primarily for the purpose of expressing limited assurance
that there are no material modifications that should be made to the basic
financial statements in order for them to be in conformity with generally
accepted accounting principles. The supplementary information contained in the
schedules of general and administrative expenses for the three and six months
ended August 31, 2000 and 1999 is presented for purposes of additional analysis
and is not a required part of the basic financial statements. Such August 31,
2000 information has been subjected to the inquiry and analytical procedures
applied in our review of the basic August 31, 2000 financial statements, and we
are not aware of any material modifications that should be made to the August
31, 2000 information.
/s/ CHRISTENSEN & DUNCAN CPA's LC
CHRISTENSEN & DUNCAN CPA's LC
October 10, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
BALANCE SHEETS (UNAUDITED)
August 31, 2000 and February 29, 2000
August 31, February 29,
ASSETS 2000 2000
-------------- --------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash in bank $ 12,589 31,171
Accounts receivable 19,179 37,811
Prepaid expenses 13,155 6,991
-------------- --------------
Total current assets 44,923 75,973
PROPERTY AND EQUIPMENT
Property and equipment 98,890 93,140
Less: accumulated depreciation (33,876) (22,810)
-------------- --------------
Property and equipment, net 65,014 70,330
-------------- --------------
OTHER ASSETS
Investment in software development 401,267 100
-------------- --------------
TOTAL ASSETS $ 511,204 146,403
============== ==============
LIABILITIES AND STOCKHOLDERS' - DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 282,103 269,265
Short term debt 101,501 49,514
-------------- --------------
Total Current Liabilities 383,604 318,779
LONG TERM DEBT 266,526 17,432
STOCKHOLDERS' - DEFICIT
Common stock, $.001 par value, 75,000,000 shares
authorized, 26,735,988 and 23,683,630 shares issued
and outstanding, respectively 26,736 23,683
Due from shareholders for sale of company stock (205,922) (225,922)
Additional paid-in capital 2,713,366 2,015,357
Accumulated deficit (2,673,106) (2,002,926)
-------------- --------------
Total Stockholders' - Deficit (138,926) (189,808)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' - DEFICIT $ 511,204 146,403
============== ==============
</TABLE>
See accompanying notes to financial statements and accountants' review report
F-3
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
Three and Six Months Ended August 31, 2000 and 1999
Three months ended Six months ended
August 31, August 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 20,194 46,781 38,401 102,490
Less cost of goods sold 5,703 24,236 10,161 35,945
------------ ------------ ------------ ------------
Gross Profit 14,491 22,545 28,240 66,545
EXPENSES:
General and Administrative Expenses 306,557 157,512 289,954 285,296
Services provided for common stock - 400 363,388 69,292
Depreciation 5,560 3,400 11,066 6,800
Interest 33,860 3,131 36,608 3,131
------------ ------------ ------------ ------------
Total Expenses 345,977 164,443 701,016 364,519
------------ ------------ ------------ ------------
NET LOSS FROM OPERATIONS (331,486) (141,898) (672,776) (297,974)
OTHER INCOME:
Interest 121 - 123 -
Other 1,963 838 2,473 838
------------ ------------ ------------ ------------
NET LOSS BEFORE INCOME TAXES $ (329,402) (141,060) (670,180) (297,136)
PROVISION FOR INCOME TAXES $ - - - -
------------ ------------ ------------ ------------
NET LOSS $ (329,402) (141,060) (670,180) (297,136)
============ ============ ============ ============
NET LOSS PER COMMON SHARE:
Weighted Average Shares Outstanding:
Basic 26,971,503 15,733,955 25,631,642 12,871,606
Diluted 26,971,503 15,733,955 25,631,642 12,871,606
Net Loss per Common Share:
Basic (.012) (.009) (.026) (.023)
Diluted (.012) (.009) (.026) (.023)
</TABLE>
See accompanying note to financial statements and accountants' review report.
F-4
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
Six Months Ended August 31, 2000
Paid - In
Common Stock Capital in
------------ Excess of Accumulated
Shares Amount Par Value Deficit
------ ------ --------- -------
<S> <C> <C> <C> <C>
Balance, February 29, 2000 23,683,630 $ 23,683 2,015,357 (2,002,926)
Issuance of common stock for services at
various dates 2,152,358 2,153 361,235 -
Issuance of common stock for cash at
various dates 900,000 900 309,600 -
Net loss for six months ended
August 31, 2000 - - - -
Beneficial note conversion feature - - 27,174 -
---------- ---------- ---------- ----------
Balance August 31, 2000 26,735,988 $ 26,736 (2,713,366) (2,673,106)
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements and accountants' review report.
F-5
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended August 31, 2000 and 1999
2000 1999
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (670,180) (297,136)
Non cash items included in net loss:
Services paid in stock 363,388 69,292
Depreciation 11,065 6,800
Interest expense on convertible note conversion
feature 27,174 -
Changes in assets and liabilities:
(Increase) in prepaid expenses (6,164) (9,634)
(Increase) decrease in accounts receivable 18,632 (55,810)
(Decrease) increase in accounts payable 12,838 (1,622)
Increase in advances payable - 8,020
--------------- --------------
Net Cash Flows used in Operating Activities (243,246) (280,090)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in investment in software development (401,167) -
Purchase of equipment (5,750) (29,782)
--------------- --------------
Net Cash Flows used in Investing Activities (406,917) (29,782)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from sale of stock 310,500 198,000
Stockholder loans, net 20,000 34,850
Proceeds from long-term debt 250,000 -
Payment of long-term debt (906) -
--------------- --------------
Net Cash Flows from Financing Activities 631,581 232,850
--------------- --------------
NET DECREASE IN CASH (18,582) (77,022)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 31,171 77,695
--------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,589 673
=============== ==============
SUPPLEMENTAL INFORMATION:
CASH PAID DURING THE PERIOD FOR INTEREST $ 7,693 3,131
=============== ==============
</TABLE>
See accompanying notes to financial statements and accountants' review report.
F-6
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
Schedules of General and Administrative Expenses (Unaudited)
Three and Six Months Ended August 31, 2000 and 1999
Three months ended Six months ended
August 31, August 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Accounting $ 10,050 $ 1,000 $ 14,050 $ 1,000
Taxes and licenses 474 94 1,010 114
Consulting fees 14,598 69,957 38,098 110,505
Postage and deliveries 1,255 1,363 1,464 2,946
Salaries and wages 170,691 38,966 58,764 63,080
Insurance 5,334 5,744 12,263 8,521
Investor relations 528 787 2,102 1,177
Legal 32,061 13,373 39,889 18,559
Maintenance and repairs 2,654 96 1,493 611
Marketing - 3,341 1,750 3,541
Meals and entertainment 5,290 - 6,396 151
Office Supplies and expense 20,804 2,662 27,087 4,986
Rental equipment - 2,527 3,079 2,527
Tools and small equipment 2,543 362 5,099 2,298
Telephone 1,162 8,078 5,051 15,958
Travel 561 8,738 5,823 46,371
Rent 5,748 - 21,776 2,310
Utilities - - 219 138
Other Expenses 32,804 424 44,541 503
---------- ---------- ---------- ----------
Total General and Administrative
Expenses $ 306,557 $ 157,512 $ 289,954 $ 285,296
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements and accountants' review report.
F-7
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO REVIEWED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Business Operations Commercial Concepts, Inc.creates proprietary software
platforms. From these platforms individual internet related database software
products are developed. As each product completes beta testing the Company seeks
a distribution partner to market and provide ongoing support for the product.
The Company has elected a February fiscal year end for accounting and reporting
purposes.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
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.
Capitalization of Software Development Costs - 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. Amortization expense of
capitalized software costs has not been provided for in the accompanying
statements of operations because the software products are not available as yet
for sale to customers.
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
liabilities.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates the continuation of
the Company as a going concern
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. On or about July 18,
2000, the company initiated a $6,500,000 equity line of credit with a private
investment group (see Note 7). The equity line of credit will be formalized upon
Securities and Exchange Commission acceptance of the Company's SB-2 registration
statement. Management believes that the actions presently being taken will
provide the opportunity for the Company to continue as a going concern.
