SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB-A
Annual Report Pursuant to
the Securities Exchange Act of 1934
For the fiscal year ended 12-31-97
Commission file number 33-26531-LA
COMMERCIAL LABOR MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0241079
- ------------------------ -------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
137 N. Larchmont, #507, Los Angeles, CA 90004
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (323)933-0565
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: None
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 the filing
requirements for at least the past 90 days.
Yes_______ No_________
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. X
-----
State issuer's revenues for its most recent fiscal year. $0
1
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Transitional Small Business Disclosure Format:
Yes X No
----- -----
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 1997: $11,187 (based on the average of the closing
bid and prices as reported on OTC BB as of January 15, 1998)
Number of outstanding shares of the registrant's $.001 par value common stock,
as of December 31, 1997: 8,173,804.
2
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PART 1
Item 1. Business
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
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 re-established 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
maquilador (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 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 canceled, and the Company tendered back all of the shares of Commercial
Labor Management, Inc. which it owned. The Company is now seeking to make
3
<PAGE>
another business acquisition or enter into another business combination with an
operating entity.
In June 1997, all issued and outstanding shares of the Company's Series
A Convertible Preferred Stocks were converted by their holders into 7,200,00
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
50,000,000 shares, par value $.001 per share, and (ii) effected a one for five
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 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.
No significant business activity was conducted by the Company during
the fiscal year. As a result, no income was realized by the Company in its last
fiscal year.
The Company was inactive and presently does not participate in any
industry segment. The Company had no material revenues, or operating profits or
identifiable assets attributable to its industry segment.
4
<PAGE>
Item 2. Property
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 be identified.
The Company does not have any formal offices at year end. Records are
maintained and mail received at 137 N. Larchmont, #507, Los Angeles, CA 90004.
The Company owns no real property.
Item 3. Legal Proceedings
The Company is a party to no pending legal proceedings, nor is any
property subject to such proceedings, at year end 1997.
Item 4. Submission of Matters to a Vote of Security
Holders
In December 1997, the Company effected a one-for-twenty reverse stock
split of the issued and outstanding shares through written consent of a majority
of the issued and outstanding shares and concurrent Board of Directors
Resolution. For trading purposes, there was a delay in implementing the reverse
split. On November 3, 1998, the NASDAQ Stock Market, Inc. issued a Uniform
Practice Advisory (UPC #084-98) advising NASDAQ members that the effective date
of the one-for-20 reverse stock split for settlement purposes would be revised
to occur on October 14, 1998 rather than September 22, 1998 because NASDAQ
believes that "a sufficient lack of information and uncertainty existed in the
marketplace to warrant a revision" ruling. There is no assurance regarding the
final outcome of the NASDAQ'S UPC #084-98, or the effect the ruling and dispute
will have on the Company.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's common stock trades on the NASD OTC Bulletin Board Market
under the symbol "CLMI."
As of the date of this report, management knows of no trading of the
Company's common stock. The range of high and low bid quotations for each fiscal
5
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quarter since the last report and previous to years, as reported by the National
Quotation Bureau Incorporated, was as follows:
1997 High Low
First quarter .01 *
Second quarter .01 *
Third quarter .01 *
Fourth quarter $.01 *
1996 High Low
First quarter .07 .05
Second quarter .02 .01
Third quarter .02 .01
Fourth quarter $.02 $.01
1995 High Low
First quarter 8.00 .13
Second quarter 1.25 .75
Third quarter 3.25 .25
Fourth quarter $3.25 $.13
* No quotations reported
The above quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions.
As of December 31, 1997, there were 284 record holders of the Company's
common Stock.
The Company has not declared or paid any cash dividends on its common
stock and does not anticipate paying dividends for the foreseeable future.
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition and Changes in Financial
Condition
During the fiscal year ended 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
6
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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.
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
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 at no cost 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.
