**UNITED
STATES SECURITIES AND EXCHANGE COMMISSION**
 **Washington
D.C. 20549**
  
 **FORM
10-KSB**
  
 x
    
    **ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.**
 
 **For
the fiscal year ended February 28, 2005**
 
  ̈
    
    **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.**
 
 **For
the transition period from** **** **,
20** **** **,
to** **** **,
20** **** **.**
 
 **Commission
File Number**
 **33-98682**
  
 **American
Commerce Solutions, Inc.**
 **(Exact
Name of Registrant as Specified in Charter)**
 
  
 **Delaware**
    
    **05-0460102****(State
      or Other Jurisdiction of**
      **Incorporation
      or Organization)**
    
    **(I.R.S.
      Employer Identification Number)**
 
 **1400
Chamber Drive, Bartow, Florida 33830**
 **(Address
of Principal Executive Offices)**
 
 **(863)
533-0326**
 **(Registrant’s
Telephone Number, Including Area Code)**
 
  
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act during the past 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. x YES  ̈ NO
 
 Check if
no disclosure of delinquent filers in response to Item 405 of Regulation S-B is
contained in this form, and no disclosure will be contained, to the best of
registrant’s knowledge, in definitive proxy of 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.......$2,753,633
 
 Aggregate
market value of the voting and non-voting common equity of the registrant held
by non-affiliates of the registrant at February 28, 2005 was $3,645,105 based
upon the closing sale price of $.02 or the Registrant’s common stock, $.002 par
value, as reported by the National Association of Securities Dealers OTC
Bulletin Board on February 28, 2005.
 
 There
were 182,255,226 shares of the Registrant’s $.002 par value common stock
outstanding as of February 28, 2005.
 
 Transitional
Small Business Format (check one) Yes  ̈ NO x
  1
 AMERICAN
COMMERCE SOLUTIONS, INC.
 FORM
10-KSB - INDEX
 
 Part IItem
      1
    Description of BusinessItem
      2.
    Description of PropertyItem
      3.
    Legal ProceedingsItem
      4.
    Submission of Matters to a Vote of Security
      HoldersPart IIItem
      5.
    Market for Common Equity and Related Stockholder
      MattersItem
      6.
    Management’s Discussion and AnalysisItem
      7.
    Consolidated Financial
  StatementsItem
      8.
    Changes in and Disagreements with Accountants on Accounting
      and Financial DisclosureItem
      8A.
    Controls and ProceduresItem
      8B
    Other informationPart IIIItem
      9.
    Directors, Executive Officers, Promoters, and Control
      Persons; Compliance with
      Section 16(a) of the Exchange ActItem
      10.
    Executive CompensationItem
      11.
    Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder MattersItem
      12.
    Certain Relationships and Related
      TransactionsItem
      13.
    Exhibits and Reports on Form 8-KItem
      14.
    Principal Accountants Fees and
  ServicesSignaturesCertifications
 
 
 
 2
 
 **AMERICAN
COMMERCE SOLUTIONS, INC.**
 
 This
Annual Report on Form 10-KSB and the documents incorporated herein by reference
contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates and
projections about American Commerce Solution, Inc.’s industry, management
beliefs, and assumptions made by management. Words such as “anticipates,”
“expects,” “intends,” “plans,” ”believes,” “seeks,” “estimates,” variations of
such words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results and outcomes may differ materially from what
is expressed or forecasted in any such forward-looking statements.
 
 **PART I**
 
 **ITEM
1.****DESCRIPTION
OF BUSINESS**
 
 American
Commerce Solutions, Inc., was incorporated in Rhode Island in May 1991 under the
name Jaque Dubois, Inc. and was re-incorporated in Delaware in 1994. In July
1995, the Company's name was changed to JD American Workwear, Inc. In December
2000 the shareholders voted to change the name of the company to American
Commerce Solutions, Inc. to more accurately portray the activities of the
company.
 
 American
Commerce Solutions, Inc. (the "Company" or "American Commerce") is a
multi-industry holding company for its operating subsidiaries. As of the close
of its most recently completed fiscal year end, the Company had two wholly owned
subsidiaries operating in the manufacturing segment and the fiberglass segment.
The operating subsidiaries are International Machine and Welding, Inc. located
in Bartow, Florida and Chariot Manufacturing Company, Inc. located in Tampa,
Florida.
 
 The
Company intends to expand its holdings by acquiring additional subsidiaries to
facilitate its business plan. The current business plan has been in development
since June 2000.
 
 International
Machine and Welding, Inc. provides specialized machining services for heavy
industry. Target customers in the region include mining, agriculture processing,
maritime, power generation and industrial machinery companies. Additional
operations include heavy equipment service to the construction, forestry, waste
and scrap industries. The operation provides complete service of the equipment,
which includes rebuilding undercarriages, engines, transmissions, final drives
and hydraulics. The effective service area for the operation located in the
Southeastern region of the United States is a prime and lucrative market for
such services. Growth in this region of the United States (population,
infrastructure, and building) has created long term needs for construction
equipment. All of these machines require periodic maintenance, and at certain
points major overhauls. In addition to its 38,000 square foot facility, the
operation also provides fully equipped field service vehicles so machines do not
have to be removed from the work site.
 
 International
Machine and Welding, Inc. also sells OEM and after-market repair parts for heavy
equipment. The operation has an extensive cross-reference listing and network of
sources. One of the major competitive advantages of the operation is its ability
to determine exactly what the customer needs and fulfill the requirement. In
many cases, the customer may not have service manuals or to be able to identify
part numbers. If a customer has more than one type of machine, which is quite
common, they may have to contact a number of different suppliers to get parts
for multiple machines. Our operation identifies the required parts and arranges
the necessary repairs. As a result, the customer only has to make one phone call
for all of their needs. This also makes International Machine and Welding, Inc.
an attractive alternative for sales to customers outside the United States.
Orders can be accumulated throughout the month and be sent on consolidated
shipments. This has created a niche market for the direct parts sales division.
The operation currently has two customer relationships in the Caribbean.
Management believes that this market has not been fully targeted by its
competitors and offers potential as a source of increased business.
 
