<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission File No. 33-26531-LA
COMMERCIAL LABOR MANAGEMENT, INC.
- ---------------------------------
A Nevada IRS Employer No.
Corporation 88-241079
Edward L. Torres, President
Commercial Labor Management, Inc.
208 Mira Mar Avenue, Suite One
Long Beach, California 90803
(562) 987-5443
<TABLE>
<S> <C>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:. . . . . . . . . . . . . . . . . . . . .None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:. . . .Common Stock, Par Value $.05 Per Share
</TABLE>
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
[ ]
Aggregate market value of voting common stock held by
non-affiliates of the registrant (based upon the average of
the closing bid and ask prices $.05 and $.07, respectively,
as reported by the NASD OTC Bulletin Board on January 15,
1996)
$555,875
Number of shares of registrant's common stock outstanding
as of January 15, 1996
9,264,584
DOCUMENTS INCORPORATED BY REFERENCE: None.
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<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTORY NOTE 3
PART I
ITEM 1 - BUSINESS
Background 3
Employees 4
ITEM 2 - PROPERTIES 4
ITEM 3 - LEGAL PROCEEDINGS 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 5
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS 5
Market Information 5
Dividends 6
ITEM 6 - SELECTED FINANCIAL DATA 6
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND OF RESULTS OF OPERATIONS 6
Background 6
Results of Operations 7
Liquidity and Capital Resources 7
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 8
Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 8
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS OF THE REGISTRANT 8
ITEM 11 - EXECUTIVE COMPENSATION 9
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 9
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 10
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 10-K 10
Index to Financial Statements 10
Index to Exhibits 11
Signatures 12
Report of Independent Auditors 13
Consolidated Balance Sheet 15
Consolidated Statement of Operations 17
Consolidated Statement of Cash Flows 18
Consolidated Statement of Shareholders' Equity 19
Notes to Consolidated Financial Statements 20
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<PAGE>
INTRODUCTORY NOTE
This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange act of 1934, [as amended]. The Company intends that
such forward-looking statements be subject to the safe harbors created by such
statutes. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. Accordingly, to
the extent that this Annual Report contains forward-looking statements
regarding the financial condition, operating results, business prospects or any
other aspect of the Company, please be advised that the Company's actual
financial condition, operating results and business performance may differ
materially from that projected or estimated by the Company in forward-looking
statements. The differences may be caused by a variety of factors, including
but not limited to adverse economic conditions, intense competition, including
intensification of price competition and entry of new competitors and products,
adverse federal, state and local government regulation, inadequate capital,
unexpected costs and operating deficits, increases in general and
administrative costs, lower sales and revenues than forecast, loss of
customers, customer returns of products sold to them by the Company or its
subsidiaries disadvantageous currency exchange rates, termination of contracts,
loss of supplies, technological obsolescence of the Company's products,
technical problems with the company's products, price increases fore supplies
and components, inability to raise prices, failure to obtain new customers,
litigation and administrative proceedings which could involve the Company in
the future, the possible acquisition of new businesses that result in operating
losses or that do not perform as anticipated, resulting in unanticipated
losses, the possible fluctuation and volatility of the Company's operating
results, financial condition and stock price, losses incurred in litigating and
settling cases, dilution in the Company's ownership of its subsidiaries and
businesses, adverse publicity and news coverage, inability to carry out
marketing and sales plans, loss or retirement of key executives, changes in
interest rates, inflationary factors and other specific risks that may be
alluded to in this Annual Report or in other reports issued by the Company. In
addition, the business and operations of the Company are subject to substantial
risks which increase the uncertainty inherent in the forward-looking
statements. In light of the significant uncertainties inherent in the
forward-looking information included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved.
PART I
ITEM 1. BUSINESS
BACKGROUND:
Commercial Labor Management, Inc. is a Nevada corporation (the "Company")
organized on October 18, 1988 with the initial name Tokyo Raiders, Inc. It
subsequently changed its name to Club USPN, Inc., then to XL Corp. and then to
Commercial Labor Management, Inc. The Company was incorporated for the purpose
of engaging in any lawful business, with its original purpose to evaluate and
acquire one or more unspecified businesses or properties. Until May
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<PAGE>
1990, the Company was a developmental stage enterprise raising capital,
searching for an acquisition, and acquiring 7.5 acres of undeveloped
residential land in New Jersey, at which time it changed its name to Club USPN,
Inc. An acquisition of a pizza marketing network company in 1990 was mutually
rescinded by the Company and the acquiree on September 30, 1990.
