<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, 1997 Commission File No. 33-26531-LA
COMMERCIAL LABOR MANAGEMENT, INC.
- ---------------------------------
A Nevada IRS Employer No.
Corporation 88-241079
Edward L. Torres, President
208 Mira Mar Avenue, Suite One
Long Beach, California 90803
(562) 987-5443
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
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 YES X NO
days. ----- -----
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 $.00 and $.01,
respectively, as reported by the NASD OTC Bulletin Board
on January 15, 1998) $ 11,187
Number of shares of registrant's common stock outstanding
as of December 31, 1997. 8,173,804
DOCUMENTS INCORPORATED BY REFERENCE: None.
- 1 -
<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 8
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
- 2 -
<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
- 3 -
<PAGE>
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 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 on September 30, 1990.
Principal operations of the Company were not restablished 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), and 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.
In October 1997, all issued and outstanding shares of the Company's Series A
Convertible Preferred Stocks were converted by their holders into 7,200,000
shares of the Company's Common Stock.
In December 1997 the Company, by the written consent of its majority
shareholders representing approximately 82.6% of the total issued and
outstanding Common Stock of the Company, (i) amended its Articles of
Incorporation to increase the authorized Common Stock from 15,000,000 to
20,000,000 shares, par value $ .05 per share, and (ii) effected a 20 for one
reverse stock split to result in a total of 643,804 shares of Common Stock
issued and outstanding. On December 31, 1997, an additional 7,530,600 shares
of the Common Stock were issued to a consultant for services rendered,
resulting in a total of 8,173,804 shares of the Company's Common Stock issued
and outstanding as of December 31, 1997.
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.
- 4 -
<PAGE>
ITEM 2. PROPERTIES
The Company previously owned 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 was encumbered by
a first mortgage in the principal amount of $81,776, bearing simple interest
at the rate of 12% per annum, payable upon demand. The Company conveyed the
property in 1997 in consideration for the assumption of the mortgage debt by
the purchaser. 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.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any pending or threatened legal proceedings to which
it is or may be subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the year
ended December 31, 1997.
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 prices as
reported on the OTC Bulletin Board. The Company is not aware of any trades
in its Common Stock during the year ended December 31, 1997.
YEAR ENDED DECEMBER 31, 1997:
<TABLE>
<CAPTION>
Quarter High Low Last Sale
------- ---- --- ---------
<S> <C> <C> <C>
4 $ .01 $ .00 None
3 $ .01 $ .00 None
2 $ .01 $ .00 None
1 $ .01 $ .00 None
</TABLE>
YEAR ENDED DECEMBER 31, 1996:
<TABLE>
<CAPTION>
Quarter High Low Last Sale
------- ---- --- ---------
<S> <C> <C> <C>
4 $ .02 $ .01 $ .01
3 $ .02 $ .01 $ .01
2 $ .02 $ .01 $ .01
1 $ .07 $ .05 $ .05
</TABLE>
- 5 -
<PAGE>
YEAR ENDED DECEMBER 31, 1995:
<TABLE>
<CAPTION>
Quarter High Low Last Sale
------- ---- --- ---------
<S> <C> <C> <C>
4 $ 3.25 $ .25 $ .25
3 $ 3.25 $ .75 $3.00
2 $ 1.25 $ .25 $ .75
1 $ 8.00 $ .13 $ .63
</TABLE>
On March 27, 1998, the last sales price per share of the Company's common
stock, as reported by the NASD OTC Bulletin Board Market, was $.00.
On March 27, 1998, the Company's 8,173,804 shares of common stock outstanding
were held by approximately 284 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.
ITEM 6. SELECTED FINANCIAL DATA
A summary of selected financial data for the three years ended December 31,
1997, 1996, and 1995 is presented below, and should be read in conjunction with
the audited consolidated financial statements for the years ended December 31,
1997, 1996 and 1995.