No operations were conducted and no revenues were generated in the
fiscal year. The Company at year end had no capital, no cash, and no other
assets. The Company at year end was totally illiquid and needed cash infusions
from shareholders to provide capital, or loans from any sources.
Results of Operations
1997 Compared to 1996
During the fiscal year ended December 31, 1997, the Company incurred no
general and administrative expenses. In 1996 the Company incurred $25,875 in
General and Administrative expenses most of which were professional fees and
wrote off as uncollectable a $180,000 receivable from an officer. At present,
the Company has no business income or operations. Accordingly, the reported
financial information herein may not be indicative of future operating results.
Profit/loss on operations in 1997 was ($0) compared to the 1996 loss on
operations ($205,875).
7
<PAGE>
1996 Compared to 1995
During the fiscal year ended December 31, 1996, the Company incurred
$25,875 general and administrative expenses most of which were professional fees
and wrote off $180,000 which was an uncollectible receivable. In 1995 the
Company incurred $0 in General and Administrative expenses. The Company had no
business income or operations in 1996 but attempted an acquisition in 1995 which
was rescinded within 3 months. Accordingly, the reported financial information
herein may not be indicative of future operating results. Loss on operations in
1996 was ($205,875) compared to the 1995 profit/loss on operations $0.
Item 7. Financial Statements and Supplementary Data
Please refer to pages F-1 through F-11.
Item 8. Changes in and Disagreements on Accounting and
Financial Disclosure
In connection with audits of two most recent fiscal years and any
interim period preceding resignation, no disagreements exist with any former
accountant on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope of procedure, which disagreements if not
resolved to the satisfaction of the former accountant would have caused him to
make reference in connection with his report to the subject matter of the
disagreement(s).
The principal accountants' reports on the financial statements for any
of the past two years contained no adverse opinion or a disclaimer of opinion
nor was qualified as to uncertainty, audit scope, or accounting principles
except for the "going concern" qualification.
PART III
Item 9. Directors and Executive Officers of the
Registrant and Compliance with Section 16(a)
The directors and executive officers of the Company as of December 31,
1997, are as follows:
Name Age Position
- ----------------- ----- ------------------------------
Edward L. Torres 39 President, CFO, Director
Mark French 35 Secretary, Treasurer, Director
The term of office of each director and executive officer ends at, or
immediately after, the next annual meeting of shareholders of the Company.
Except as otherwise indicated, no organization by which any director or officer
8
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has been previously employed is an affiliate, parent or subsidiary of the
Company.
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, 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 an
Financial West Group. Since 1994, Mr. French has been an independent financial
consultant for different companies seeking to raise capital.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership of equity securities of the
Company with the Securities and Exchange Commission and NASDAQ. Officers,
directors and greater-than 10% shareholders are required by the Securities and
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) filings.
1. The following people did not file any reports under Section 16(a)
during the most recent fiscal year:
a. Edward Torres President and Director
b. Mark Richardson Shareholder
c. Mark French Vice President and Director
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2. For each person, listed by subparagraph letter above:
Number of late Number of Known failures
reports transactions not to file forms
reported on a
timely basis
- ---------------- --------------------- --------------
a. none none none
b. none none none
c. none none none
Item 10. Executive Compensation
The Company accrued no compensation to the executive officers as a
group for services rendered to the Company in all capacities during the 1997
fiscal year. No one executive officer received, or has accrued for his benefit,
in excess of $60,000 for the year. No cash bonuses were or are to be paid to
such persons.
The Company does not have any employee incentive stock option plans.
There are no plans pursuant to which cash or non-cash compensation was
paid or distributed during the last fiscal year, or is proposed to be paid or
distributed in the future, to the executive officers of the Company. No other
compensation not described above was paid or distributed during the last fiscal
year to the executive officers of the Company. There are no compensatory plans
or arrangements, with respect to any executive office of the Company, which
result or will result from the resignation, retirement or any other termination
of such individual's employment with the Company or from a change in control of
the Company or a change in the individual's responsibilities following a change
in control.