F-8
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO REVIEWED FINANCIAL STATEMENTS
NOTE 4 - INCOME TAXES
Deferred tax assets at August 31, 2000 consisted of the following:
Deferred tax asset arising from:
Net operating loss carryforwards $ 623,431
Less allowance valuation at 100% (623,431)
-----------
Deferred tax asset $ NONE
===========
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
----------- --------- -----
2001 $ 8,617 1,364
2002 14,355 249,924
2007 548 221,790
2008 115 457,099
2009 123 831,904
2010 3,863 -
2011 1,464 -
2012 250,024 -
2013 221,890 -
2019 457,199 -
2020 832,004 -
------- --------
$1,790,202 1,762,081
========== =========
NOTE 5 - CURRENT AND LONG - TERM DEBT
Long
Current Term Total
Advances payable by shareholder, at 15%
interest annually. No repayment terms
have been established. No note has been
executed for this advance. $ 3,999 - $ 3,999
Note payable to individual dated June
15, 2000 at 10% interest annually, due
December 15, 2000 42,988 - 42,988
Note payable to shareholder, dated June
22, 2000, at 15% interest annually, due
December 22, 2000. 20,000 - 20,000
Note payable to shareholder, dated
August 28, 2000, at 15% interest
annually, due August 28, 2001. 10,000 - 10,000
Note payable to individual, dated June
22, 2000, at 10% interest annually, due
December 22, 2000. Terms include option
to convert into 200,000 shares of Common
stock at $.10 per share. 20,000 - 20,000
Convertible note payable (see Note 7) - $251,769 251,769
Obligations under capital leases (see Note 9) 4,514 14,757 19,271
-------- -------- --------
$101,501 $266,526 $368,027
======== ======== ========
F-9
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO REVIEWED FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE CONTINUED
Long term debt at August 31, 2000 is scheduled to mature as follows:
2001 101,501
2002 4,514
2003 256,463
2004 4,514
2005 1,035
--------
Total 368,027
--------
NOTE 6 - LOANS RECEIVABLE FROM SHAREHOLDERS FOR SALE OF COMPANY STOCK
The following summarizes receivable amounts due to the company for sale of
company stock:
2,000,000 shares issued May 5, 1999 to a company officer
valued at $.06 per share $ 120,000
1,598,000 shares issued August 9, 1999 to a company
officer, valued at $.06 per share. Remaining balance due 80,880
42,000 shares issued August 9, 1999 to a shareholder
valued at par value of stock 42
400,000 shares issued May 31, 2000 to a shareholder,
valued at $.5288 per share. Remaining Balance due 5,000
---------
$ 205,922
=========
NOTE 7 - CONVERTIBLE NOTES PAYABLE
On or about July 18, 2000 The Company issued to a private investment group a
$250,000, 6% convertible note due July 20, 2003. The note is convertible into
common shares of the Company based upon the three lowest closing prices for the
Company during the thirty trading days prior to the date of the note, or the
three lowest closing prices during the sixty trading days prior to the
conversion date. In accordance with Emerging Issues Task Force No. 98-5, The
Company recorded interest expense of $27,174 and a corresponding increase to
additional paid-in capitol during the six months ended August 31, 20000, in
connection with the beneficial conversion feature. The Company retains a
redemption clause in the note that allows the Company to repurchase the note
upon payment of 130% of the note's face value, plus accrued interest. In
addition, 850,000 five-year warrants were issued for shares of the Company's
common stock at an exercise price of $0.4375, which approximates the fair market
value of the Company's common stock. This convertible note is part of a
$6,500,000 equity line of credit (see Note 3). The entire line will become
available to the Company upon successful registration by the Company of an SB-2
filing with the Securities and Exchange Commission. An additional $250,000
convertible note became available to the Company upon filing of the SB-2
documents on September 14, 2000. An additional 850,000 five year warrants were
also issued for shares of the Company's common stock at an exercise price of
$.1925.
F-10
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO REVIEWED FINANCIAL STATEMENTS
NOTE 8 - RELATED PARTY TRANSACTIONS
On or about April 18, 2000 L&B Charitable Trust purchased 500,000 restricted
common shares of the Company for $100,000. The purchase price also included
two-year warrants to purchase an additional 500,000 common shares of the Company
at an exercise price of $0.50 in the first year and $0.75 in the second year.
On May 31, 2000, the company issued 500,000 restricted shares of company stock
to an officer of the Company for services, valued at $.20 per share, for a total
of $100,000.
On August 16, 2000, the Company issued a total of 97,306 restricted shares of
company stock to three officers of the company for services, valued at $ .281
per share for a total of $27,343.
NOTE 9 - LEASE COMMITMENTS
As of August 31, 2000, the Company leased office space and certain equipment
under various noncancelable operating and capital leases. Future minimum lease
payments required under the operating and capital leases are as follows:
Operating Capital
Leases Leases
2001 ................................... $ 74,451 $ 8,064
2002 ................................... 77,421 8,064
2003 ................................... 80,514 8,064
2004 ................................... 62,181 8,064
2005 ................................... - 2,181
------------ --------
Total minimum lease payments $ 294,567 34,437
============
Less amount representing interest 15,166
------
Present value of net minimum lease payments 19,271
Less current portion 4,514
--------
Total $ 14,757
========
As of August 31, 2000, the Company has equipment purchased under noncancelable
capital leases with a cost of $22,570 and accumulated amortization of $3,300.
F-11
<PAGE>
COMMERCIAL CONCEPTS, INC.
FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
FEBRUARY 29, 2000, AND FEBRUARY 28, 1999 AND 1998
WITH ACCOUNTANTS' REPORT THEREON
F-12
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
of Commercial Concepts, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Commercial Concepts, Inc. (a
Utah corporation) as of February 29, 2000, and February 28, 1999, and the
related statements of operations, stockholders' equity, and cash flows for the
years 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 audits. The financial statements and
supplementary information of Commercial Concepts, Inc. as of February 28, 1998
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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits 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 29, 2000 and February 28, 1999, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements as of February 29, 2000, 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, LLC
Fitzgerald Sanders, LLC
Salt Lake City, Utah
May 17, 2000
F-13
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
BALANCE SHEETS
February 29, 2000 and February 28, 1999
ASSETS 2000 1999
-------------- --------------
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 31,171 77,695
Accounts receivable 37,811 -
Due from officer - 12,340
Inventory - 4,500
Prepaid expenses 6,991 -
-------------- --------------
Total current assets 75,973 94,535
-------------- --------------
EQUIPMENT
Equipment 86,140 38,033
Leasehold improvements 7,000
Less: accumulated depreciation (22,810) (7,213)
Net property and equipment 70,330 30,820
-------------- --------------
OTHER ASSETS
Software marketing rights 100 100
-------------- --------------
TOTAL ASSETS $ 146,403 125,455
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 106,902 55,661
Accrued expenses 162,363 -
Long-term debt - short term 49,514 -
-------------- --------------
Total Current Liabilities 318,779 55,661
-------------- --------------
Long term debt 17,432 -
-------------- --------------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value, 50,000,000 shares
authorized, 23,683,630, and 9,136,280 shares
issued and outstanding, respectively 23,683 9,136
Stock subscriptions receivable (225,922) -
Additional paid-in capital 2,015,357 1,231,580
Accumulated Deficit (2,002,926) (1,170,922)
-------------- --------------
Total Stockholders' Equity (189,808) 69,794
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 146,403 125,455
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-14
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF OPERATIONS
Years Ended February 29, 2000, and February 28, 1999 and 1998
2000 1999 1998
------------- ------------- -------------
REVENUES:
<S> <C> <C> <C>
Sales $ 261,263 64,657 -
------------- ------------- -------------
Total Revenues 261,263 64,657 -
Less cost of goods sold 81,797 31,336 -
------------- ------------- -------------
Gross Profit 179,466 33,321 -
------------- ------------- -------------
EXPENSES
General and Administrative expenses 630,997 360,571 46,751
Services provided for common stock 239,402 121,275 -
Bad Debts 55,770 - -
Depreciation 15,597 6,203 24,421
Abandoned Acquisitions 80,000 - 83,600
African project-funds transferred
to other members of venture - - 43,357
------------- ------------- -------------
Total Expenses 1,021,766 488,049 198,129
------------- ------------- -------------
NET LOSS FROM OPERATIONS (842,300) (454,728) (198,129)
OTHER INCOME (EXPENSE)
Miscellaneous income 15,806 - 1,244
Interest income - 159 19
Interest expense (5,510) (2,630) -