Principal operations of the Company were not reestablished until May 10, 1993,
when the Company agreed to acquire all of the shares of SONO International, a
Nevada corporation, effective on June 9, 1993, in exchange for 625,000 shares
of the Company's common stock. SONO International ("SI") was organized in
Nevada on July 2, 1992, to provide contract manufacturing and maquiladora
(shelter) services in Tijuana, Baja California, Mexico, with four wholly-owned
subsidiaries: WIRETECH and EXCEL Mexican Manufacturing (both Nevada
corporations), WIRETECH de Mexico, S.A. de C.V., and Operadora de Shelters,
S.A. de C.V. (both Mexican corporations).
On September 30, 1994, the Company sold its SI operations unit to SI's former
stockholders, and received in return 619,200 shares of the Company's common
stock held by those former SI stockholders. The Company's motivation for this
transaction was due to the substantial losses incurred by the SI unit, without
signs of immediate improvement. The shares received back by the Company
provided the Company with a reduction in share capitalization which could be
used in acquiring or merging with a more promising operating company.
On March 21, 1995, the Company entered into an Agreement and Plan of
Reorganization with Commercial Labor Management, Inc. pursuant to which the
Company acquired 100% of the total issued and outstanding common and preferred
stock of Commercial Labor Management, Inc. in exchange for 1,928,330 shares of
the Company's common stock. Effective July 1, 1995, the Company and Commercial
Labor Management, Inc. entered into a Rescission Agreement pursuant to which
they mutually agreed to rescind the acquisition because the Company did not
believe that it had received adequate consideration for its purchase. As a
result, the Company received a return of its 1,928,330 shares of common stock
which have been cancelled, and the Company tendered back all of the shares of
Commercial Labor Management, Inc. which it owned. The Company is now seeking
to make another business acquisition or enter into another business combination
with an operating entity.
EMPLOYEES:
The Company does not currently have any employees. The executive officers of
the Company are not currently paid any salary or other compensation for their
services.
ITEM 2. PROPERTIES
The Company owns 7.5 acres of undeveloped residential land in the township of
Howell, County of Monmouth, in the State of New Jersey. The land was
originally transferred to the Company in April 1990 and is encumbered by a
first mortgage in the principal amount of $81,776, bearing simple interest at
the rate of 12% per annum, payable on December 31, 1996. The Company intends
to sell this property if satisfactory terms can be reached. The Company does
not presently lease any office facilities. The leasing of office facilities is
pending the acquisition of or merger with another business which has not yet
been identified.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any pending or threatened legal proceedings to
which it is or may become subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 27, 1995, the Company amended its Articles of Incorporation to
increase the authorized capital stock of the Company to 15,000,000 shares of
common stock, par value $.05 per share, and 2,000,000 shares of preferred
stock, par value $.05 per share. The amendment was approved by the written
consent of a majority of the stockholders on March 21, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.
MARKET INFORMATION:
The Company's common stock trades on the NASD OTC Bulletin Board Market under
the symbol "CLMI." The following table sets forth the range of bid prices for
the common stock during the periods indicated, and the last sale price as
reported on the OTC Bulletin Board.
YEAR ENDED DECEMBER 31, 1995:
- ----------------------------------------------------------------
Quarter High Low Last Sale
- ----------------------------------------------------------------
4 $ 3.25 $ .25 $ .25
- ----------------------------------------------------------------
3 $ 3.25 $ .75 $3.00
- ----------------------------------------------------------------
2 $ 1.25 $ .25 $ .75
- ----------------------------------------------------------------
1 $ 8.00 $ .13 $ .63
- ----------------------------------------------------------------
- ----------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994:
- ----------------------------------------------------------------
Quarter High Low Last Sale
- ----------------------------------------------------------------
4 $ 9.00 $3.00 $5.50
- ----------------------------------------------------------------
3 $10.00 $2.00 $4.00
- ----------------------------------------------------------------
2 $10.00 $4.00 $5.00
- ----------------------------------------------------------------
1 $ 8.00 $2.00 $4.00
- ----------------------------------------------------------------
- ----------------------------------------------------------------
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<PAGE>
On January 15, 1996, the last sales price per share of the Company's common
stock, as reported by the NASD OTC Bulletin Board Market, was $.20.
On January 15, 1996, the Company's 6,739,013 shares of common stock outstanding
were held by approximately 297 shareholders of record.
DIVIDENDS:
The Company has not paid cash dividends on its common stock since inception.