10
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
<S> <C> <C> <C> <C> <C> <C>
Name and Year Salary Bonus Other Annual Restricted Securities
Principal ($) ($) Compensation Stock Underlying
Position ($) Award(s) Options/
($) SARs (#)
- ------------------------------------------------------------------------------------------------------------------------------------
Edward L. 1995 0 0 0 0 0
Torres,
President
1996 0 0 0 0 0
1997 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Mark 1995 0 0 0 0 0
French,
Secretary
1996 0 0 0 0 0
1997 0 0 0 0 0
</TABLE>
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
(Except for compensation of Officers who are also Directors which Compensation
is listed in Summary Compensation Table of Executives)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Cash Compensation Security Grants
Name Annual Meeting Consulting Number Number of
Retainer Fees Fees/Other of Securities
Fees ($) ($) Fees ($) Shares Underlying
(#) Options/SARs(#)
- ------------------------------------------------------------------------------------------------------------------------------------
A. Director 0 0 0 0 0
Edward L. Torres
B. Director 0 0 0 0 0
Mark French
</TABLE>
Item 11. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth information, as of December 31, 1997,
with respect to the beneficial ownership of the Company's $.05 par value common
stock by each person known by the Company to be the beneficial owner of more
than five percent of the outstanding common stock.
11
<PAGE>
Stock Names and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
- -------------- --------------------- ----------- --------
Common Mark J. Richardson (3) 7,530,000 92.1%
1299 Ocean Avenue
Suite 900
Santa Monica, CA 90401
Security Ownership of Management (Continued)
The following table sets forth information, as of December 31, 1997,
with respect to the beneficial ownership of the Company's $.05 par value common
stock by the directors and officers of the Company, both individually and as a
group.
Stock Names and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
- -------------- -------------------- ---------- --------
Common Edward L. Torres (1) 0 0
208 Mira Mar Ave.
Suite One
Long Beach, CA 90803
Common Mark French (2) 100,000 1.2%
967 Scottland Drive
Mt. Pleasant, SC 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.
(3) Mr. Richardson is a consultant to the Company.
Item 12. 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 position 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
12
<PAGE>
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 non-interest 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 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 not currently 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 right, 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 June 1997, the holders of the 180
shares of the Company's Series A Convertible Preferred stock converted all of
their Series A Convertible Preferred Stock into 360,000 shares of common stock
(post reverse split one-for-20). In December 1997, the Company amended its
Articles of Incorporation to increase its authorized common stock from
15,000,000 shares to 50,000,000 shares. At that time, the Company also effected
a one for 20 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 services performed for the Company.
13
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
The following documents are filed as part of this report:
1. Reports on Form 8-K: dated July 1
1995 and filed November 12, 1997
2. Exhibits:
14
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CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
COMMERCIAL LABOR MANAGEMENT, INC.
Commercial Labor Management, Inc., a Nevada corporation (the "Corporation")
does hereby certify that:
1. The Articles of Incorporation of the Corporation shall be amended by revising
Article III to read in full as follows:
"ARTICLE III
SHARES OF STOCK
---------------
The maximum number of shares of all classes which the Corporation is
authorized to have outstanding is fifty-two million (52,000,000) shares
consisting of fifty million (50,000,000) shares of Common Stock, all par value
$.001 per share, and two million (2,000,000) shares of Preferred Stock, all par
value $.001 per share. The holders of Preferred Stock shall have such rights,
preferences, and privileges as may be determined, prior to the issuance of such
shares, by the Board of Directors."
2. The issued an outstanding common stock of the Corporation is hereby
reverse split pursuant to which one share of common stock will be issued and
outstanding for every 20 shares of common stock currently issued and outstanding
as of the effective date of this amendment.
3. The foregoing amendment has been duly authorized and approved by the
Board of Directors of the Corporation.
4. The foregoing amendment has been duly adopted and approved by the
written consent of the stockholders holding no less than a majority of the
Corporation's outstanding stock entitled to vote thereon.