------------- ------------- -------------
NET LOSS $ (832,004) (457,199) (196,866)
============= ============= =============
LOSS PER SHARE $ (.05) (.08) (0.04)
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-15
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended February 29, 2000, and February 28, 1999 and 1998
Paid - In
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 2,472,850 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 9,136,280 $ 9,136 1,231,580 (1,170,922)
</TABLE>
The Accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended February 29, 2000, and February 28, 1999 and 1998 (Continued)
Paid - In
Common Stock Capital in
------------ Excess of Accumulated
Shares Amount Par Value Deficit
------ ------ ---------- -------
<S> <C> <C> <C> <C>
Balance February 28, 1999 9,136,280 $ 9,136 1,231,580 (1,170,922)
Issuance of common stock
for acquistions 700,000 700 79,600 -
Issuance of common stock for repayment
of loans 100,000 100 - -
Litigation settlement, Note 11 360,000 360
Issuance of common stock for cash at
various dates during the year 2,400,000 2,400 330,600 -
Issuance of common stock for services at
various dates during the year 10,987,350 10,987 373,577 -
Net loss for the year ended
February 29, 2000 - - - (832,004)
---------- --------- --------- ----------
Balance, February 29, 2000 23,683,630 $ 23,683 2,015,357 (2,002,926)
========== ========= ========= ==========
</TABLE>
The Accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC
STATEMENTS OF CASH FLOWS Years
Ended February 29, 2000, and February 28, 1999 and 1998
2000 1999 1998
----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) from current operations $ (832,004) $ (457,199) $ (196,866)
Items not requiring current cash flows: - - -
Services paid in stock 239,402 121,275 -
Decrease in officer loans paid in stock - 28,929 -
Depreciation 15,597 6,203 24,421
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 prepaid expense (6,991) - -
(Increase) in accounts receivable (37,811) - -
(Increase) in inventory 4,500 (4,500) -
(Increase) decrease in stock sales
receivable - - 30,023
(Decrease) increase in accounts payable 51,241 46,561 8,382
(Decrease) increase in accrued expenses 162,363 - (7,488)
Increase (decrease) in franchise taxes - (905) 100
----------- ----------- ------------
Net Cash Flows used in Operating Activities (403,703) (254,251) (42,121)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (32,537) (11,831) (7,850)
----------- ----------- ------------
Net Cash Flows used in Investing Activities (32,537) (11,831) (7,850)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from sale of stock and capital
contributions 333,000 311,800 21,000
Increase in stockholder loans 45,000 - -
Stockholder loan repayment 12,340 - -
Stockholder loans (624) 31,256 4,725
----------- ----------- ------------
Net Cash Flows from Financing Activities 389,716 343,056 25,725
----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF CASH FLOWS (Continued)
Years Ended February 29, 2000, and February 28, 1999 and 1998
2000 1999 1998
----------- ----------- ------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH $ (46,524) 76,974 (24,246)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 77,695 721 24,967
----------- ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 31,171 $ 77,695 721
=========== =========== ============
SUPPLEMENTAL INFORMATION:
CASH PAID FOR:
Interest $ 5,510 $ 2,630 -
=========== =========== ============
Income taxes $ 100 $ 100 100
=========== =========== ============
NON CASH TRANSACTIONS
Shares issued to pay for services $ 384,564 $ 116,150 -
=========== =========== ============
Shares conveyed to officers for loan
repayments $ - $ 28,929 21,092
=========== =========== ============
Shares issued for software and documentation $ - $ - 100
=========== =========== ============
Equipment purchased for debt $ 25,570 $ - -
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-19
<PAGE>
AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
Our report on our audits of the basic financial statements of Commercial
Concepts, Inc. for February 29, 2000 and February 28, 1999 appears on page 2.
These audits were 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 audits 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.
/s/ Fitzgerald Sanders, LLC
Salt Lake City, Utah
May 17, 2000
F-20
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS INC.
Schedule of General and Administrative Expense
Years Ended February 29, 2000, and February 28, 1999 and 1998
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Accounting $ 11,735 6,353 4,880
Bank Charges 1,002 2,091 622
Taxes and licenses 14 1,798 -
Consulting fees 387,857 16,090 26,211
Education and seminars - - 64
Postage and deliveries 3,314 1,058 -
Salaries and wages - 131,765 -
Liability insurance 783 - -
Health insurance 22,664 - -
Investor relations 1,912 - 1,292
Janitorial - - -
Laboratory supplies - - -
Legal 53,641 57,862 5,700
Maintenance and repairs 3,288 3,385 81
Marketing 5,214 40,999 5,000
Meals and entertainment 2,339 - -
Office lease 27,786 - 1,340
Office supplies and expense 3,787 8,346 78
Rental equipment 11,648 - -
Subcontractors - - -
Tools 5,582 1,755 424
Telephone 27,911 21,348 105
Travel 52,148 24,751 594
Rent - 31,247 -
Utilities 394 859 250
Other Expenses 6,257 10,864 10
State franchise tax 100 100 100
----------- ----------- -----------
Total general and administrative expense $ 629,376 $ 360,571 46,751
=========== =========== ===========
</TABLE>
F-21
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Business Operations The Company creates proprietary software platforms. From
these platforms individual internet related database software products are
developed. As each product completes beta testing the Company seeks a
distribution partner to market and provide ongoing support for the product.
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
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 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.
Due to operating losses no provision for deferred income taxes has been made.
Inventories - Inventories are stated at the lower of cost or market on a
first-in, first-out basis. Inventories consist of packaged software and related
packaging supplies, for the period ending February 28, 1999.
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.
F-22
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999, CONTINUED
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
liabilities
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-23
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 CONTINUED
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
Deferred tax assets and deferred tax liability comprise the following at
February 29, 2000 and February 28, 1999.
2000 1999
---- ----
Deferred tax asset:
Net operating loss carryforwards $ 623,431 340,550
Deferred tax liability
Excess tax depreciation - -
Net deferred tax benefit before allowance Valuation (623,431) 340,550
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
----------- --------- -----
2001 $ 8,617 1,364
2002 14,355 249,924
2007 548 221,790
2008 115 457,099
2009 123 831,904
2010 3,863 -
2011 1,464 -
2012 250,024 -
2013 221,890 -
2019 457,199 -
2020 832,004 -
------- ----------
$1,790,202 $1,762,081
========== ==========
F-24
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 CONTINUED
NOTE 6 - NOTES PAYABLE
Long
Current Term Total
------- ---- -----
Note payable to individual, dated August 16,
1999, due February 12, 2000, with interest at
10% annually. Includes conversion option to
exchange for 100,000 shares of restricted
Company stock. Holders intends to exercise
conversion option. $ 15,000 - 15,000
Note payable to individual, dated August 16,
1999, due February 12, 2000, with interest at
10% annually. Terms include conversion option
to exchange 40,000 shares of Company stock.
Holder intends to exercise conversion option. 10,000 - 10,000
Note payable to individual, dated December 9,
1999, due December 9, 2000 at 10% interest
annually. Terms include option to convert
200,000 shares of Company stock. 20,000 - 20,000
Obligations under capital leases 4,514 17,432 21,946
-------- ------ ------
$ 49,514 17,432 66,946
======== ====== ======
Long term debt at February 29, 2000 is scheduled to mature as follows:
2001 49,514
2002 4,514
2003 4,514
2004 4,514
2005 3,890
NOTE 7 - 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 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.
F-25
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 CONTINUED
NOTE 7 - PURCHASE OF ADVICE PRODUCTIONS, INC. (CONTINUED)
Effective February 29, 2000 the Company dissolved Advice Productions. The
Company entered into a Settlement and General Release with the prior owner of
Advice Productions, which, among other matters, dissolved any employment
relationship between the parties. The Settlement and General Release provided
for a recapture by the Company of 600,000 shares of restricted Company common
stock valued at $.20 per share. Of the $200,000 goodwill recorded by the Company
as a result of the original acquisition of Advice Productions, $80,000 was
expensed in the period ending February 29, 2000. The remaining $120,000 of
goodwill was reversed to record the recapture and retirement by the Company of
600,000 Shares of restricted common stock.
NOTE 8- 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.