Payment of dividends is within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company. The
Company does not anticipate declaring or paying dividends on its common stock
in the foreseeable future. The Company currently has 180 shares of Series A
Convertible Preferred Stock ("Series A Preferred") issued and outstanding. The
Series A Preferred has a cumulative noncompounded dividend of 8% per annum and
a liquidation preference of $1,000 per share. The Series A Preferred Stock was
issued in May 1995. No dividend may be declared or paid on the Company's
common stock until all cumulative unpaid dividends on The Series A Preferred
has been declared and paid. To date, no dividends have been declared or paid
on the Series A Preferred.
ITEM 6. SELECTED FINANCIAL DATA
A summary of selected financial data for the three years ended December 31,
1995, 1994 and 1993 is presented below, and should be read in conjunction with
the audited consolidated financial statements for the years ended December 31,
1995, 1994 and 1993.
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
FOR THE YEAR: 1995 1994 1993
- ----------------------------------------------------------------------------
Sales $ 0 $ 0 $3,962,415
Income (loss) before
income taxes,
minority interest and
extraordinary items 0 (577,161) 108,858
Net Income 0 (468,697) 107,393
- ----------------------------------------------------------------------------
PER SHARE:
- ----------------------------------------------------------------------------
Net income (loss) before
extraordinary items 0 (.37) $ .15
Net income (loss) 0 (.30) $ .15
- ----------------------------------------------------------------------------
AT YEAR END:
- ----------------------------------------------------------------------------
Total assets $ 692,326 $462,711 $1,577,525
Long-term obligations 0 81,776 1,213,046
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND:
The Company sought to make a business acquisition during the calendar year
ending December 31, 1994. By the end of the year it had not successfully made
an acquisition and planned to continue to search for and evaluate operating
businesses for potential purchase. On March 21, 1995, the Company entered into
an Agreement and Plan of Reorganization with Commercial Labor Management, Inc.
("CLM") pursuant to which the Company issued 1,928,330 shares of its common
stock in exchange for all of the issued and outstanding common and preferred
stock of CLM. The plan of reorganization was rescinded in its entirety on July
1, 1995 pursuant to a Rescission Agreement mutually agreed to and implemented
by the Company and CLM. All shares of common stock issued by the Company in
the reorganization were tendered back and cancelled, and the Company tendered
all shares of CLM back to its owner. Because of the rescission, no operations
of CLM are reflected in the financial statements of the Company for the year
ended December 31, 1995. The balance sheet of the Company does, however,
reflect advances made and other capital stock issued in connection with the
Company's attempt to acquire CLM. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital
Resources."
RESULTS OF OPERATIONS:
The Company did not incur operating expenses or earn revenue during the fiscal
year ending December 31, 1995. Because of the rescission of the Agreement and
Plan of Reorganization by the Company and CLM, no operations of CLM are
reflected in the Company's financial statements for the fiscal year ending
December 31, 1995. All costs incurred in connection with the attempted
acquisition of CLM were borne by CLM or its owner under the Rescission
Agreement entered into by the Company and CLM, effective July 1, 1995. A
portion of those costs are reflected in a demand noninterest bearing note
receivable in the principal amount of $180,000, payable by the owner of CLM to
the Company. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Liquidity and Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES
In May 1995 the Company issued 180 shares of Series A Convertible Preferred
Stock in a private placement pursuant to Rule 506 of Regulation D of Section
4(2) of the Securities Act of 1933, as amended. A total of $180,000 in capital
was raised from the issuance of the preferred stock. The Series A Convertible
Preferred Stock is convertible at any time by its holders into the Company's
common stock at a conversion price equal to 70% of the average bid price of the
Company's common stock on the OTC Bulletin Board Market over the five trading
days immediately preceding the conversion date, multiplied by the original
purchase price of the Series A Convertible Preferred Stock plus cumulative
unpaid dividends. Each share of Series A Convertible Preferred Stock has a
liquidation preference equal to $1,000 per share and a cumulative noncompounded
dividend of 8% per annum. No dividends may be declared or paid
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<PAGE>
on the Company's common stock unless and until all cumulative unpaid dividends
on the Series A Convertible Preferred Stock are first declared and paid. Each
share of the Series A Convertible Preferred Stock has one vote (i.e.,
equivalent to the voting rights of each share of the Company's common stock)
and generally votes with the common stock as a single class. The proceeds of
the issuance of the Series A Convertible Preferred Stock were advanced to CLM
in connection with the attempted acquisition of CLM by the Company. The
advance of $180,000 is now reflected as a note receivable on the Company's
balance sheet. There is no assurance that the promissory note, payable by
Edward L. Torres, the prior owner of CLM and current President and Chairman of
the Board of Directors of the Company, will be repaid because Mr. Torres has
indicated that he does not have the financial capability to repay it. The
Company presently has no other source of financing or capital, and no operating
businesses. The Company is currently seeking and evaluating potential
businesses for acquisition. If the Company needs funding for such an
acquisition, it would have to issue stock or incur borrowings. There is no
assurance that the Company will be able to make a business acquisition or
obtain any additional capital or financing. The Company is not currently
incurring operating costs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary financial information
which are required to be filed under this item are presented under "Item 14.