Dated: December 18, 1997 COMMERCIAL LABOR MANAGEMENT, INC.
/s/ Edward Torres
----------------------------------
Edward Torres, President
/s/ Edward Torres
----------------------------------
Edward Torres, Secretary
STATE OF CALIFORNIA }
} SS.
COUNTY OF LOS ANGELES }
On December 18, 1997, before me, Sheryl J. McLamb, a notary public in and
for said state, personally appeared Edward Torres, personally known to me to be
the person whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his authorized capacities, and that by his
signature on the instrument the entity upon behalf of which the persons acted,
executed the instrument.
WITNESS my hand and official seal.
Signature: /s/ Sheryl J. McLamb Sheryl J. McLamb
------------------------ Comm. #1115587
Notary Public - California
Los Angeles County
My Comm. Expires Nov. 3, 2000
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
COMMERCIAL LABOR MANAGEMENT, INC.
Commercial Labor Management, Inc., a Nevada corporation (the "Corporation")
does hereby certify that:
1. The issued and outstanding common stock of the Corporation is hereby
reverse split pursuant to which one share of common stock will be issued and
outstanding for every five shares of common stock currently issued and
outstanding as of the effective date of this amendment.
2. The foregoing amendment has been duly authorized and approved by the
Board of Directors of the Corporation.
3. The foregoing amendment has been duly adopted and approved by the
written consent of the stockholders holding no less than a majority of the
Corporation's outstanding stock entitled to vote thereon.
Dated: July 1, 1998 COMMERICAL LABOR MANAGEMENT, INC.
/s/ Edward Torres
-----------------------------------
Edward Torres, President
/s/ Edward Torres
-----------------------------------
Edward Torres, Secretary
<PAGE>
STATE OF CALIFORNIA }
} SS.
COUNTY OF ANGLES }
On July 1, 1998, before me, Caroline A. Rhuys, a notary public in and for
said state, personally appeared Edward Torres, proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacities, and that by his signature on the instrument the entity upon behalf
of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature: /s/ Caroline A. Rhuys CAROLINE A. RHUYS
--------------------------- Commission #1173448
Notary Public - California
Los Angeles County
My Comm. Expires Feb 12, 2002
<PAGE>
ARMANDO C. IBARRA
CERTIFIED PUBLIC ACCOUNTANT
(A Professional Corporation)
Armando C. Ibarra, CPA Members of the
Armando Ibarra, Jr., CPA California Society of
Lawrence Hayman, CPA, Ret Certified Public Accountants
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, stockholder's equity and retained earnings, and statement
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
misstatements. 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 the generally accepted
accounting principles.
/s/ Armando C. Ibarra
March 10, 1998
637 Third Avenue, Suite H, Chula Vista, CA 91910
Tel: (619) 422-1348 Fax: (619) 422-1465
F-1
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL LABOR MANAGEMENT, INC.
BALANCE SHEET
<S> <C> <C>
ASSETS
December 31, December 31,
1997 1996
---------------------------------------------------------------
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
===============================================================
The Accompanying Notes are an Integral Part of This Statement
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL LABOR MANAGEMENT, INC.
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
December 31, December 31,
1997 1996
----------------------------------------------------------
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 shares
authorized, 180 issued &
outstanding 180,000
Common stock, $.001 par value,
50,000,000 shares authorized,
8,173,804 issued and outstanding
(until June 1997) 231,813 51,813
Paid-in Capital 572,506 864,217
Accumulated deficit (627,868) (627,868)
----------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 176,451 468,162
----------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $202,326 $582,326
==========================================================
The Accompanying Notes are an Integral Part of This Statement
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL LABOR MANAGEMENT, INC.
STATEMENT OF INCOME
<S> <C> <C>
December 31, December 31,
1997 1996
-------------------------------------------------------------
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
=============================================================
The Accompanying Notes are an Integral Part of This Statement
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL LABOR MANAGEMENT, INC.