Effecive October 12, 1999, V. Kelly Randall resigned as Secretary Treasurer. On
October 12, 1999 the Board of Directors appointed Scott Adamson as Secretary
Treasurer. On February 15, 2000 the Board of Directors appointed Karl Hansen
Chief Financial Officer of the Company, a member of the Board of Directors and
Secretary Treasurer of the Company, following the resignation of Scott Adamson
from that position on the same day.
Effective February 29, 2000 Larry Rogers resigned from the Board of Directors.
The vacancy created by Roger's resignation was filled April 18, 2000 with the
appointment of Lee Kunz to the Board of Directors.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company has transactions with certain stockholders and officers who receive
compensation paid in the form of wages, royalties, consulting fees, and Company
stock.
On August 9, 1999, the Company issued 1,398,000 shares of restricted Company
common stock for services to an officer, valued at $.06 per share, for a total
of $83.880.
On September 15, 1999 the Company issued 4,000,000 shares of restricted Company
common stock for services to two officers, valued at $.03 per share, for a total
of $122,000.
On December 23, 1999 the Company issued 271,250 shares of restricted Company
common stock for services to two officers, valued at $.08 per share for a total
of $21,700.
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.
F-26
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 CONTINUED
NOTE 9 - RELATED PARTY TRANSACTIONS (CONTINUED)
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.
NOTE 10 - LEASE COMMITMENTS
As of February 29, 2000, the Company leased office space and certain equipment
under various noncancelable operating and capital leases. Future minimum lease
payments required under the operating and capital leases are as follows:
Operating Capital
Leases Leases
------ ------
2000 ................................... $ 73,713 $ 8,064
2002 ................................... 76,656 8,064
2003 ................................... 79,716 8,064
2004 ................................... 82,908 8,064
----------
2005 ................................... - 6,362
---------
Total minimum lease payments $312,993 38,618
========
Less amount representing interest 16,672
------
Present value of net minimum lease payments 21,946
Less current portion 4,514
---------
Total $ 17,432
=========
As of February 29, 2000, the Company has equipment purchased under noncancelable
capital leases with a cost of $22,570 and accumulated amortization of $1,042.
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.
F-27
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 CONTINUED
NOTE 11 - LITIGATION SETTLEMENT
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.
F-28
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997
WITH
INDEPENDENT AUDITOR'S REPORT
F-29
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT F-31
FINANCIAL STATEMENTS
Balance Sheets F-32
Statements of Operations F-33
Statement of Stockholders' Equity F-34-36
Statements of Cash Flows F-37-38
Notes to Financial Statements F-39-45
ACCOMPANYING INFORMATION
Independent Auditor's Report on supplementary information F-46
Schedule of General and Administrative Expense F-47
F-30
<PAGE>
Independent Auditor's Report
Board of Directors and Stockholders
Commercial Concepts, Inc.
Salt Lake City, Utah
I have audited the accompanying balance sheets of Commercial Concepts, Inc. (a
development stage company) as of February 28, 1998 and 1997 and the related
statements of operations, stockholders' equity, and cash flows for the years
then ended and from March 1, 1992 to February 28, 1998. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits. The
financial statements of Commercial Concepts, Inc. as of February 28, 1992,
including cumulative totals from inception to February 28, 1992, were audited by
other auditors whose report dated May 7, 1992 expressed a qualified opinion on
the financial statements as to going concern.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes 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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Commercial Concepts, Inc. as of
February 28, 1998 and 1997 and the results of its operations and its cash flows,
for the years then ended and from March 1, 1992 to February 28, 1998 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has suffered recurring losses from operations
and has limited working capital. These factors raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ David T. Thompson P.C.
David T. Thompson P.C.
Salt Lake City, Utah
March 11, 1998
F-31
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
BALANCE SHEETS
February 28, February 28,
ASSETS 1998 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash in bank $ 721 $ 24,967
Deposit 5,385 -
Due from officer - 1,750
Receivable, less bad debt allowance of $175,000 - -
Promissory note, less bad debt allowance of $20,000 - -
Stock sales receivable - 30,023
------------- -------------
Total current assets 6,106 56,740
------------- -------------
BUILDING AND EQUIPMENT
Building - 313,998
Equipment 26,202 91,790
------------- -------------
26,202 405,788
Less: accumulated depreciation (1,010) (9,333)
------------- -------------
Property and equipment - net 25,192 396,455
------------- -------------
OTHER ASSETS
Software marketing rights 100 -
Sand and gravel rights - -
------------- -------------
Total other assets 100 -
------------- -------------
TOTAL ASSETS $ 31,398 $ 453,195
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,100 $ 718
Accrued liabilities - 7,488
Franchise taxes payable 905 805
Stockholders' loans 2,975 -
Mortgage payable - 250,000
------------- -------------
Total Current Liabilities 12,980 259,011
------------- -------------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value, 50,000,000 shares authorized,
4,803,403, and 4,700,930 shares issued and outstanding respectively 4,803 4,701
Additional paid-in capital 727,338 706,340
Earnings (Deficit) accumulated during the development stage (713,723) (516,857)
------------- -------------
Total Stockholders' Equity 18,418 194,184
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,398 $ 453,195
============= =============
</TABLE>
The accompanying notes are an intergral part of these financial statements.
F-32
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From the Date
of Inception
For the Year For the Year (March 1, 1984)
Ended Ended Through
February 28, February 28, February 28,
1998 1997 1998
------------ ------------ --------------
<S> <C> <C> <C>
REVENUE
Land sales $ - $ - $ 36,297
------------ ------------ --------------
Total Revenues - - 36,297
------------ ------------ --------------
Cost of goods sold - - 14,164
------------ ------------ --------------
Gross Profit - - 22,133
------------ ------------ --------------
EXPENSES
Amortization - - 50
General and Administrative 46,751 204,617 348,942
African project-funds transferred
to other members of venture 43,357 35,025 78,382
Bad debt - 198,000 198,000
Depreciation 24,421 9,333 33,754
Loss on building reconveyance and
equipment abandonment 83,600 - 83,600
------------ ------------ --------------
Total Expenses 198,129 446,975 742,728
------------ ------------ --------------
NET INCOME (LOSS) FROM OPERATIONS (198,129) (446,975) (720,595)
OTHER INCOME (EXPENSE)
Miscellaneous income 1,244 2,010 3,254
Interest 19 806 3,721
Interest expense - (75) (103)
------------ ------------ --------------
NET INCOME (LOSS) $ (196,866) $ (444,234) $ (713,723)
============ ============ ==============
EARNINGS (LOSS) PER SHARE $ (0.04) $ (0.12) $ (0.98)
============ ============ ==============
</TABLE>
The accompanying notes are an intergral part of these financial statements.
F-33
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION (MARCH 1, 1984) THROUGH FEBRUARY 28, 1998
Common Stock Capital in
------------------------ Excess of Accumulated Treasury
Shares Amount Par Value Deficit Stock
------------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, March 1, 1984 - $ - $ - $ - $ -
Shares issued to directors for cash, at inception 328,000 328 9,672 - -
Shares issued in public offering 1,000,000 1,000 99,000 - -
Shares issued to directors for land 4,402,000 4,402 262,973 - -
Net income (loss) for the year ended
February 28, 1985 - - - (45,842) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1985 5,730,000 5,730 371,645 (45,842) -
Net income (loss) for the year ended
February 28, 1986 - - - (16,211) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1986 5,730,000 5,730 371,645 (62,053) -
Net income (loss) for the year ended
February 28, 1987 - - - (14,355) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1987 5,730,000 5,730 371,645 (76,408) -
Net income (loss) for the year ended
February 28, 1988 - - - (5,298) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1988 5,730,000 5,730 371,645 (81,706) -
Net income (loss) for the year ended
February 28, 1989 - - - 7,594 -
--------- ------ -------- --------- --------
BALANCE, February 28, 1989 5,730,000 5,730 371,645 (74,112) -
Purchase of treasury stock at cost - - - - 313,183
--------- ------ -------- --------- --------
Net income (loss) for the year ended
February 28, 1990 - - - (1,675) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1990 5,730,000 5,730 371,645 (75,787) 313,183
Net income (loss) for the year ended
February 28, 1991 - - - 9,397 -
--------- ------ -------- --------- --------
BALANCE, February 28, 1991 5,730,000 5,730 371,645 (66,390) 313,183
Net income (loss) for the year ended
February 28, 1992 - - - (548) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1992 5,730,000 $5,730 $371,645 $ (66,938) $313,183
--------- ------ -------- --------- --------
Continued page 5
The accompanying notes are an intergral part of these financial statements.