<TABLE>
<CAPTION>
FOR THE YEAR: 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Sales $ 0 $ 0 $ 0
Income (loss) before
income taxes,
minority interest and
extraordinary items 0 0 0
Income (loss) before
minority interest and
extraordinary items 0 0 0
Net Income 0 0 0
PER SHARE:
Net income (loss) before
extraordinary items 0 0 0
Net income (loss) 0 0 0
AT YEAR END:
Total assets $202,326 $1,440,359 $692,326
Long-term obligations 0 0 0
</TABLE>
- 6 -
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND:
During the fiscal year ending December 31, 1997 the Company continued to
search for and evaluate operating businesses for potential acquisition,
although no offers were made by the Company. The search for a new business
acquisition was only conducted sporadically because management, which was not
paid any compensation by the Company during the fiscal year ending December
31, 1997, was able to dedicate only a limited amount of time to the Company's
affairs. Management plans to continue to maintain the Company's reports to
the Securities and Exchange Commission current in 1998 and to intensify its
focus on the Company's goal of acquiring or entering into a business
combination with a new operating business.
RESULTS OF OPERATIONS:
The Company did not incur operating expenses or earn revenue during the
fiscal year ending December 31, 1997. In December 1996, the Company wrote
off a $180,000 demand note receivable from Edward L. Torres, the Company's
President and Chairman of the Board of Directors, as an uncollectible debt.
See "CERTAIN RELATED TRANSACTIONS." Mr. Torres was paid no compensation by
the Company during the fiscal year ending December 31, 1997. He has been
providing services to the Company in its endeavor to update its financial
statements and public reports to the Securities and Exchange Commission.
LIQUIDITY AND CAPITAL RESOURCES:
The Company has no working capital and had a working capital deficit (i.e.,
current liabilities in excess of current assets) of $ 25,875 as of December
31, 1997. The current liabilities are comprised of accounts payable to the
Company's independent certified public accountants for professional services
rendered. The Company presently has no financial resources to pay its
accounts payable. The Company has no operations and would have to raise
capital by issuing stock or incurring borrowings in order to repay its
accounts payable. There is no assurance that the Company will be able to
raise capital or borrow funds in the future, or acquire an operating business
with revenues.
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.
- 7 -
<PAGE>
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 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, 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, 1997, no officer or director of the Company
earned more than $60,000 in total compensation.
- 8 -
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1997, 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) 100,000
967 Scottland Drive
Mt. Pleasant, South Carolina
29464
Common Stock Mark J. Richardson(3) 7,530,000
1299 Ocean Avenue
Suite 900
Santa Monica, California 90401
- -------------------------------------------------------
(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.
(3) Mr. Richardson is a consultant to the Company.
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
- 9 -
<PAGE>
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 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 agreed to repay
$180,000 to the Company upon demand. Commercial Labor Management, Inc. ceased
conducting business in July 1995 and the Company is currently not paying Mr.
Torres any compensation for his services as an officer or director of the
Company.
On December 31, 1996, the Company wrote off the $180,000 note payable to it by
Edward L. Torres, its President and Chairman of the Board of Directors, as an
uncollectible debt. The Company believes that Mr. Torres does not have the
financial capability to repay the note. Furthermore, since July 1995 Mr. Torres
has been providing valuable services for the Company for which he has received
no compensation to date. The Company is contemplating issuing shares of its
common stock to Mr. Torres as compensation for his services to the Company. The
Company is also contemplating issuing shares of its common stock to Mark French,
the corporate Secretary and a director, in consideration for services rendered
by him for the Company since March 21, 1995. The number of shares of common
stock to be issued to Mr. Torres and Mr. French for services rendered has not
yet been determined.
In October 1997 the Company conveyed all of its rights, title and interest in
and to 7.5 acres of land to the holder of a demand note payable by the
Company and secured by the land, in consideration for a discharge and
cancellation of the demand note in full. In October 1997, the holders of 180
issued and outstanding shares of the Company's Series A Convertible Preferred
Stock converted all of their Series A Convertible Preferred Stock into Common
Stock. In December 1997 the Company amended its Articles of Incorporation to
increase its authorized Common Stock from 15,000,000 shares to 20,000,000
shares. At that time, the Company also effected a 20 for 1 reverse split of
its issued and outstanding Common Stock. On December 31, 1997, the Company
issued 7,530,600 shares of its Common Stock to Mark J. Richardson in
consideration for consulting services performed for the Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
INDEX TO FINANCIAL STATEMENTS: PAGE
- ------------------------------ ----
Independent Auditor's Report............................................. 13
Consolidated balance sheet at December 31, 1997 and 1996................. 14
Consolidated statement of income for the years ended
December 31, 1997 and 1996.............................................. 16
Consolidated statement of cash flow for the years ended
December 31, 1997 and 1996.............................................. 17
Consolidated statement of stockholders' equity
from December 31, 1993 to December 31, 1997............................. 18
Notes to consolidated financial statements.............................. 19
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.