Exhibits, Financial Statement Schedules and Reports on Form 10-K" in this
document, and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
The following persons are the officers and directors of the Company, who will
serve in such capacities until their successors are duly qualified and elected.
Name Position
---- ---------
Edward L. Torres Chairman of the Board of Directors,
President and Chief Financial Officer
Mark French Director and Secretary
Edward L. Torres has been the President, Chief Financial Officer and Chairman
of the Board of Directors of the Company since July 30, 1995, and was the
President of the Company from March 21, 1995 until June 1, 1995. Mr. Torres
was also the President and principal shareholder of Commercial Labor
Management, Inc. from its inception in 1992 until July 30, 1995, when it
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<PAGE>
ceased to conduct business. Commercial Labor Management, Inc. was engaged in
the business of leasing employees to a variety of businesses, primarily in
California. Since the cessation of business by Commercial Labor Management,
Inc., Mr. Torres has been an independent marketing consultant for other
employee leasing companies. Mr. Torres has a Bachelors in Business
Administration from South Bay University.
Mark French has been the Secretary and a director of the Company since July 30,
1995 and March 21, 1995, respectively, and was the President of the Company
from June 1, 1995 until July 30, 1995. Mr. French began his career in
investments and securities in London, England, where he was an institutional
options and bond trader for Barclays de Zoete Wedd, an investment banking firm.
From 1990 to 1994, Mr. French was a registered representative with the National
Association of Securities Dealers, Inc. holding Series 7, 24 and 63 licenses.
During that period he held positions with Chatfield Dean & Associates and
Financial West Group. Since 1994 Mr. French has been an independent financial
consultant for different companies seeking to raise capital.
ITEM 11. EXECUTIVE COMPENSATION
During the year ended December 31, 1995, no officer or director of the Company
earned more than $60,000 in total compensation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1995, the total number of
shares of capital stock known by the Company to be owned by (i) each officer of
the Company, (ii) each director of the Company, and (iii) each beneficial owner
of 5% or more of the capital stock of the Company.
NAME AND ADDRESS OF NUMBER OF SHARES
TITLE OF CLASS OF STOCK EACH BENEFICIAL OWNER BENEFICIALLY OWNED
- ----------------------- --------------------- ------------------
Common Stock Edward L. Torres(1) 0
208 Mira Mar Avenue
Suite One
Long Beach, California 90803
Common Stock Mark French(2) 0
967 Scottland Drive
Mt. Pleasant, South Carolina
29464
- ------------------------------------
(1) Mr. Torres is the President, Chief Financial Officer and Chairman of the
Board of Directors of the Company.
(2) Mr. French is the Secretary and a director of the Company.
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 21, 1995, the Company entered into an Agreement and Plan of
Reorganization with Commercial Labor Management, Inc. pursuant to which it
acquired 100% of the total issued and outstanding common and preferred stock of
Commercial Labor Management, Inc. from Edward L. Torres in exchange for
1,923,380 shares of newly issued common stock of the Company. Upon the closing
of the reorganization, Mr. Torres became the President of the Company as well
as remaining the President of its wholly owned subsidiary, Commercial Labor
Management, Inc. As it became apparent that the reorganization would be
mutually rescinded, Mr. Torres temporarily resigned from his positions as
President of the Company while the Rescission Agreement was negotiated,
executed and implemented. Mr. Torres tendered all shares of the Company which
had been issued to him back to the Company pursuant to the Rescission
Agreement. Commercial Labor Management, Inc. ceased to conduct business on
July 30, 1995 after the rescission, and Mr. Torres then became the President
and Chairman of the Board of Directors of the Company. See "Item 1. BUSINESS
- - Background."
On July 1, 1995, the Company received a noninterest bearing demand note payable
to it by Edward L. Torres, the owner of Commercial Labor Management, Inc., in
connection with the Rescission Agreement entered into by the Company and
Commercial Labor Management, Inc. effective July 1, 1995. Pursuant to the
demand note, Mr. Torres has agreed to treat the $180,000 expended by the
Company in connection with its attempted acquisition of Commercial Labor
Management, Inc. as an advance by the Company to Mr. Torres. Mr. Torres has
agreed to repay $180,000 to the Company upon demand. The Company has not yet
demanded repayment of the note. The Company is currently not paying Mr. Torres
any compensation for his services as an officer or director of the Company.