F-34
<PAGE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION (MARCH 1, 1984) THROUGH FEBRUARY 28, 1998
Common Stock Capital in
------------------------ Excess of Accumulated Treasury
Shares Amount Par Value Deficit Stock
------------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, February 28, 1992 5,730,000 $ 5,730 $371,645 $ (66,938) $313,183
Prior period adjustment to correct error 386,039 386 (386) - -
--------- ------ -------- --------- --------
REVISED BALANCE, February 28, 1992 6,116,039 6,116 371,259 (66,938) 313,183
Cancel shares held in treasury May 1992 (2,621,200) (2,621) (310,562) - (313,183)
Reverse split of common stock on a 1 for 10
basis May 1992 (3,183,959) (3,184) 3,184 - -
Contributed capital during fiscal year ended
February 28, 1993 - - 15 - -
Net income (loss) for the year ended
February 28, 1993 - - - (115) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1993 310,880 311 63,896 (67,053) -
Contributed capital during fiscal year 1994 - - 15 - -
Net income (loss) for the year ended
February 28, 1994 - - - (223) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1994 310,880 311 63,911 (67,276) -
Contributed capital during fiscal year ended
February 28, 1995 - - 25 - -
Net income (loss) for the year ended
February 28, 1995 - - - (3,863) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1995 310,880 311 63,936 (71,139) -
Net income (loss) for the year ended
February 28, 1996 - - - (1,484) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1996 310,880 $ 311 $ 63,936 $ (72,623) $ -
--------- ------ -------- --------- --------
Continued page 6
The accompanying notes are an intergral part of these financial statements.
F-35
<PAGE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION (MARCH 1, 1984) THROUGH FEBRUARY 28, 1998
Common Stock Capital in
------------------------ Excess of Accumulated Treasury
Shares Amount Par Value Deficit Stock
------------- ---------- ------------ ------------- -------------
<S> <C> <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 1996 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 stock for cash at approx-
imately $2.02 per share, February 1997 98,000 98 197,607 - -
Direct costs of common stock offering and
common stock issuance - - (39,419) - -
Net income (loss) for the year ended,
February 28, 1997 - - - (444,234) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1997 4,700,930 4,701 706,340 (516,857) -
Acquisition of treasury shares at cost,
July 1997, 400,000 shares - - - - -
Issue of shares at cost on acquisition of
sand and gravel rights - - - - -
Issuance of shares for software and documentation
at par value ($.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 income (loss) for the year ended,
February 28, 1998 - - - (196,866) -
--------- ------ -------- --------- --------
BALANCE, February 28, 1998 4,803,430 $4,803 $727,338 $(713,723) $ -
--------- ------ -------- --------- --------
</TABLE>
The accompanying notes are an intergral part of these financial statements.
F-36
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From the Date
of Inception
For the Year For the Year (March 1, 1984)
Ended Ended Through
February 28, February 28, February 28,
1998 1997 1998
-------------- -------------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from current operations $ (196,866) $ (444,234) $ (713,723)
Items note requiring current cash flows
Services paid in stock - 4,200 4,200
Amortization - - 50
Depreciation 24,421 9,333 33,754
Loss on building reconveyance 83,600 - 83,600
Assets conveyed to individuals as compensation 21,092 - 21,092
Changes in assets and liabilities
(Increase) in deposits (5,385) - (5,385)
(Increase) in due to officer - (1,750) (1,750)
(Increase) in receivable - (175,000) (175,000)
Increase in receivable bad debt allowance - 175,000 175,000
(Increase) in promissory note - (20,000) (20,000)
Increase in promissory note bad debt allowance - 20,000 20,000
(Increase) decrease in stock sales receivable 30,023 (30,023) -
(Decrease) increase in accounts payable 8,382 (7,098) 9,100
(Decrease) increase in accrued liabilities (7,488) 7,488 -
Increase in franchise taxes 100 245 905
--------- ---------- -----------
Net Cash Flows (used) in Operating Activities (42,121) (461,839) (568,157)
--------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs - - (50)
Purchase of building and equipment (7,850) (405,788) (413,638)
--------- ---------- -----------
Net Cash Flows (used) in Investing Activities (7,850) (405,788) (413,688)
--------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from sale of stock and capital contributions 21,000 682,013 1,080,443
Cost of stock sales and stock offerings - (39,419) (39,419)
Purchase of treasury stock - - (313,183)
Mortgage payable on building - 250,000 250,000
Stockholder loans 4,725 - 4,725
--------- ---------- -----------
Net Cash Flows from Financing Activities 25,725 892,594 982,566
--------- ---------- -----------
Continued on page 8
The accompanying notes are an intergral part of these financial statements.
F-37
<PAGE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From the Date
of Inception
For the Year For the Year (March 1, 1984)
Ended Ended Through
February 28, February 28, February 28,
1998 1997 1998
-------------- -------------- ---------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH (24,246) 24,967 721
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,967 - -
--------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 721 24,967 721
--------- ---------- -----------
SUPPLEMENTAL INFORMATION
NON CASH TRANSACTIONS
Shares issued to pay for services $ - $ 4,200 $ 4,200
========= ========== ===========
Assets conveyed to individuals as compensation $ 21,092 $ - $ 21,092
========= ========== ===========
Shares issued for software and documentation $ 100 $ - $ 100
========= ========== ===========
</TABLE>
The accompanying notes are an intergral part of these financial statements.
F-38
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Organization - Commercial Concepts, Inc. was incorporated in Utah on
March 1 1984. The Company has not commenced planned principal
operations but has sold its common stock to the public. To date the
Company has been unsuccessful in developing business operations from
capital raised. The Company is defined as a development stage company.
The Company has elected a February 28, fiscal year end. In November of
1997, the Company experienced a change in it's Board of Directors and
management. Under the Company's new management, the Company is now
engaged in the business of purchasing promising computer software
products and in effectively marketing and distributing them. The
Company has also acquired sand and gravel rights on 200 acres of
property located in Tooele, Utah. The Company is currently exploring
the sale and lease of those rights.
Provision For Taxes - No provision for income taxes have been made due
to operating losses. The State of Utah Franchise taxes have been shown
as operating expenses in the statements of operation. Income tax
expense includes federal and state taxes currently payable and deferred
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.
Organization Costs - The Company amortized its organization costs over
sixty (60) months using the straight-line method, commencing March 1,
1984.
Cash Equivalents - The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash
equivalents. At inception shares were issued to directors for land.
Cash has not been paid for interest or income taxes. The Company had no
noncash investing or financing activities other than the land
transaction at inception.
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.
Building and Equipment - The cost of building and 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.
NOTE 2 - PUBLIC OFFERING OF COMMON STOCK
The Company originally offered and sold 1,000,000 shares of its
authorized but unissued common 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, 1998.
F-39
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - OTHER COMMON STOCK TRANSACTIONS
In November 1988 land owned by the Company was conveyed to a
stockholder at book value for common stock of the company. In May 1992
the shares held in treasury were canceled.
On April 29, 1996 there was a change in control in the Company which
resulted from the appointment of new officers and directors of the
Company. In connection with the appointment of the new officers and
directors, the Company began a new plan of operations in the business
of smelting and refining precious metals (See Note 9). In conjunction
with the new business and change of control, the Company issued
4,000,000 common shares at par value to persons who had performed
services for the Company, developed the new plan of operations for the
Company and provided expertise to the Company in the area of precious
metal smelting and refining.
On May 1, 1996, the Company commenced a private offering of common
shares of the Company at $5.00 per share. The offering was conducted by
the Company through its officers and directors on a "best efforts"
basis, pursuant to an exemption from registration under Regulation D
and similar exemptions from registration under the laws of various
states. The Company sold a total of 92,050 shares and raised a total of
$460,250.
During 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. 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. Also during February 1997, 98,000 shares of common stock of
the Company was issued in exchange for $197,705 at an approximate price
per share of $2.02. The direct costs associated with the private
offering of stock and the February 1997 stock transaction was $34, 419.