- 10 -
<PAGE>
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
- ----------- -----------
23 Consent of independent auditors
REPORTS ON FORM 8-K FILED IN 1997
- ---------------------------------
Report on Form 8-K, dated July 1, 1995 and filed on November 12, 1997.
- 11 -
<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: March 30, 1998
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 TORRES President, Chief Financial Officer, March 30, 1998
- ---------------------- and Chairman of the Board of
EDWARD TORRES Directors
/s/ MARK FRENCH
- ---------------------- Director, Secretary March 30, 1998
MARK FRENCH
- 12 -
<PAGE>
ARMANDO C. IBARRA
CERTIFIED PUBLIC ACCOUNTANT
(A PROFESSIONAL CORPORATION)
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Commercial Labor Management, Inc.
We have audited the accompanying balance sheet of Commercial Labor
Management, Inc. (a Nevada corporation) as of December 31, 1997 and 1996 and
the related statements of income, stockholders' equity and retained earnings,
and statements of 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, 1997 and 1996, and the results of operations, and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ ARMANDO C. IBARRA
- -------------------------
ARMANDO C. IBARRA, CPA
March 10, 1998
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
BALANCE SHEET
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---------------
<S> <C> <C>
CURRENT ASSETS
Note receivable $0 $0
TOTAL CURRENT ASSETS 0 0
FIXED ASSETS
Tax benefit 202,326 202,326
Land 0 380,000
--------------------
TOTAL FIXED ASSETS 202,326 582,326
--------------------
TOTAL ASSETS $202,326 $582,326
--------------------
--------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
BALANCE SHEET
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
--------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $25,875 $25,875
Note payable for land 0 88,289
--------------------
TOTAL CURRENT LIABILITIES 25,875 114,164
--------------------
TOTAL LIABILITIES 25,875 114,164
STOCKHOLDERS' EQUITY:
Preferred convertible stock, $1,000 par value
1,000 share authorized, none issued & outstanding 0 180,000
Common stock, $.05 par value, 20,000,000 shares
authorized, 8,173,804 issued and outstanding 231,813 51,813
Paid-in Capital 752,506 864,217
Accumulated deficit (627,868) (627,868)
---------------------
TOTAL STOCKHOLDER'S EQUITY 176,451 468,162
---------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $202,326 $582,326
----------------------
----------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
STATEMENT OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
----------------------------
<S> <C> <C>
EXPENSES:
Bad debt expense $180,000
Professional fees 25,875
----------------------------
TOTAL EXPENSES 0 ($205,875)
----------------------------
Net Income/(Loss) Before Taxes (205,875)
Income Tax Benefit (70,000)
----------------------------
NET INCOME (LOSS) 0 ($135,875)
----------------------------
Weighted Average Number of
Shares Outstanding 10,205,625 9,264,585
Income Per Share
of Common Stock 0 0
---------------------------
---------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
COMMERCIAL LABOR MANAGEMENT, INC.