There is no assurance that Mr. Torres will ever be able to repay the demand
note to the Company.
The Company is contemplating issuing shares of its common stock to Mr. Torres
and Mr. French as compensation for their services to the Company. The number
of shares of common stock to be issued to Mr. Torres and Mr. French for
services rendered has not yet been determined.
-10-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
INDEX TO FINANCIAL STATEMENTS: PAGE
- ------------------------------ ----
Report of Independent Auditors.............................................. 13
Consolidated balance sheet at December 31, 1995 and 1994 ................... 15
Consolidated statement of operations for the years ended
December 31, 1995 and 1994.................................................. 17
Consolidated statement of cash flows for the years ended
December 31, 1995 and 1994.................................................. 18
Consolidated statement of shareholders' equity from December 31, 1992 to
December 31, 1995........................................................... 19
Notes to consolidated financial statements.................................. 20
All other schedules are omitted as the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or notes thereto.
INDEX TO EXHIBITS:
Exhibits designated by the symbol ** are management contracts or compensatory
plans or arrangements that are required to be filed with this report pursuant
to this Item 14.
The Company undertakes to furnish to any shareholder so requesting a copy of
any of the following exhibits upon payment to the Company of the reasonable
costs incurred by the Company in furnishing any such exhibit.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Certificate of Amendment of Articles of Incorporation of XL
Corp.(1)
10.1 Rescission Agreement, dated July 1, 1995, by and between
Commercial Labor Management, Inc. and Commercial Labor
Management, Inc.
23 Consent of Independent Auditors
- -----------------------------
(1) Incorporated by reference from the Report on Form 8-K, dated March 28,
1995.
REPORTS ON FORM 8-K, FILED IN 1995
- -----------------------------------
20.1 Report on Form 8-K, dated March 28, 1995, regarding the
acquisition of the assets of Commercial Labor Management, Inc.
and the amendment to the articles to incorporation.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: January 15, 1996
COMMERCIAL LABOR MANAGEMENT, INC.
----------------------------------
(Registrant)
By:/s/ EDWARD L. TORRES
----------------------------------
EDWARD L. TORRES
President and Chief Executive Officer
Pursuant to requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ EDWARD L. TORRES President, Chief Financial Officer, and January 15, 1996
- -------------------- Chairman of the Board of Directors
EDWARD L. TORRES
/s/ MARK FRENCH Secretary, Director January 15, 1996
- ----------------
MARK FRENCH
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Commercial Labor Management
We have audited the accompanying balance sheet of Commercial Labor Management,
Inc. (a Nevada corporation) as of December 31, 1995 and 1994 and the related
statements of income, stockholder's equity and retained earnings, 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit 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 provide 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 Labor Management,
Inc. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Armando C. Ibarra
- ----------------------------------
ARMANDO C. IBARRA, C.P.A., apc
Chula Vista, CA
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
CURRENT ASSETS
Note receivable $180,000 $0
------------------------
TOTAL CURRENT ASSETS 180,000 0
FIXED ASSETS
Tax benefit 132,326 132,326
Land 380,000 380,000
------------------------
TOTAL FIXED ASSETS 512,326 512,326
------------------------
TOTAL ASSETS $692,326 $512,326
------------------------
------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $0 $0
Note payable for land 88,289 81,776
------------------------
TOTAL CURRENT LIABILITIES 88,289 81,776
------------------------
TOTAL LIABILITIES 88,289 81,776
STOCKHOLDERS' EQUITY:
Preferred convertible stock, $1,000 par value
1,000 share authorized, 180 issued & outstanding 180,000 0
Common stock, $.05 par value, 15,000,000 shares
authorized, 9,264,584 issued and outstanding 51,813 51,813
Paid-in Capital 864,217 864,217
Accumulated deficit (491,993) (485,480)
------------------------
TOTAL STOCKHOLDER'S EQUITY 604,037 430,550
------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $692,326 $512,326
------------------------
------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
STATEMENT OF INCOME
DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
-------------------------
<S> <C> <C>
EXPENSES:
Bad debt expense $0 $0
Professional fees 0 0
Employee benefits 0 0
Interest expense 0 2,169
-------------------------
TOTAL EXPENSES 0 (2,169)
-------------------------
Net Income (Loss) Discontinued Operations 0 (720,924)