During fiscal year 1998 and 1997 certain officers, directors and
stockholders of the company contributed capital to the Company in the
amount of $16,000 and $24,058 respectively.
During the six months ended August 31, 1997, the Company had 400,000
shares of its outstanding common stock conveyed back to it by two
stockholders. The stock was acquired at zero value or no cost for the
non performance of duties. These shares later became part of the
transaction wherein the Company issued the treasury shares to acquire
sand and gravel rights in 200 acres of property located in Tooele,
Utah. These rights were recorded at zero value on the financial
statements at February 28, 1998.
NOTE 4 - ACTIONS BY THE BOARD
In May 1992 the Company approved and executed a reverse split of common
stock on a 1 for 10 shares basis. A reorganization plan was approved in
1992 and later rescinded that same year. In August 1992, the Company
approved a new Board of Directors.
NOTE 5 - 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 date which raise substantial doubt as to the Company's
ability to continue as a going concern.
F-40
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - GOING CONCERN - CONTINUED
In view of these matters, continued existence of the Company is
dependent upon the Company's ability to develop working capital, to
meet future and current creditors' demand for payment and to attain
future profitable operations. Management believe that actions presently
being taken will provide the opportunity for the Company to continue as
a going concern.
NOTE 6 - INCOME TAX
During fiscal year-end February 28, 1998 and 1997, 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 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
Deferred tax assets:
<S> <C> <C>
Bad debt allowance $ 66,300 $ 66,300
Net operating loss carryforward 185,102 109,659
--------- ---------
251,402 175,959
Deferred tax liability
Excess tax depreciation (1,305) (573)
--------- ---------
Net deferred tax benefit before allowance 250,097 175,386
Valuation allowance (250,097) (175,386)
--------- ---------
Net deferred tax benefit $ -0- $ -0-
========= =========
</TABLE>
For tax purposes, the Company had available, at February 28, 1998 and
1997, net operating loss ("NOL") carryforwards for regular Federal
Income Tax purposes of $544,417 and $322,527 which will expire as shown
below. Valuation allowances of $250,735 and $175,386 have been
established for those tax credits which are not expected to be realized
during 1998 and 1997 respectively. During 1998 and 1997 respectively,
the allowance increased $74,711 and $150,735. The NOL Carryforwards are
as follows:
Year Amount
---- ------
2000 $ 43,418
2001 8,617
2002 14,355
2007 548
2008 115
2009 123
2010 3,863
2011 1,464
2012 250,024
2013 221,890
F-41
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - BUILDING AND EQUIPMENT
On June 10, 1996 the Company purchased a building at 269 West Brooklyn
Avenue in Salt Lake City, Utah, comprised of a total of approximately
7,200 square feet of office, laboratory and work space. The building
was formerly owned by Union Assay Office, Inc. and was used for the
purpose of assaying material for precious metals. In connection with
the purchase, the Company acquired all of the equipment used by Union
Assay Office, Inc. The total purchase price for the building and
equipment was $300,000. The terms of the purchase was payment of
$50,000 paid at closing and the balance of $250,000 to be paid one year
after closing. The purchase was an arms length transaction.
Due to the expenses associated with the African project (See note 9)
and limited available operating capital during June of 1997 and because
Union Assay Corporation had not fulfilled the terms of the Purchase
Agreement, namely, they had not provided to the Company a statement
indicating that the Property had been examined for hazardous substances
and that no hazardous substances existed on the Property, and that
Union Assay Corporation would indemnify the Company should any
environmental liability result from the possession and ownership of the
building, the Company rescinded the Purchase Agreement and reconveyed
the building to Union Assay Corporation.
Improvements to the building paid by the Company were left with the
building in the reconveyance and the down payment of $50,000 paid at
the time of purchase was expensed. Certain Lab equipment was also left
with the building when it was reconveyed. During this same period of
time, the Company determined the retrieval of Company assets in Ghana
would not be cost effective and thus the equipment of the Company in
Ghana was abandoned. The total cost of the reconveyance of the building
and the abandonment of equipment was $83,600.
At the same time as the building reconveyance transaction, management
paid certain individuals associated with the smelting and refining
project compensation by giving Company assets to them. Lab and office
equipment was given individuals working with the Company as
compensation for services rendered. The depreciated cost or fair market
value of the equipment given was approximately $21,098.
NOTE 8 - BAD DEBT
On June 10, 1996 the Company added a certified public accountant as a
signatory to the bank account of the Company who was also a manager of
Northlake/Smith Proprietary, L.L.C. Without authorization from the
board of directors of the Company, during the period between June 10,
1996 and July 31, 1996, the accountant removed approximately $175,000
from the Company's account and deposited it into the account of
Northlake/Smith Proprietary, L.L.C. At the present time, management
believes that some of the funds taken were used to pay legitimate
expenses of the Company and that the balance was used to enrich the
members and managers of Northlake/Smith Proprietary, L.L.C. personally
or to further the business activities of Northlake/Smith Proprietary,
L.L.C.
F-42
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - BAD DEBT - CONTINUED
Management has notified the office of the Utah State Attorney General
about the activities of the Principals of Northlake/Smith Proprietary,
L.L.C. Management intends to pursue recovery of the funds taken from
the Company. The Principals of Northlake/Smith Proprietary, L.L.C.
through legal counsel have indicated an interest to repay the funds
taken. Management is also aware that the person responsible for taking
the funds might not have sufficient assets to repay the Company even if
a restitution order or judgment is obtained by the Company. Since no
assurance can be given that the funds will be recovered and since there
is a substantial possibility that the amounts taken will not be
recovered management of the Company has set-up a bad debt allowance for
possible uncollectibility of $175,000.
Management of the Company had agreed to issue common shares of the
Company in exchange for proprietary processes and chemical formulas for
precious metal production and refining to be acquired from
Northlake/Smith Proprietary, L.L.C. and its affiliates. Despite
repeated requests for the delivery and disclosure of the processes and
chemical formulas by the Company's management, no disclosure or
delivery was ever made. Therefore, on July 31, 1996, management
terminated the Company's relationship with Northlake/Smith Proprietary,
L.L.C. and instructed the transfer agent of the Company to void all
share certificates in the name of Northlake/Smith Proprietary, L.L.C.
and its affiliates which were being held for the Company by its
transfer agent. No share certificates were ever delivered by the
Company or its agents to Northlake/Smith Proprietary, L.L.C. or any of
its affiliates.
On August 30, 1996, the Company loaned $25,000 to Larry D. Rogers (See
Note 9). The amount loaned was due upon demand with an interest rate of
7% and secured by real property owned by Mr. Rogers. Mr. Rogers repaid
$5,000 of loan leaving a balance due of $20,000. Management has also
decided to set-up a bad debt allowance for possible uncollectibility of
this debt in the amount of $20,000.
The total of the two bad debt items previously discussed is $195,000
and is shown as a line item expense on the Statements of Operation for
1997 along with additional bad debt of $3,000 for a total bad debt of
$198,000 for the year 1997.
NOTE 9 - SMELTING AND REFINING CONTRACTS AND AFRICAN PROJECT
On August 29, 1996, the Company entered into a contract with Larry D.
Rogers for the smelting and refining of gold concentrates. The gold
concentrates were to come from a gold concession in Africa operated by
Mr. Rogers' company Tribal Gold, Ltd. The Company was to retain 10% of
all values recovered from the concentrates as payment for the services
performed by the Company. The Company intended to retain the precious
metals for use by the Company in its other smelting and refining
activities.
On November 1, 1996, the Company entered into a contract with David R.
High, d.b.a., Royalty Metals (Royalty) for the smelting and refining of
all precious metals extracted by Royalty and/or Bonsa Abawye Miners
Associates from its concession or ore acquired from other concessions
in Ghana, Africa. A Royalty was granted or sold to the Company for a
30% ownership interest in all precious metals delivered to the Company
from the above contract.
F-43
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - SMELTING AND REFINING CONTRACTS AND AFRICAN PROJECT - CONTINUED
The Company from November 1996 to February 1997 expanded its
involvement in the African Project adding to the Company the
responsibility as mine site co-manager for the mining concession held
by Royalty and to work in conjunction with Albritco Ltd., Canada an
additional member involved in the Royalty concession. As co-manager the
Company was to provide geological services to develop a plan of
operation for the mine site and to use its best efforts to develop a
refining and/or smelting process and facility for the extraction of
precious metals, at competitive rates, from ore concentrates obtained.