 Chariot
Manufacturing Company, Inc., which was acquired on October 11, 2003 from a
related party, manufactures motorcycle trailers with fiberglass bodies. These
trailers are sold both on the retail and dealer levels. The company also
provides non warranty repairs, modification of existing Chariot Trailers.
 
 The Board
of Directors of American Commerce Solutions, Inc. has determined that it will
seek to acquire additional fiberglass manufacturing operations and construction
operations that utilize heavy equipment. Additional segments being considered
are manufacturing supply operations, consumer products and commercial
construction support services.
 
 ACQUISITIONS
AND DIVESTITURES
 
 The
Company sold back to its original founder the assets and certain liabilities of
its JD American Workwear, Inc. operation and all of the Rhode Island Truck and
Equipment, Inc. operations on May 31, 2001 and October 31, 2001, respectively.
The terms and conditions of these transactions have been reported in their
respective Form 10-QSB for the period ended May 31, 2001 and November 30, 2001
and are incorporated by reference herein.
 
 On June
1, 2000, the Company completed the purchase of International Machine and
Welding, Inc. by acquiring all of the outstanding capital stock of its holding
company, Patina Corporation for a total purchase price of $4,446,159. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, International Machine and Welding, Inc.'s results of operations
have been included in the consolidated financial statements since the date of
acquisition. The acquisition was funded by the issuance of 9,800 shares of
Series C 6% Preferred Stock.
 
 On June
1, 2000, the Company completed the purchase of Rhode Island Truck and Equipment
Corp. d/b/a International Paving, Inc. by acquiring all its outstanding capital
stock for a total purchase price of $238,000. The acquisition was funded by the
issuance of 200,000 shares of common stock.
 
 On June
1, 2001, the Company discontinued the operations of its JD American Workwear,
Inc. subsidiary and exchanged certain assets and liabilities with the President
of the subsidiary for 725,000 shares of the Company's common stock and notes
payable of $43,115. On October 31, 2001, the Company returned all of the stock
of Rhode Island Truck and Equipment Corp. to its original owners in exchange for
155,000 shares of the Company's common stock.
 
 On
October 11, 2003, the Company acquired 100 percent of the outstanding common
stock of Chariot Manufacturing Company, Inc. from a related party for $360,000.
The acquisition was financed through the assignment of a note receivable valued
at $150,000, $30,000 worth of common stock and a note payable for $180,000.
 
 During
the year ended February 28, 2005, the Company entered into a purchase agreement
to acquire certain assets, including equipment and inventory from a supplier for
$848,650. The Company acquired equipment and inventory valued at $768,826 and
$6,208, respectively, and forgiveness of payables of $73,616 by the supplier. In
exchange for the assets and forgiveness of payables, the Company assigned
receivables $131,658, forgave debt of $273,376 and issued notes payable of
$443,616.
 
 3
 BUSINESS
STRATEGY
 
 The
Company has adopted a business strategy that focuses on expansion through
acquisition. The key elements of acquisition targets must include solid
management, profitability, geographical locations compatibility and/or
undervalued companies that can be enhanced by shared services and
opportunities.
 
 Under the
current strategy, the Company is developing three divisions of its chosen
segment: Manufacturing and a new segment within the manufacturing industry:
Fiberglass.
 
 MANUFACTURING
SEGMENT
 
 The
Manufacturing Segment through International Machine and Welding, Inc. offers a
broad range of products and services to heavy industry through its three
divisions. The operations of Division 1 provide specialized machining of very
large components and machinery repair to industries such as aerospace,
agricultural processing, chemical, defense, mining, maritime and power
generation. Our 38,000 square foot facility located in Bartow, Florida is one of
the only operations in the Southeast capable of machining components up to 55
feet in length and/or 20 feet in diameter. Division 2 provides heavy equipment
service (parts and labor), which includes repair and bonded rebuilds of engines,
tracks, undercarriages, transmissions, final drives and hydraulic systems on
heavy equipment. The equipment we repair is from the heavy construction industry
including bulldozers, scrapers, loaders, excavators, large tractors, rollers,
etc. The division provides field service via equipped service trucks to provide
repairs at the customer's site. Division 3 sells replacement parts to the heavy
equipment market, directly to the end user with most of the parts exported
outside the United States.
 
 FIBERGLASS
SEGMENT
 
 The
Fiberglass Segment through Chariot Manufacturing Company, Inc. produces a line
of fiberglass trailers suitable for a wide range of uses. Some of the uses
include the transportation of motorcycles, ATVs, personal watercraft, small
vehicles, vending, mobile fiber optic workstations, utility and other
specialized applications. The trailers are available in both open and enclosed
configurations. The fiberglass unibody construction of the product is stronger,
yet lighter than conventional aluminum and steel trailers. The Chariot trailer
has a steel tube sub frame which is tucked up inside the fiberglass body
reducing drag. Since the body is molded in fiberglass, the shape can be
optimized to reduce drag. The overall shape, coupled with the light weight of
the trailer also improves gas mileage while towing. The trailers can be fitted
with optional features such as custom interiors and sleeper options.
 
 MANUFACTURING
AND SOURCES OF SUPPLY
 
 Manufacturing
Segment
 
 Supplies
and parts used by International Machine and Welding, Inc. are purchased from
several major suppliers including Caterpillar, John Deere, Case and other major
manufacturers and after market parts suppliers. The machining operations
purchase from many suppliers based on the need of specific jobs. Although the
operations do not have any long-term contracts with any of its suppliers,
management believes that it has excellent business relationships with its
current suppliers and it is not exposed to any significant risk in the event any
one source of supply is discontinued, because there are many
suppliers.
 