-------------------------
LOSS BEFORE TAXES 0 (723,093)
Income tax benefit 0 (132,326)
-------------------------
NET INCOME (LOSS) 0 (590,767)
-------------------------
-------------------------
Weighted Average Number of
Shares Outstanding 578,524 1,548,388
Loss Par Share
of Common Stock 0.00 ($0.38)
-------------------------
-------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
STATEMENT OF CASH FLOW
DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
-------------------------
<S> <C> <C>
NET CASH FLOWS FROM OPER. ACTIVITIES:
Cash received from customers $0 $1,897,740
CASH EXPENSES:
Cash paid to suppliers 0 1,670,899
Cash paid for operating expenses 0 742,607
Interest paid 0 2,253
-------------------------
CASH PAID FOR OPERATING ACTIVITIES 0 2,415,759
-------------------------
NET CASH FROM OPERATING ACTIVITIES 0 (518,019)
-------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of leasehold improvements 0 (19,520)
Purchase of equipment 0 (1,821)
-------------------------
NET CASH USED IN INVESTING ACTIVITIES 0 (21,341)
-------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Common Stock, Treasury Stock 0 11,813
Paid-in Capital 0 578,812
Cash loss on sale of operations 0 (41,972)
Proceeds from notes payable 0 0
-------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 0 548,653
-------------------------
NET INCREASE (DECREASE) IN CASH 0 (9,293)
-------------------------
CASH AT BEGINNING OF YEAR 0 9,293
-------------------------
CASH AT END OF YEAR $0 $0
-------------------------
-------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM DECEMBER 31, 1993 TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Preferred Stock
---------------------------------------------- Additional Treasury
Number Number Paid-in Stock Accumulated
of Shares Amount of Shares Amount Capital & Adj's Deficit Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE-DEC. 31, 1993 800,000 40,000 219,192 (171,685) 105,287 364,479
1994 ACTIVITY
Excercise of warrants 50,000
Two-for-one split on 3/1/94 850,000
Warrants exercised 197,867 11,813 473,340 171,685 656,838
Adjust stock to reflect the 1993
SEMAC debt exchange (395,141)
Sale of operations (619,200) 171,685
Loss for the year ended 12/31/94 (590,767) (590,767)
----------------------------------------------------------------------------------------------
BALANCE-DEC. 31, 1994 883,526 $51,813 $864,217 0 ($485,480) $430,550
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
1995 ACTIVITY
Three-for-one reverse split 3/20 (589,018)
1995 Net Transactions 8,970,076
Issuance of Preferred Stock 180,000 $180,000 180,000
Loss for the year ended 12/31/95 (6,513) (6,513)
----------------------------------------------------------------------------------------------
BALANCE - DEC. 31, 1995 9,264,584 $51,813 180,000 $180,000 $864,217 0 ($491,993) $604,037
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
COMMERCIAL LABOR MANAGEMENT
NOTES TO THE FINANCIAL STATEMENT
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL:
Commercial Labor Management, Inc. (formerly XL Corp.) is a Nevada
Corporation (the "Company") was organized October 19, 1988.
The Company was originally incorporated in Nevada under the Tokyo Raiders on
October 19, 1988. In 1990, the Company acquired certain rights to a pizza
franchise and changed its name to Club USPN, Inc. In June of 1993, the
Company acquired Sono International, Inc., but those operations were
discontinued and the shares of Sono were sold to the original shareholders
of Sono. In March of 1995 the Board approved the merger with Commercial
Labor Management which was handled as a reverse merger, and also approved a
name change to Commercial Labor Management. However, that merger was
rescinded and never completed. The Company is currently seeking other
potential mergers or acquisitions.
INCOME TAX REPORTING:
The Company files a corporate tax return in the U.S.
EARNINGS PER SHARE:
The calculations of earnings per share was determined by dividing the net
income or loss by the computed weighted average number of common shares
outstanding during the applicable period, adjusted for the 1 for 3 reverse
split effected in March 20, 1995. The weighted average number of shares
outstanding for 1995 is 578,524.
INCOME TAXES:
In December 1992 the Financial Accounting Standards Board issued Statement
of Accounting Standards Number 109, "Accounting for Income Taxes" (FASB
109). Adoption of FASB 109 is required for fiscal years beginning after
December 15, 1992. The Company follows the requirements set forth in FASB
109.
2. PAID IN CAPITAL:
Paid in capital is made up in part by contributions of office furniture &
equipment, manufacturing equipment, trade receivable, and accounts payable
in exchange for common stock. Common stock was issued to Shareholder's of
record in exchange for these net assets. Also, in the fourth quarter of
1994 the Company issued some common stock to individuals to whom money was
owed for professional services rendered, prior to the sale-back of 9/30/94.