STATEMENT OF CASH FLOW
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
--------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET CASH FROM OPERATING ACTIVITIES 0 0
--------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
NET CASH FROM INVESTING ACTIVITIES 0 0
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES
NET CASH FROM FINANCING ACTIVITY 0 0
--------------------
NET INCREASE (DECREASE) IN CASH 0 0
CASH AT BEGINNING OF YEAR 0 0
--------------------
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, 1997
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------------------------------- Additional Treasury
Number Number Paid-in Stock Accumulated
of Shares Amount of Shares Amount Capital & Adjs Deficit Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE-December 31, 1993 800,000 40,000 219,192 (171,685) 105,287 $364,479
1994 ACTIVITY
Exercise 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 period ended 9/30/95 (6,513) (6,513)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE - Dec. 31, 1995 9,264,584 $51,813 180,000 $180,000 $864,217 0 $(491,993) $604,037
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
1996 ACTIVITY
Loss for the year ended 12/31/96 (135,875) (135,875)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE - Dec. 31, 1996 9,264,584 $51,813 180,000 $180,000 $864,217 0 ($627,868) $468,162
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
1997 ACTIVITY
Cancellation of land transaction (291,711) (291,711)
General cancellations (2,603,548)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE - March 31, 1997 6,661,036 $51,813 180,000 $180,000 $572,506 0 ($627,868) $176,451
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Cancellations (4,425,000)
Issuances/Conversions 10,628,048 $180,000 180,000 $180,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE - June 30, 1997 12,864,084 $231,813 0 $0 $572,506 0 ($627,868) $176,451
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE - Sept. 30, 1997 12,864,084 $231,813 0 $0 $572,506 0 ($627,868) $176,451
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Twenty-for-one reverse split 643,204
New issuances 7,530,600
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE - Dec. 31, 1997 8,173,804 $231,813 0 $0 $572,506 0 ($627,868) $176,451
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS CONSOLIDATED
FINANCIAL STATEMENTS
<PAGE>
COMMERCIAL LABOR MANAGEMENT
NOTES TO THE FINANCIAL STATEMENT
DECEMBER 31, 1997
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. For 1996 the shares outstanding
are 9,264,584. For 1997 the calculation is as follows: 9,264,584 shares
outstanding for 7 weeks, 6,661,036 was outstanding for 9 weeks, 11,941,528
for 1 week, 12,864,084 for approximately 23 weeks, and 8,173,804 for
approximately 12 weeks, equals an average of 10,205,625.
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 shareholders of
record in exchange for these net assets. Also, in the fourth quarter of
1994 the Company issued shares of common stock to individuals to whom
money was owed for professional services rendered. Paid in capital
includes $180,000 reflecting the conversion of 180 outstanding shares of
Preferred Stock into common stock in the second quarter of 1997.
<PAGE>
COMMERCIAL LABOR MANAGEMENT
NOTES TO THE FINANCIAL STATEMENT
DECEMBER 31, 1997
3. CAPITAL STOCK:
PREFERRED STOCK
The Company is authorized to issue up to 1,000 shares of Preferred Stock.
As of December 31, 1996, the Company had outstanding 180 shares of Series A
Convertible Preferred Stock. Each share of Series A Convertible Preferred
Stock was convertible, at certain times or on the occurrence of certain
events, into shares of the Company's common stock valued at 70% of the
market price. The outstanding shares of Series A Convertible Preferred
Stock were converted into common stock in the second quarter of 1997.
COMMON STOCK
The authorized capital stock of the Company includes 20,000,000 shares of
common stock. Authorized shares of common stock at September 30, 1995 were
15,000,000, and increased to 20,000,000 shares in April of 1997 at $.05 par
value. As of December 31, 1996, 9,264,584 shares of common stock were
outstanding and 8,173,804 shares of common stock were outstanding as of
December 31, 1997. The outstanding shares of common stock reflect a 20
for 1 reverse split in December 1997.
4. TAX BENEFIT:
The Company has a loss carryforward in the amount of $821,659 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>
EXHIBIT 23
CONSENT OF ARMANDO IBARRAB
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The undersigned indpendent 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, 1996 and
1997, 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, 1997.
/s/ ARMANDO IBARRA, C.P.A.
- ---------------------------------
Armando Ibarra, C.P.A.
Chula Vista, California
March 31, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 380,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 582,326
<CURRENT-LIABILITIES> 114,164
<BONDS> 0
0
180,000
<COMMON> 51,813
<OTHER-SE> 236,399
<TOTAL-LIABILITY-AND-EQUITY> 682,326
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 205,875
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (205,875)
<INCOME-TAX> (70,000)
<INCOME-CONTINUING> (135,875)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (135,875)
<EPS-PRIMARY> (.015)
<EPS-DILUTED> 0
</TABLE>