 Fiberglass
Segment
 
 Likewise,
Chariot Manufacturing Company, Inc. has a ready supply of material available
through both seasoned and new suppliers and vendors.
 
 MARKETING
AND SALES
 
 Manufacturing
Segment
 
 International
Machine and Welding, Inc. operates three divisions at one location. Division 1
sales have traditionally come from industries within a 100-mile radius of its
facilities requiring specialized machining applications. Direct salesmen have
established relationships with specific customers and the Company has expanded
the business relationship through quality, rapid turn and value. While this
business is quite lucrative, visibility is limited. The operation intends to
expand its operations in the OEM market, where the subsidiary provides
components to manufacturers of large machines. These types of accounts generally
involve annual contracts with three-month rolling schedules. The expansion of
the market also is expected to increase the serviceable territory from the
Southeast to include the entire United States.
 
 Direct
sales personnel who primarily target mid-tier accounts handle sales for Division
2 and 3. We believe that this broad niche market is largely untapped by the
larger factory-sponsored operations which cater specifically to very large
accounts. Margins are typically very slim in these accounts and a large
percentage of customer base is represented by very few accounts. Because we are
an independent repair facility, we can provide service to a much broader base of
customers with greater margins than the large factory-sponsored competitors.
 
 Fiberglass
Segment
 
 Chariot
Manufacturing Company, Inc. sells through a network of dealers throughout the
United States, or directly to individuals. Inquiries from individuals come from
a number of sources including the Company’s participation in industry events,
the Company’s web site and from people who have seen the product on the road and
called the Company’s phone number, (which is on every trailer produced either in
graphic form or molded into the fiberglass body). Many inquiries result from
referrals from existing customers. The Company has a 28 year history and is well
known in the industry. Recently, the Company has begun to pursue OEM business,
where trailers are sold to companies rather than individuals or dealers. These
companies will install their products into the trailer and sell the package to
the end user.
 
 COMPETITION
 
 Manufacturing
Segment
 
 The
principal competitors of the Manufacturing Division consists of regional
companies such as Southern Machinery, Florida Plating and Machine, Arroyo and
Florida Metalizing in the machining operations and national corporations such as
Ringhaver Equipment, Caterpillar, and Case repair facilities in the heavy
equipment parts and service category. Management believes that the ability to
rapidly turn goods or to provide parts on a timely basis gives it a competitive
advantage. We are able to ship parts directly to the consumer, usually on the
same day as the order or to return all service work within the time specified
either by completing the work at the customers site or because of immediate
turnaround capabilities.
 
 Fiberglass
Segment
 
 Chariot
Manufacturing’s principal competitors include companies such as Pace American,
Hallmark, Feather Light and Wells Cargo. Chariot is competitively priced when
compared to comparably equipped trailers. Chariot is positioned in the market as
a premium product. Many features are standard equipment on the Chariot, while
they are options on competitive products. Chariot’s aerodynamic styling,
lightweight, unibody construction, balance, resale value and standard features
differentiate it from the competition.
 4
 CUSTOMER
DEPENDENCE
 
 Manufacturing
Segment
 
 International
Machine and Welding, Inc. has a broad and diverse base of customers. The
division does not rely on any single customer, the loss of which would have a
material adverse effect on the segment. This division does generate a
significant amount of revenues from sales and services provided to three
different industries. The construction industry accounted for approximately -44%
of the division's revenues in fiscal 2005 compared to 34% in fiscal 2004, while
the industrial and mining industries accounted for approximately 39% and 17% in
fiscal 2005 compared to 43.5% and 21% in fiscal 2004, respectively, of the
division's total revenues. Due to these concentrations, the results of
operations of the division could be affected by changes in the economic,
regulatory, or other related conditions impacting on these
industries.
 
 Although
the division does not rely on a single customer, three of the Company’s
customers accounted for approximately 48% of total revenues. These customers
were Vehicare 23%, Mosaic Phosphates 16% and Dixie Southern 9%.
 
 Fiberglass
Segment
 
 Chariot
Manufacturing Company, Inc. has a wide base of customers. The loss of a single
customer or dealer would not have a material adverse effect on the business. The
primary use of the product is to transport motorcycles. The motorcycle industry
growth has been strong in recent years. Sales for the Company’s products,
however, are not tied to sales of new motorcycles.
 
 EMPLOYEES
 
 At
February 28, 2005, the Company and its subsidiaries had 26 full-time employees.
Of these workers, two are performing management and marketing functions, seven
are performing accounting, financial and office functions, three provide sales
functions and the remainder provide support, maintenance or fulfill shop
operation requirements. The parent operation has three full time employees. The
Manufacturing segment employs 15 full time employees. Chariot Manufacturing
Company, Inc. employs 8 full time employee while contracting substantially all
of the fiberglass activity.
 
 FUTURE
ACQUISITIONS
 
 The
Company remains dedicated to its basic business plan, which calls for growth
through acquisition of strategic business opportunities. Although discussions
and negotiations continue with multiple companies, the most anticipated
opportunities remain to be within the fiberglass industry. As of the filing of
this document, we have not completed the close of a fiberglass recycling
company, however progress is being made daily with all requisite functions,
i.e., accounting, legal and structural.
 