<PAGE>
COMMERCIAL LABOR MANAGEMENT
NOTES TO THE FINANCIAL STATEMENT
DECEMBER 31, 1995
3. CAPITAL STOCK:
PREFERRED CONVERTIBLE STOCK
Each share of Series A Convertible Preferred Stock is convertible, at
certain times or on the occurrence of certain events, into shares of Company
Common Stock valued at 70% of the Market Place. The Company authorized
1,000 shares and there were 180 shares issued and outstanding as of December
31, 1995.
COMMON STOCK
The authorized capital stock of the company consists of Common Stock.
Authorized shares of stock at September 30, 1995 were 15,000,000. There are
9,264,585 shares outstanding as of December 31, 1995.
The issuance for the CLM acquisition and anti-dilutive clause were made on
9/30/95.
4. TAX BENEFIT:
The Company has a loss carryforward in the amount of $615,784 available to
offset future taxable income. These losses expire as they offset income or
can be carryforward for a maximum of 15 years. The Company believes it
will use the credit before it expires. However, no estimates of future
income are available so the benefit is reflected as a long-term asset.
<PAGE>
RESCISSION AGREEMENT, DATED JULY 1, 1995
RECISSION AGREEMENT
This Recission Agreement (the "Agreement") is entered into as of this 1st
day of July 1995 by and between Commercial Labor Management, Inc., a Nevada
corporation, formerly known as XL Corp. (the "Company"), and Commercial Labor
Management, Ltd., a California limited liability company (the "Acquiree"), and
Edward L. Torres, an individual (the "Shareholder"), with respect to the
following facts:
RECITALS
A. The Company and the Acquiree entered into an Agreement and Plan of
Reorganization, dated March 21, 1995, pursuant to which the Company
acquired 100% of the issued and outstanding stock of the Acquiree in
exchange for the issuance of a total of 1,928,330 shares (the "Shares") of
the Company's stock to the shareholder (the "Shareholder") of the Acquiree
(the "Transaction").
B. The Company and the Acquiree wish to rescind the Transaction because the
Company does not believe that it received adequate consideration for the
Shares issued by it to the Shareholder.
C. The Shareholder acknowledges the validity of the Company's concerns and is
willing to rescind the Transaction by returning the Shares to the Company
in exchange for a return by the Company to the Shareholder of 100% of the
total issued and outstanding stock of the Acquiree.
NOW, THEREFORE, in consideration of the mutual agreements herein and in
light of the recitals stated above, the parties hereto agree as follows:
1. RECISSION OF ACQUISITION
In order to rescind the Transaction and restore the ownership of the
Acquiree and the Shares as such ownership was prior to the effective date of the
Agreement and Plan of Reorganization, dated March 21, 1995, by and between the
Company and the Acquiree, and in consideration for the mutual tender of shares,
the Shareholder hereby tenders 1,928,330 Shares (subject to adjustment for
subsequent stock splits or reverse splits) to the Company for redemption and
cancellation, and the Company hereby tenders 5,000,000 shares of the common
stock and 2,000,000 shares of the preferred stock which it owns in the Acquiree,
which is 100% of the total issued and outstanding stock of the Acquiree, to
Edward L. Torres. The effective date of the recission of the Transaction and
the mutual tender of shares is July 1, 1995.
2. NOTICE
Notice will deemed to be given by one party to the other parties of this
Assignment upon personal delivery by messenger, air courier, express mail or
certified registered mail, return
-1-
<PAGE>
receipt requested, or upon facsimile or telegram, or three days after mailing
by first class mail by the party giving the notice, addressed to the parties
as follows, or to any other address or facsimile numbers provided to the
parties in writing in accordance with this Assignment by the party making the
change:
If to the Company: Commercial Labor Management, Inc.
967 Scottland Drive
Mount Pleasant, South Carolina 29464
Attention: Mark French, President
If to Acquiree: Commercial Labor Management, Ltd.
13033 East Penn Street
Whittier California 90602
Attention: Edward L. Torres, President
If to Shareholder: The address of the Shareholder as listed
below the Shareholder's signature to this
Agreement.
3. INJUNCTIVE RELIEF
3.1 DAMAGES INADEQUATE
Each party acknowledges that it would be impossible to measure in
money the damages to the other party if there is a failure to comply with any
covenants and provisions of this Agreement, and agrees that in the event of any
breach of any covenant or provision, the other party to this Agreement will not
have an adequate remedy at law.