Difficulties with the local tribal leaders, internal working conditions
and inclimate weather led the Company to abandon its efforts in Ghana.
Management has decided to expense all costs associated with these
projects. Expenses associated with the above are shown as African
Project expenses in the accompanying financial statements.
NOTE 10 - COMMITMENTS
In association with its new business direction, the Company in February
1998 leased office space for $2,885 per month for 12 months and has an
option to purchase the leased space for $225,000 with a down payment of
$22,500, the balance to be amortized over (20) years at 9.75%, and a
balloon payment at the end of twenty-four (24) months for the remaining
balance.
The Company has committed to issue 16,000 shares of common stock in the
first quarter of 1998 to the individual who contributed $16,000 to the
Company in January and February of 1997. The transaction to raise the
contributed capital caused the individual to incur personal tax
liability. The Company will reimburse the individual for the tax
liability.
The Company has a marketing contract with Masterpiece Productions
(Masterpiece) to market the Company's software products. The Company
will award 1,000 shares of common stock for every 1,000,000 names
delivered and 8 percent from the gross sales of the software products.
The Company will also issue 25,000 shares of common stock in
consideration of Masterpiece performing 25 months of marketing, website
design, graphics and related activities. (To be prorated if less than
the 25 months of service are performed). The Company will also provide
additional cash consideration, upon approval, for Masterpiece updating
or revising the e-mail address list.
The Company has entered into a software contract with Brian Pratt
wherein the Company obtained the software and documentation known as
"Tyler" or also known as "Multi Vision". The Company will pay Mr. Pratt
$.75 for each copy of the programs sold. Mr. Pratt received a one time
payment of 100,000 shares of common stock as part of the transaction to
obtain the marketing rights.
The Company has entered into a software contract with Albert Fretz and
Bryan Thomas wherein the Company obtained the exclusive marketing
rights to software known as "Quick-Fix 2000". Mr. Fretz and Mr. Thomas
will receive $1.50 from the Company for each copy of the software sold.
Mr. Fretz and Mr. Thomas received, as a one time payment for software,
100,000 shares of common stock of the Company from the shares owned by
an officer and director of the Company. The Company had no acquisition
costs for this software and it's recorded at zero value in the
financial statements..
F-44
<PAGE>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - COMMITMENTS -CONTINUED
The Company has entered into two distribution agreements to market the
above software products regionally and internationally without regard
to territorial sales rights. The distributors will purchase varying
levels of software units at varying prices and dates as per schedules
outlined in the agreements. One of the owners of the entity that the
Company signed a distribution agreement with is a stockholder of the
Company.
NOTE 11 - PROPOSED PUBLIC OFFERING OF COMMON STOCK
The Company is preparing a disclosure memorandum through which it
proposes to offer to selected individuals a maximum of five hundred
thousand (500,000) shares of common stock at two dollars ($2.00) per
share for a total of $1,000,000. There is no minimum offering amount
and any funds received from the offering will be immediately available
for Company use. The Company may pay commissions of 10%. It is
estimated direct costs of the offering will be $30,000. The shares will
be offered until August of 1998 or until $1,000,000 is received
whichever is first. The Company has the discretion to extend the
offering 90 days.
NOTE 12 - SUBSEQUENT EVENTS
Subsequent to February 28, 1998, the Company entered into a product
fulfillment contract with "Com Share" in Los Angeles. The Company as
per provisions as outlined in the contract will pay "Com Share" for
diskette duplication, shipping, and secure credit card services.
The Company has also contracted with "Target Teleservices" in Salt Lake
City, Utah. The Company as per provisions of the contact will pay
"Target Teleservices" for provided call-in sales of up to 32,000 calls
per day. Any overage in sales call pressure for the Company's software
beyond Target's capabilities will, by agreement, be deflected to Matrix
Marketing for completion.
F-45
<PAGE>
AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
My audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Schedule of general and
administrative expenses is presented for purposes of additional analysis an is
not a required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in my opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ David T. Thomson, P.C.
David T. Thomson, P.C.
Salt Lake City, Utah
March 11, 1998
F-46
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
(A Development Stage Company)
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSE
For the Year For the Year
Ended Ended
February 28, February 28,
1998 1997
----------------- -----------------
<S> <C> <C>
Accounting $ 4,880 $ 1,445
Bank charges 622 1,074
Business fees and licenses - 210
Consulting fees 26,211 78,183
Education and seminar 64 747
Freight - 227
Officer compensation - 23,000
Insurance - 850
Investor relations 1,292 7,491
Janitorial - 933
Laboratory supplies - 6,216
Legal 5,700 -
Maintenance and repairs 81 208
Marketing 5,000 -
Meals and entertainment - 1,711
Office lease 1,340 -
Office supplies 78 5,016
Rental equipment - 1,063
Subcontractors - 3,160
Tools 424 233
Telephone 105 9,468
Travel 594 -
Rental - 3,622
Utilities 250 2,758
Other expenses 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 $ 46,751 $ 204,617
======== =========
</TABLE>
F-47
<PAGE>
No dealer, salesman or other person is
authorized to give any information or to
make any representations other than
those contained in this prospectus in
connection with the offer made hereby.
If given or made, such information or
representations must not be relied upon COMMERCIAL
as having been authorized by the CONCEPTS, INC.
Company. This prospectus does not
constitute an offer to sell or a 27,869,091
solicitation of an offer to buy any of Shares of Common Stock
the securities covered hereby in any
jurisdiction or to any person to whom it
is unlawful to make such offer or
solicitation in such jurisdiction.
Neither the delivery of this prospectus
nor any sale made hereunder shall, in
any circumstances, create any
implication that there has been no
change in the affairs of Commercial
Concepts since the date hereof.
Table of Contents
Page
PROSPECTUS SUMMARY 4
DESCRIPTION OF BUSINESS 5
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS 5
RISK FACTORS 5
USE OF PROCEEDS 12 PROSPECTUS
DESCRIPTION OF PROPERTY 13
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS 13
MANAGEMENT'S DISCUSSION AND ANALYSIS 16
RESULTS OF OPERATIONS 16
LIQUIDITY AND CAPITAL RESOURCES 19
DESCRIPTION OF SECURITIES 23
EXPERTS 28 December 20, 2000
LEGAL MATTERS 29
WHERE CAN YOU FIND ADDITIONAL
INFORMATION 29
FINANCIAL STATEMENTS 31
30
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or officers of the
registrant are insured or indemnified in any manner against any liability which
they may incur in such capacity are as follows:
The Registrant's Articles of Incorporation provide for the
indemnification of the Registrant's directors and officers to the fullest extent
permitted by the Utah Revised Business Corporation Act ("URBCA"). The liability
of directors and officers of the Registrant is limited such that a director or
officer is not liable to the Registrant or its shareholders for any action taken
or any failure to take any action, as an officer or director, as the case may
be, unless:
(i) the director or officer has breached or failed to perform
the duties of the office in compliancess. 16-10(a)-841 of the URBCA; and
(ii) the breach or failure to perform constitutes gross
negligence, willful misconduct, or intentional infliction of harm on the
Registrant or its shareholders.
Directors of the Registrant are personally liable if such director votes for or
assents to an unlawful distribution under the URBCA or the Registrant's Articles
of Incorporation.
The Registrant will pursuant to ss. 16-10a-902 of the URBCA, indemnify
an individual, made party to a proceeding because he was a director, against
liability incurred in the proceeding if:
(i) the director's conduct was in good faith;
(ii) the director reasonably believed that his conduct was in,
or not opposed to, the Registrant's best interests; and
(iii) in the case of any criminal proceeding, he has no
reasonable cause to believe his conduct was unlawful; provided that, the
Registrant may not indemnify the same director if (A) indemnification is sought
in connection with a proceeding by or in the right of the Registrant in which
the director was adjudged liable to the Registrant; or (B) indemnification is
sought in connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not including action in his
official capacity, in which proceeding he was adjudged liable on the basis that
he derived an improper personal benefit.
Indemnification under this section in connection with a proceeding by or in the
right of the Registrant is limited to reasonable expenses incurred in connection
with the proceeding.