 FORWARD
LOOKING STATEMENTS
 
 This
Annual Report on Form 10-KSB (including the Exhibits hereto) may contain
"forward-looking statements" within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995, including, but not limited
to, statements regarding, among other things, the financial condition and
prospects of the Company and its subsidiaries, results of operations,
projections, plans for future business development activities and the
opportunities available within its market areas, capital spending plans,
financing sources, projections of financial results or economic performance,
capital structure, the effects of competition, statements of plans,
expectations, or objectives of the Company, and the business of the Company and
its subsidiaries. These forward-looking statements are typically identified by
words or phrases such as "believe," "expect," "anticipate," "plan," "estimate,"
"intend," and other similar words and expressions, or future or conditional
verbs such as "should," "would," and "could" and other characterizations of
future events or circumstances. In addition, the Company may from time to time
make such written or oral "forward-looking statements" in future filings with
the Securities and Exchange Commission (including exhibits thereto), in its
reports to stockholders, and in other communications made by or with the
approval of the Company.
 
 These
forward-looking statements reflect the current views of the Company at the time
they are made and are based on information currently available to the management
of the Company and upon current expectations, estimates, and projections
regarding the Company and its industry, management's beliefs with respect
thereto, and certain assumptions made by management. These forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties, and other factors (many of which are outside the control of the
Company), which could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. Such forward-looking
statements speak only to the date that such statements are made, and the Company
undertakes no obligation to update any forward-looking statements, whether as
the result of new information, future events, the occurrence of unanticipated
events, or otherwise. The following sets forth some, but not necessarily all, of
the factors that may cause the Company's actual results to vary materially from
those which are the subject of any forward-looking statements.
 
 RISK
FACTORS
 
 Accumulated
Deficit and Operating Losses and Anticipated Earnings; Explanatory Language in
Auditor's Report. The Company had an accumulated deficit at February 28, 2005 of
$14,841,951 and net loss to common shareholders of $1,278,889 for the year ended
February 28, 2005. The Company had an accumulated deficit of $13,563,062, and
net loss to common shareholders of $1,644,144 for the year ended February 29,
2004. The Company's financial statements are presented on the basis that the
Company is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the ordinary course of business. While there can
be no assurance of this outcome, management believes its plan of operation will
allow the Company to achieve this goal.
 
 Growth
Plans and Risk of Expansion. The Company adopted and implemented a business
strategy, which seeks growth and expansion through the acquisition of
synergistic companies. Accordingly, the growth and financial performance of the
Company will depend, in large part, upon the Company's ability to identify and
locate suitable acquisitions, to manage such growth and the resultant diverse
operations, to manage the margins of the acquired operations, and to attract,
hire, train, and retain qualified supervisory personnel and other operational
employees to meet the Company's needs as it expands, as well as the availability
of sufficient working capital. Difficulties resulting from the failure of the
Company to manage and control its growth could materially adversely affect the
Company's operating results and financial condition.
 
 No
Assurance of Acquisitions. Although the Company has had preliminary discussions
with potential acquisition candidates, the Company has only completed one such
transaction in the last fiscal year. The Company does have current
understandings or arrangements (oral or written) relating to specific
acquisitions, but can not give specific timing to close the potential
acquisitions. Until binding agreements are in place there can be no assurance
that any proposed acquisition will be consummated or that adequate, acceptable
and affordable financing will be available.
 
 Furthermore,
to the extent that acquisitions are consummated, the Company’s success or
failure will depend upon management’s ability to integrate the acquired business
into the company and implementation of adequate management skills and systems
necessary to accomplish the Company's strategy. Additionally, the Company is
unable to predict whether or when, once integrated, any acquisition may achieve
comparable levels of revenues, profitability, or productivity as existing
Company operations, or otherwise perform as expected (including achievement of
expected synergies or financial benefits). The Company may face competition for
desirable acquisitions from entities that may possess greater resources than the
Company.
 
 5
 Acquisition
Risks. Acquisitions involve a number of special risks, some or all of which
could have a material adverse effect on the Company's results of operations or
financial condition. Such risks include, but are not limited to, the diversion
of management's attention from core operations, difficulties in the integration
of acquired operations and retention of personnel, customers, and suppliers,
unanticipated problems or legal liabilities, tax and accounting issues, and the
inability to obtain all necessary governmental and other approvals and
consents.
 
 Need for
Additional Financing. Cash flows from the sale of securities provided the
working capital needs and principal payments on long-term debt through most of
fiscal 2005. However, the Company will need to obtain additional financing in
order to finance its acquisition and growth strategy. There can be no assurance
that debt or equity financing will be available to the Company on acceptable
terms, if at all. If the Company does require additional financing and it cannot
be obtained or the terms of such financings are unfavorable, it may have a
material adverse impact on our operations and profitability, and the Company may
need to curtail its business plan and strategy.
 
 Loss of
Certain Members of Our Management Team Could Adversely Affect the Company. The
Company is dependent to a significant extent on the continued efforts and
abilities of our Chairman, Robert E. Maxwell and President and Chief Executive
Officer, Daniel L. Hefner. If the company were to lose the services of either of
these individuals or other key employees or consultants before a qualified
replacement could be obtained, the business could be materially affected.
 
 Expected
Volatility in Share Price. The market price of our stock has traded in a wide
range. From March 1, 2001 through February 28, 2005 the price of our common
shares has ranged from $0.01 to $0.78 per share. The price of our common stock
may be subject to fluctuations in response to quarter-to-quarter variations in
operating results, creation or elimination of funding opportunities, restriction
of the acquisition plans, and favorable or unfavorable coverage of our officers
and Company by the press.
 
 ITEM 2.
DESCRIPTION OF PROPERTY
 
 International
Machine and Welding, Inc. owns in fee simple title a 38,000 square foot facility
in Bartow, Florida, which currently serves as the principal executive offices of
American Commerce Solutions. A note payable to Valrico State Bank, originally at
$875,000 encumbers this building. As of February 28, 2005, the balance on this
note is $800,831. This note needs to be refinanced by November 2005. The note
and mortgage in favor of Valrico State Bank allowed the Company to negotiate a
settlement with GE Capital Small Business and other creditors, substantially
reducing debt service and generating a one time gain of $812,014, which was
recognized during fiscal year ending February 28, 2003.
 