STATEMENT OF CASH FLOW
<S> <C> <C>
December December
31, 1997 31, 1996
---------------------------------------------------
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
===================================================
The Accompanying Notes are an Integral Part of This Statement
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL LABOR MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM DECEMBER 31, 1993 TO DECEMBER 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock Preferred Stock
-------------------------------------------------------
Additional
Number of Paid-in Treasury
Number of Shares Capital Stock & Accumulated
Shares Amount Amount Adj's Deficit Total
-----------------------------------------------------------------------------------------------------------
BALANCE -
12/31/93 800,000 40,000 219,192 (171,685) 105,287 364,479
1994 ACTIVITY
Exercise of
warrants 50,000
2-for-1 split
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
3-for-1 reverse
split 3/20
1995 Net (589,018)
Transactions
Issuance of 8,970,076
Preferred Stock
Loss for the
period ended 180,000 180,000 180,000
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 - June
30, 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)
General (291,711)
cancellations
(2,603,548)
-----------------------------------------------------------------------------------------------------------
BALANCE - Mar.
31, 1997 6,661,036 $51,813 180,000 180,000 $572,506 0 ($627,868) $176,451
===========================================================================================================
Cancellations
Issuances/Con- (4,425,000)
versions 10,628,048 180,000 180,000 180,000 $572,506 0 ($627,868) 176,451
-----------------------------------------------------------------------------------------------------------
BALANCE - June
30, 1997 12,864,048 231,813 0 0 $572,506 0 ($627,868) 176,451
===========================================================================================================
BALANCE - Sept.
30, 1997 12,864,048 231,813 0 0 $572,506 0 ($627,868) 176,451
===========================================================================================================
20-for-1 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
===========================================================================================================
The Accompanying Notes are an Integral Part of This Statement
</TABLE>
F-8
<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
share 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 were 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.
F-9
<PAGE>
COMMERCIAL LABOR MANAGEMENT
NOTES TO THE FINANCIAL STATEMENT
DECEMBER 31, 1997
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
forth quarter of 1994, the Company issued some common stock to
individuals to whom money was owed for professional services rendered
prior to September 30, 1994.
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. The shares
were converted to 360,000 shares of common stock in the third quarter
of 1997.
Common Stock
------------
The authorized capital stock of the Company consists of Common Stock.
Authorized shares of Common Stock at September 30, 1995 were 15,000,000
and increased to 50,000,000 shares in April of 1997 at $.05 par value
subsequently reduced to $.001 par value, 9,264,584 shares were
outstanding as of December 31, 1996; and 8,173,804 shares were
outstanding as of December 31, 1997. A 20 for 1 reverse split of the
outstanding Common Stock occurred in December 1997, and after the
reverse split, the Company issued 7,530,600 new shares of its Common
Stock.
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 carryforwarded 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.
F-10
<PAGE>
INDEX
Form 10-K
Regulation Consecutive
S-K Number Exhibit Page Number
- ----------- --------------- -------------------------
3.1 Articles of *Incorporated by
Incorporation reference to Registration
Statement #2-87742-D
3.2 Bylaws *Incorporated by
reference to Registration
Statement #2-87742-D
3.3 Amendments to Articles
of Incorporation filed
May 1998
3.4 Amendments to the Articles
of Incorporation filed
August 1998
27.1 Financial Data Schedule F-12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
COMMERCIAL LABOR MANAGEMENT, INC.
(Registrant)
Date: March 24, 1999
/s/ Edward L. Torres
------------------------------------
President
Pursuant to the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
COMMERCIAL LABOR MANAGEMENT, INC.
(Registrant)
Date: March 24, 1999
-------------------------------------
Director
-------------------------------------
Director
-------------------------------------
Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 202,326
<CURRENT-LIABILITIES> 25,875
<BONDS> 0
0
0
<COMMON> 231,813
<OTHER-SE> (55,362)
<TOTAL-LIABILITY-AND-EQUITY> 202,326
<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>