3.2 INJUNCTIVE RELIEF
It is therefore agreed that the other party to this Agreement who is
entitled to the benefit of the covenants and provisions of this Agreement which
have been breached, in addition to any other rights or remedies which they may
have, shall be entitled to immediate injunctive relief to enforce such covenants
and provisions, and that in the event that any such action or proceeding is
brought in equity to enforce them, the defaulting or breaching party will not
urge as a defense that there is an adequate remedy at law.
4. WAIVERS
If any party shall at any time waive any rights hereunder resulting from
any breach by the other party of any of the provisions of this Agreement, such
waiver is not to be construed as a continuing waiver of other breaches of the
same or other provisions of this Agreement. Resort to any remedies referred to
herein shall not be construed as a waiver of any other rights and remedies to
which such party is entitled under this Agreement or otherwise.
-2-
<PAGE>
5. SUCCESSORS AND ASSIGNS
Each covenant and representation of this Agreement shall inure to the
benefit of and be binding upon each of the parties, their personal
representatives, assigns and other successors in interest.
6. ATTORNEY'S FEES
In the event that either party must resort to legal action in order to
enforce the provisions of this Agreement or to defend such action, the
prevailing party shall be entitled to receive reimbursement from the
nonprevailing party for all reasonable attorney's fees and all other costs
incurred in commencing or defending such action, or in enforcing this Agreement,
including but not limited to post judgement costs.
7. ENTIRE AND SOLE AGREEMENT
This Agreement constitutes the entire agreement between the parties and
supersedes all agreements, representations, warranties, statements, promises and
undertakings, whether oral or written, with respect to the subject matter of
this Agreement. This Agreement may be modified only by a written agreement
signed by all parties.
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, and venue for any action hereunder shall be in
the appropriate forum in the County of Los Angeles, State of California.
9. SEVERABILITY
The provisions of this Agreement are meant to be enforced severally so that
the determination that one or more provisions are enforceable or invalid shall
not affect or render invalid any other provision of this Agreement, and such
other provisions shall continue to be in full forced in accordance with their
terms.
10. RIGHTS CUMULATIVE
All rights and remedies under this Agreement are cumulative, and none is
intended to be exclusive of another. No delay or omission in insisting upon the
strict observance of performance of any provision of this Agreement, or in
exercising any right or remedy, shall be construed as a waiver or relinquishment
of such provision, nor shall it impair such right or remedy. Every right and
remedy may be exercised from time to time and as often as deemed expedient.
11. CAPTIONS
The paragraph and other headings contained in this Agreement are for
reference purposes only, and shall not limit or otherwise affect the meaning
hereof.
-3-
<PAGE>
12. LEGAL HOLIDAYS
In the case where the date on which any action required to be taken,
document required to be delivered or payment required to be made is not a
business day in Los Angeles, California, such action, delivery or payment need
not be made on that date, but may be made on the next succeeding business day.
13. COUNTERPARTS
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
14. PARTIES
This Agreement shall inure solely to the benefit of and shall be binding
upon the parties hereto and their respective successors, legal representatives
and assigns, and no other person shall have or be construed to have any
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision contained herein.
15. AUTHORITY
All signatories to this Agreement do hereby declare that they have the
authority to execute this Agreement on behalf of the parties to this Agreement.
COMPANY: COMMERCIAL LABOR MANAGEMENT, INC.
By /s/ Mark French
-----------------------------------------------------------
Mark French, President
ACQUIREE: COMMERCIAL LABOR MANAGEMENT, LTD.
By /s/ Edward L. Torres
-----------------------------------------------------------
Edward L. Torres, President
SHAREHOLDER: /s/ Edward L. Torres
-----------------------------------------------------------
Edward L. Torres
208 Mira Mar Avenue, Suite One
-----------------------------------------------------------
Street Address
Long Beach, California 90803
-----------------------------------------------------------
City, State and Zip Code
-4-
<PAGE>
EXHIBIT 23
CONSENT OF ARMANDO IBARRA
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The undersigned independent certified public accounting firm hereby
consents to the inclusion of its report on the financial statements of
Commercial Labor Management, Inc. for the years ended December 31, 1994 and
1995, and to the reference to it as experts in accounting and auditing
relating to said financial statements, in the Report on Form 10-K, dated
December 31, 1995.
/s/ ARMANDO IBARRA, C.P.A.
- ---------------------------------
Armando Ibarra, C.P.A.
Chula Vista, California
January 15, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 180,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 180,000
<PP&E> 380,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 692,326
<CURRENT-LIABILITIES> 88,289
<BONDS> 0
0
180,000
<COMMON> 51,813
<OTHER-SE> 372,224
<TOTAL-LIABILITY-AND-EQUITY> 692,326
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