 Chariot
Manufacturing Co., Inc. has its corporate offices at the International Machine
and Welding facilities in Bartow, Florida. Its manufacturing operations are
housed in an approximately 12,500 square foot moveable facility located in
Tampa, Florida. The land that the facility is housed on, approximately 1.5
acres, is under a lease /option by AFG assigned to American Commerce Solutions,
Inc. as part of the July 2004 asset purchase of AFG assets. AFG is one of
Chariot’s key fiberglass suppliers. It is anticipated that the facilities will
be adequate to meet the company’s sales projections until a more permanent
facility can be secured or the land is purchased to create a more permanent
operation. The adjacent, slightly larger parcel is available. ACS has a ‘right
of first refusal’ on this parcel.
 
 ITEM 3.
LEGAL PROCEEDINGS
 
 None.
 
 ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 During
the year ended February 28, 2005, the Company did not submit any matters to a
vote of its security holders.
 
 PART II
 
 ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
 
 MARKET
INFORMATION
 
 Since the
April 1996 closing of the Company's initial public offering, the Company's
Common Stock has traded in the over-the-counter market on the National
Association of Securities Dealers, Inc. OTC Bulletin Board System ("OTCBB").
Until January 31, 2001 the company's common stock traded under the symbol
"JDAW." In connection with the name change, since February 10, 2001, the common
stock has traded under the symbol "AACS." The following table sets forth the
range of high and low closing bid quotations of the Common Stock as reported by
the OTCBB for each fiscal quarter for the past two fiscal years. High and low
bid quotations reflect inter-dealer prices without adjustment for retail
mark-ups, markdowns or commissions and may not necessarily represent actual
transactions.
 
 Bid
      PricesHigh
    Low**FISCAL
      2005**First
      Quarter (March 1, 2004 through May 31, 2004)
    $0.04
    $0.02Second
      Quarter (June 1, 2004 through August 31, 2004)
    $0.03
    $0.01Third
      Quarter (September 1, 2004 through November 30, 2004)
    $0.04
    $0.01Fourth
      Quarter (December 1, 2004 through February 28, 2005)
    $0.03
    $0.02**FISCAL
      2004**First
      Quarter (March 1, 2003 through May 31, 2003)
    $0.09
    $0.02Second
      Quarter (June 1, 2003 through August 31, 2003)
    $0.03
    $0.01Third
      Quarter (September 1, 2003 through November 30, 2003)
    $0.05
    $0.01Fourth
      Quarter (December 1, 2003 through February 29, 2004)
    $0.04
    $0.02
 
 
 On
February 28, 2005 the closing bid price of the Company's Common Stock as
reported by the OTCBB was $0.02 and there were approximately 1,204 shareholders
of record.
 
 6
 DIVIDENDS
 
 The
Company has never declared or paid a dividend on its Common Stock, and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. The Company expects to retain, if any, its future earnings for expansion
or development of the Company's business. The decision to pay dividends, if any,
in the future is within the discretion of the Board of Directors and will depend
upon the Company's earnings, capital requirements, financial condition and other
relevant factors such as contractual obligations. There can be no assurance that
dividends can or will ever be paid.
  EQUITY
COMPENSATION PLAN INFORMATION
 
 The
following table provides information about our Equity Compensation Plans.
 
 Plan
      Category
    Number
      of securities to be issued upon exercise of outstanding options
    Weighted
      average price of outstanding options
    Number
      of securities remaining available for future issuance-
    -Non-Qualified
      Option/Stock Appreciation Rights Plan approved by security
      holders
    362,500
    $0.27
    57,400Employees
      Stock Incentive Plan approved by security holders
    -
    -
    7,000,000Non-Employee
      Directors and Consultants Retainer Stock Plan approved by security
      holders
    -
    -
    7,000,000
 
 RECENT
SALES OF UNREGISTERED SECURITIES
 None
 
 ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS
 
 This
discussion is intended to further the reader’s understanding of the Company’s
financial condition and results of operations, and should be read in conjunction
with the Company’s consolidated financial statements and related notes included
elsewhere herein. This discussion also contains forward-looking statements. The
Company’s actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risks and uncertainties set forth
elsewhere in this Annual Report and in the Company’s other SEC filings. Readers
are cautioned not to place undue reliance on any forward-looking statements,
which speak only as of the date hereof. The Company is not party to any
transactions that would be considered “off balance sheet” pursuant to disclosure
requirements under ITEM 303(c).
 
 RESULTS
OF OPERATIONS
 
 The
Company owns two subsidiaries that operated in the manufacturing segment and the
fiberglass segment during the fiscal year ended February 28, 2005 and February
29, 2004. To facilitate the readers understanding of the Company's financial
performance, this discussion and analysis is presented on a segment
basis.
 
 MANUFACTURING
SEGMENT
 
 The
manufacturing subsidiary, International Machine and Welding, Inc., generates its
revenues from three divisions. Division 1 provides specialized machining and
repair services to heavy industry and original equipment manufacturers. Division
2 provides repair and rebuild services on heavy equipment used in construction
and mining as well as sales of used equipment. Division 3 provides parts sales
for heavy equipment directly to the customer. The primary market of this segment
is the majority of central and south Florida with parts sales expanding its
market internationally. The current operations can be significantly expanded
using the 38,000 square foot structure owned by International Machine and
Welding, Inc.
 
 FIBERGLASS
SEGMENT
 
 Chariot
Manufacturing Company, Inc., which was acquired on October 11, 2003 from a
related party, manufactures motorcycle trailers with fiberglass bodies. These
trailers are sold both on the retail and dealer levels. The company also
provides non warranty repairs, modification of existing Chariot Trailers.
 