31
<PAGE>
In accordance with ss. 16-10a-903 of the URBCA, the Registrant shall
indemnify a director or an officer, who is successful on the merits or
otherwise, in defense of any proceeding, or in the defense of any claim, issue
or matter in the proceeding, to which he was a party because he is or was a
director or an officer of the Registrant, as the case may be, against reasonable
expenses incurred by him in connection with the proceeding or claim with respect
to which he has been successful.
In accordance with ss. 16-10a-1-904 of the URBCA, the Registrant will
pay or reimburse the reasonable expenses incurred by a party to a proceeding in
advance of the final disposition of the proceeding, provided that:
(i) the director furnishes the corporation a written
affirmation of his good faith belief that he has met the applicable standard of
conduct described inss.16-10a-902 of the URBCA;
(ii) the director furnishes to the Registrant a written
undertaking, executed personally or on his behalf, to repay the advance if it is
ultimately determined that he did not meet such standard of conduct; and
(iii) a determination is made that the facts then known to
those making the determination would not preclude indemnification thereunder.
Section 16-10a-905 permits a director or officer who is or was a party
to a proceeding to apply for indemnification to the court conducting the
proceeding or another court of competent jurisdiction.
The Registrant will indemnify and advance expenses to an officer,
employee, fiduciary or agent of the Registrant to the same extent as a director;
or to a greater extent in some instances if not inconsistent with public policy.
The registrant's Articles of Incorporation limit liability of its
Officers and Directors to the full extent permitted by the Utah Revised Business
Corporation Act.
ITEM 25. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated costs and expenses to be
paid by Commercial Concepts in connection with the offering described in the
Registration Statement.
32
<PAGE>
----------------------------------------------- ----------------
Amount
------------------------------------------------ ---------------
SEC registration fee $2,172.19
Printing and shipping expenses $
Legal fees and expenses $
Accounting fees and expenses $
Transfer, escrow and miscellaneous expenses $
------------------------------------------------ ---------------
Total $
------------------------------------------------ ---------------
* All expenses except SEC registration fee are estimated.
ITEM 26. Recent Sales of Unregistered Securities
On or about July 18, 2000, Commercial Concepts, Inc. issued to a
private investment group a $250,000, 6% convertible note due July 20, 2003. The
note is convertible into common shares of the Registrant at a price that is a
function of the three lowest closing prices for the Registrant during the thirty
trading days prior to the date of the note, or the three lowest closing prices
during the sixty trading days prior to the conversion date. The Registrant
retains a redemption clause in the note that allows the Registrant to repurchase
the note upon payment of 130% of the note's face value, plus accrued interest.
In addition, 850,000 five-year warrants were issued for shares of the
Registrant's common stock at a price not to exceed $0.4375.
On or about April 18, 2000, L & B Charitable Trust purchased 500,000
restricted common shares of the Registrant for $100,000. The purchase price also
included two-year warrants to purchase an additional 500,000 common shares of
the Registrant at a price of $0.50 in the first year and $0.75 in the second
year. These shares were issued in reliance on Rule 506 of Regulation D
promulgated under the 1933 Act
On or about March 6, 2000, the Registrant entered into a subscription
agreement with an investor for the purchase by the investor of 1,008,434
restricted common shares. As payment for the shares, the Registrant accepted a
note receivable due August 31, 2000 for $550,000. The term of the note was
subsequently moved to September 30, 2000. At July 31, 2000, $195,500 had been
received by the Registrant. The share certificates will be issued after payment
for the balance of the note is received.
Effective February 29, 2000, the Registrant dissolved Advice
Productions. The Registrant entered into a Settlement and General Release with
the prior owner of Advice Productions, which, among other matters, dissolved any
employment relationship between the two parties. The Settlement and General
Release provided for a recapture by the Registrant of
33
<PAGE>
600,000 shares of restricted Registrant stock valued at $0.20 per share. The
shares were retired by the Registrant in March 2000.
On or about November 14, 1999, Lee Kunz, a director of the Registrant
since April 2000, purchased 300,000 common shares of the Registrant for $24,000
on behalf of L & B Charitable Trust, a Colorado trust. The shares were issued in
reliance on Rule 504 of Regulation D promulgated under the 1933 Act. Mr. Kunz,
on or about February 2000, also purchased 500,000 restricted common shares of
the Registrant for $75,000. These shares were issued in reliance on Rule 506 of
Regulation D promulgated under the 1933 Act. On or about January 2000, Mr. Kunz
on behalf of L&B Charitable Trust purchased 200,000 restricted common shares of
the Registrant for $20,000 received by the Registrant. The 200,000 shares
acquired by L & B Charitable Trust were a part of the 2,198,000 shares issued to
Scott G. Adamson, the Executive Vice President of the Registrant, in August
1999. The shares were endorsed to L & B Charitable Trust in March 2000.
On or about December 28, 1999, the Registrant 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 Registrant issued 400,000 shares to
Manoj Associates, LLC, a Colorado limited liability Registrant for $12,000. The
shares were issued in reliance on Rule 504 of Regulation D promulgated under the
1933 Act.
On or about July 19, 1999, the Registrant issued 370,000 shares as
bonuses to four persons it hired as employees or consultants. The shares were
issued in reliance on Section 4(2) of the 1933 Act.
On or about June 15, 1999, the Registrant 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 Registrant sold 2,000,000 shares of common
stock to an officer of the Registrant 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 Registrant has sold 1,500,000 shares to
unaffiliated investors for $191,000 in reliance on Rule 504 of Regulation D
promulgated under the 1933 Act.
From August 26, 1998 to October 31, 1998, the Registrant 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
Registrant operations.
On or about August 31, 1997, the Registrant 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.
34
<PAGE>
During fiscal years 1998 and 1997, certain officers, directors and
stockholders of the Registrant contributed capital to the Registrant in the
amount of $16,000 and $24,058 respectively. No stock was issued in return for
this contribution.
In February 1998, the Registrant 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 Registrant issued 200,000 shares of its
common stock to an individual at par value for payment of services rendered to
the Registrant. The shares were issued in reliance on Section 4(2) of the 1933
Act.
During February 1997, 98,000 shares of common stock were issued in
exchange for $197,705. The stock was issued in reliance on Rule 504 of
Regulation D promulgated under the 1933 Act.
ITEM 27. Exhibits
Exhibit No. SEC Reference Document
----------- ----------------------
2.1 Articles of Incorporation*
2.2 Bylaws*
5.1 Opinion and Consent of Ray, Quinney & Nebeker
10.1 Lease Agreement, dated November 10, 1999*
10.2 Office Building Lease, dated February 18, 1999*
10.3 First Amendment to Office Building Lease, dated October 5, 1999*
10.4 Agreement to Develop Software, dated June 27, 1999*
10.5 Settlement Agreement and General Release with Larry Rogers**
24.1 Consent of Fitzgerald Sanders, LLC
24.2 Consent of Ray, Quinney & Nebeker is contained in Exhibit 5.1
24.3 Equity Line Agreement
24.4 Commercial Concepts, Inc. Bonus Plan
24.5 Intermountain Health Care Agreement
24.6 Consent of David T. Thomson, P.C.
* Incorporated by reference from Registration Statement
on Form 10, as filed on March 6, 2000
** Incorporated by reference from Form 10-KSB, as filed on
May 30, 2000
35
<PAGE>
ITEM 28. Undertakings
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred to that section.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to its Articles of Incorporation or provisions of the
Utah Revised Business Corporation Act, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question, whether or not such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to (a)
Include any prospectus required by Section 10(a)(3) of the Securities Act; (b)
Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and (c) Include
any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it has met
all of the requirements of filing on Form SB-2 and has authorized this
Registration Statement to be signed on its behalf by the undersigned, in Salt
Lake City, Utah, on December 20, 2000.
Commercial Concepts, Inc.
By: /s/ George E. Richards, Jr.
------------------------------
George E. Richards, Jr.
Chief Executive Officer,
Director, and President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
Signatures Title Date
/s/ Karl Hansen
---------------------------- Chief Financial Officer, December 20, 2000
Karl Hansen Secretary and Director
/s/ Scott Adamson
---------------------------- Executive Vice President December 20, 2000
Scott Adamson and Director
/s/ Lee R. Kunz, Sr.
---------------------------- Director December 20, 2000
Lee R. Kunz, Sr.
Lee Greenberg
---------------------------- Director December 20, 2000
Lee Greenberg