 FISCAL
YEAR 2005 COMPARED TO FISCAL YEAR 2004
 
 General
 
 The
Company's consolidated net sales increased to $2,753,633 for the fiscal year
ended February 28, 2005, an increase of $669,428 or 32%, from $2,084,205 for the
fiscal year ended February 29, 2004. This increase was due to the addition of
Chariot Manufacturing and an increase in the economy.
 
 Gross
profit for the consolidated operations increased to $853,656 for the fiscal year
ended February 28, 2005 from $758,715 for the fiscal year ended February 29,
2004. Gross profit as a percentage of sales decreased in fiscal year 2005 to 31%
from 36% in fiscal year ended 2004. This decrease is due to the impact of
Chariot Manufacturing, Inc. on the consolidated income statement.
 
 Consolidated
interest expense in fiscal 2005 was $163,258 compared to $188,915 in fiscal
2004. The overall decrease in interest expense was due to the Company paying
down a portion of the notes payable during the fiscal year ended February 28,
2005.
 
 Selling,
general and administrative expenses decreased to $2,200,668 for fiscal 2005 from
$2,251,488 for fiscal 2004, a decrease of $50,820 or 2%. This decrease was due
to more efficient management of expenses.
 
 The
Company incurred a net consolidated loss of $1,278,889 for the year ended
February 28, 2005 compared to a loss of $1,644.144 for the year ended February
29, 2004. This decrease in net loss was due to the addition of Chariot
Manufacturing and an increase in the economy. As a result of the continued
losses, the Independent Auditors have questioned the Company's continuation as a
going concern.
 
 7
 Manufacturing
Segment
 
 The
manufacturing operation, International Machine and Welding, Inc. provided net
sales of $2,371,771 for the fiscal year ended February 28, 2005 compared to
$2,067,455 for the fiscal year ended February 29, 2004. The machining operations
provided $894,235 or 38% of net sales with parts and service providing
$1,477,536 or 62% of net sales for the fiscal year ended February 28, 2005 as
compared to machining operations contributing $744,906 or 36% of net sales with
parts and service providing $1,322,549 or 64% of net sales for the fiscal year
ended February 29, 2004. The overall increase in net sales is due to increased
sales effort including in the nuclear power plant area.
  Gross
profit from the International Machine and Welding, Inc. was $791,673 for the
fiscal year ended February 28, 2005 compared to $748,557 in fiscal 2004
providing gross profit margins of 33.4% and 36.21%, respectively. Although this
represents an increase in gross profit, the cost associated with increased sales
translated to a decrease in gross profit as a percentage. Additionally, three
major storms caused almost 1500 non-billable hours to the detriment of
profitability.
 
 Selling,
general and administrative expenses for International Machine and Welding, Inc.
were $906,625 for the fiscal year ended February 28, 2005 compared to $852,517
for the fiscal year ended February 29, 2004.
 
 Interest
expense was $101,016 for the fiscal year ended February 28, 2005 compared to
$133,485 for the fiscal year ended February 29, 2004. The decrease in interest
expense is due to the Company continuing to pay off its notes
payable.
 
 The
Company does not have discrete financial information on each of the three
manufacturing divisions, nor does the Company make decisions on the divisions
separately; therefore they are not reported as segments.
 
 Fiberglass
Segment
 
 The
fiberglass manufacturing operation, Chariot Manufacturing Company, Inc. was
acquired during the year ended February 2004 and provided net sales of $381,862
for the fiscal year ended February 28, 2005 as compared to $16,750 for the
fiscal year ended February 29, 2004.
 
 Gross
profit from Chariot was $61,983 for the fiscal year ended February 28, 2005 as
compared to $10,158 for the fiscal year ended February 29, 2004 providing a
gross profit margin of 16% and 61%, respectively. The decrease in gross profit
margin is due to extremely limited operation during the 2004 fiscal year. The
2005 fiscal year was one of infrastructure development.
 
 Selling,
general and administrative expenses were $347,124 for 2005 and $45,561 for 2004.
The overall increase is due to operating the company for a full year during
2005, as the operations originally commenced in February 2004.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 During
the fiscal years ended February 28, 2005 and February 29, 2004, the Company used
net cash for operating activities of $548,909 and $667,945, respectively.
Overall, the net loss decreased from the prior year. Other receivables and other
assets increased by $74,734 during the year ended February 28, 2005 and $63,672
for the year ended February 29, 2004, an increase of $11,061, or 17%. Accounts
payable also increased by $52,064 in 2004 as compared to $173,262 in 2005, an
increase of $121,198 or 233%.
 
 During
the years ended February 28, 2005 and February 29, 2004, the Company provided
(used) funds for investing activities of $32,478 and ($415,695), respectively.
This increase in cash from investing activities is mainly due to the decrease in
other receivables and the proceeds from the sale of assets.
 During
the years ended February 28, 2005 and February 29, 2004, the Company provided
cash from financing activities of $500,574 and $1,148,520, respectively. The
decrease in net cash provided by financing activities is due to a decrease in
the cash received from the exercise of stock options and warrants.
 Cash
flows from financing activities provided for working capital needs and principal
payments on long-term debt through fiscal 2005. As of February 28, 2005, the
Company had a working capital deficit of$2,032,763. To the extent that the cash
flows from financing activities are insufficient to finance the Company's
anticipated growth, or its other liquidity and capital requirements during the
next twelve months, the Company will seek additional financing from alternative
sources including bank loans or other bank financing arrangements, other debt
financing, the sale of equity securities (including those issuable pursuant to
the exercise of outstanding warrants and options), or other financing
arrangements. However, there can be no assurance that any such financing will be
available and, if available, that it will be available on terms favorable or
acceptable to the Company.
 
 During
August and September of 2004, the company sustained considerable damage to the
Bartow facilities. The disruption due to facility damage resulted in over 1500
non-billable hours. It is anticipated that much of the cost associated with the
storms will be mitigated by insurance coverage and claims.
 
 SEASONALITY
 
 The
diversity of operations in the manufacturing segment protects it from seasonal
trends except in the sales of agricultural processing where the majority of the
revenue is generated while the processors await the next harvest.
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 The
accompanying consolidated financial statements include the activity of the
Company and its wholly owned subsidiaries. All intercompany transactions have
been eliminated in consolidation. The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company reviews its estimates, including but not limited
to, recoverability of long-lived assets, recoverability of prepaid expenses and
allowance for doubtful accounts, on a regular basis and makes adjustments based
on historical experiences and existing and expected future conditions. These
evaluations are performed and adjustments are made as information is available.
Management believes that these estimates are reasonable; however, actual results
could differ from these estimates.
 
 We
believe that the following critical policies affect our more significant
judgments and estimates used in preparation of our consolidated financial
statements.
 
 We
maintain allowances for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. We base our estimate
on an analysis of the Company’s prior collection experience, customer credit
worthiness, and current economic trends. If the financial condition of our
customers were to deteriorate, additional allowances may be
required.
 
 8
 We value
our inventories at the lower of cost or market. Cost is determined on a standard
cost basis that approximates the first-in, first-out method; market is
determined based on net realizable value. We write down inventory balances for
estimated obsolescence or unmarketable inventory equal to the difference between
the cost of the inventory and the estimated market value based upon assumptions
about future demand and market conditions. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required.
 
 We value
our property and equipment at cost. Amortization and depreciation are calculated
using the straight-line and accelerated methods of accounting over the estimated
useful lives of the assets. Maintenance and repairs are charged to operations
when incurred. Betterments and renewals are capitalized. When property and
equipment are sold or otherwise disposed of, the asset account and related
accumulated depreciation account are relieved, and any gain or loss is included
in operations.
  Fair
value estimates used in preparation of the consolidated financial statements are
based upon certain market assumptions and pertinent information available to
management. The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments include
cash, accounts receivable, accounts payable, and accrued expenses. Fair values
were assumed to approximate carrying values for these financial instruments
since they are short-term in nature and their carrying amounts approximate fair
values or they are receivable or payable on demand. The fair value of the
Company’s notes payable is estimated based upon the quoted market prices for the
same or similar issues or on the current rates offered to the Company for debt
of the same remaining maturities.
 
 Deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the consolidated financial
statements carrying amounts of existing assets and liabilities and their
respective income tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized as income in the period that included the enactment date. See
consolidated financial statements footnote 13.
 
 **NEW
ACCOUNTING PRONOUNCEMENTS**
 
 In
December 2004, the Financial Accounting Standards Board (‘FASB”) issued
SFAS No. 123R, “ *Share-Based
Payment* ” (“SFAS
No. 123R”), which requires, among other things, that all share-based
payments to employees, including grants of stock options, be measured at their
grant-date fair value and expensed in the consolidated financial statements. The
accounting provisions of SFAS No. 123R are effective for reporting periods
beginning after December 15, 2005; therefore, the Company is required to adopt
SFAS No. 123R in the first quarter of fiscal year ended 2007. The pro forma
disclosures previously permitted under SFAS No. 123 will no longer be an
alternative to financial statement recognition. Management does not believe that
the adoption of SFAS No. 123R will have a material effect on the financial
condition, results of operations or cash flows.
 
 In
November 2004, the Financial Accounting Standards Board issued statement of
Financial Accounting Standard No. 151, “Inventory Costs”. The new Standard
amends Accounting Research Bulletin No. 43, “Inventory Pricing,” to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material. This Statement requires that those items be
recognized as current-period charges and requires that allocation of fixed
production overheads to the cost of conversion be based on the normal capacity
of the production facilities. This Statement is effective for fiscal years
beginning after June 15, 2005. We do not expect the adoption of this Statement
to have a material impact on our financial condition or results of
operations.
 In
June 2004, the EITF reached a consensus on Issue No. 02-14,
“ *Whether
an Investor Should Apply the Equity Method of Accounting to Investments Other
Than Common Stock* .” EITF
02-14 addresses whether the equity method of accounting should be applied to
investments when an investor does not have an investment in voting common stock
of an investee but exercises significant influence through other means. EITF
02-14 states that an investor should only apply the equity method of accounting
when it has investments in either common stock or in-substance common stock of a
corporation, provided that the investor has the ability to exercise significant
influence over the operating and financial policies of the investee. The
effective date of EITF 02-14 is the first reporting period beginning after
September 15, 2004. The adoption of EITF No. 02-14 did not have a
material impact on the financial condition, results of operations or cash flows
of the Company.
 
 In
December 2004, the FASB issued SFAS No. 153, *Exchanges
of Nonmonetary Assets, an amendment of APB Opinion No. 29.* The
guidance in APB Opinion No. 29, *Accounting
for Nonmonetary Transactions,* is based
on the principle that exchanges of nonmonetary assets should be measured based
on fair value of the assets exchanged. The guidance included certain exceptions
to that principle. The statement amends Opinion No. 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general exception for nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the
exchange. This statement shall be effective for nonmonetary exchanges occurring
in fiscal periods beginning after June 15, 2005. The Company does not believe
that the adoption of this statement will have a material effect on its financial
statements.
 
 9
 
  ITEM 7. CONSOLIDATED
FINANCIAL STATEMENTS
 
 
 ***Consolidated
Financial Statements***
 
 ***American
Commerce Solutions, Inc. and Subsidiaries***
 
 *As of
February 28, 2005 and for the*
 *Years
Ended February 28, 2005 and February 29, 2004*
 
 *Report
of Independent Registered Public Accounting Firm*
                          
 10
 
 American
Commerce Solutions, Inc. and Subsidiaries
 
 Consolidated
Financial Statements
 
 As of
February 28, 2005 and
 For the
Years Ended February 28, 2005 and February 29, 2004
 
 
 
 Contents
 
 
 Report of
Independent Registered Public Accounting Firm
 
 Consolidated
Financial Statements:
 
 Consolidated Balance Sheet
    13Consolidated Statements of
      Operations
    14Consolidated Statements of Changes in
      Stockholders’ Equity
    15Consolidated Statements of Cash
      Flows
    16Notes to Consolidated Financial
      Statements
    17-28
 
 
 
 
 
 
 
 
 11
 
 **Report
of Independent Registered Public Accounting Firm**
 
 
 Stockholders
and Board of Directors
 American
Commerce Solutions, Inc. and Subsidiaries
 Bartow,
Florida
 
 We have
audited the accompanying consolidated balance sheet of American Commerce
Solutions, Inc. and Subsidiaries as of February 28, 2005 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended February 28, 2005 and February 29, 2004. These
consolidated financial statements are the responsibility of the management of
American Commerce Solutions, Inc. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of American Commerce Solutions,
Inc. and Subsidiaries as of February 28, 2005 and the results of its operations
and its cash flows for the years ended February 28, 2005 and February 29, 2004
in conformity with accounting principles generally accepted in the United States
of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2, the
Company incurred a net loss of $1,278,889 during the year ended February 28,
2005 and has an accumulated deficit of $14,841,951 and negative working capital
of $2,032,763 at February 28, 2005. These factors, among others, raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 
 
 
 
 
 Pender
Newkirk & Company
 Certified
Public Accountants
 Tampa,
Florida
 April 14,
2005
 
 
 12
 
 American
Commerce Solutions, Inc. and Subsidiaries
 
 Consolidated
Balance Sheet
 
 February
28, 2005
 
 **Assets**Current
      assets:Cash
    
    $
    63,506Accounts
      receivable, net of allowance of $6,591
    
    82,859Accounts
      receivable, factored
    
    32,951Inventories
    
    141,307Other
      receivables
    
    196,472Other
      current assets
    
    38,481Total
      current assets
    
    555,576Property
      and equipment, net of accumulated depreciation of
    $1,525,901
    
    5,517,103Other
      assets:Loan
      costs
    
    8,815Intangible
      assets, net of accumulated amortization
    
    137,222Real
      property held for resale
    
    243,150Total
      other assets
    
    389,187$
    6,461,866**Liabilities
      and Stockholders’ Equity**Current
      liabilities:Current
      portion of notes payable
    $
    $
    1,456,070Accounts
      payable
    
    289,289Accrued
      expenses
    
    277,185Accrued
      interest
    
    226,466Due
      to stockholders
    
    321,710Deferred
      revenue
    
    17,619Total
      current liabilities
    
    2,588,339Notes
      payable, net of current portion
    
    671,774Stockholders’
      equity:Preferred
      stock, total authorized 5,000,000 shares:Series
      A; cumulative and convertible; $.001 par value;
      600
      shares authorized; 102 shares issued and outstanding;
      liquidating
      preference
      $376,125Series
      B; cumulative and convertible; $.001 par value;
      3,950
      shares authorized; 3,944 shares issued and outstanding;
      liquidating
      preference $3,944,617
    
    3Common
      stock; $.002 par value; 350,000,000 shares authorized; 182,777,226 shares
      issued;
      182,255,226
      shares outstanding
    
    365,555Additional
      paid-in capital
    
    18,035,119
    ****Stock
      subscription receivable
    
    (10,000
    )Treasury
      stock, at cost
    
    (265,526
    )Accumulated
      deficit
    
    (14,841,951
    )Loan
      costs from issuance of common stock
    
    (81,447
    )Total
      stockholders’ equity
    
    3,201,753$
    6,461,866
 
 *The
accompanying notes are an integral part of the consolidated financial
statements.*
 
 13
 
 American
Commerce Solutions, Inc. and Subsidiaries
 
 Consolidated
Statements of Operations
 
 **Year
      Ended**
      **February
      28,**
      **2005**
    
    **Year
      Ended**
      **February
      29,**
      **2004**Net
      sales
    
    
    
    
    
    
    
    $
    2,753,633
    
    $
    2,084,205Cost
      of goods sold
    
    
    
    
    
    1,899,977
    
    1,325,490Gross
      profit
    
    
    
    
    
    853,656
    
    758,715Selling,
      general and administrative expenses
    
    
    
    
    
    2,200,668
    
    2,251,488Loss
      from operations
    
    
    
    
    
    (1,347,012
    )
    (1,492,773
    )Other
      income (expense):Other
    
    
    
    
    
    (36,078
    )
    26,249Derecognition
      of Liabilities
    
    
    
    
    
    267,459
    
    11,295Interest
      expense
    
    
    
    
    
    (163,258
    )
    (188,915
    )Total
      other income (expense)
    
    
    
    
    
    68,123
    
    (151,371
    )Net
      loss
    
    
    
    
    
    
    
    $
      (1,278,889
    )
    $
    (1,644,144
    )Net
      loss per common share
    
    
    
    
    
    
    
    $
    (.01
    )
    $
    (.02
    )Weighted
      average number of common shares outstanding
    
    
    
    
    
    160,610,369
    
    76,522,038
 
 *The
accompanying notes are an integral part of the consolidated financial
statements*
         
 14
 
 American
Commerce Solutions, Inc. and Subsidiaries
 
 Consolidated
Statements of Changes in Stockholders' Equity
 
 Years
Ended February 28, 2005 and February 29, 2004
 
 **Common
      Stock**
    
    **Preferred
      Stock****Shares**
    
    **Amount**
    ****
    **Shares**
    ****
    **Amount**
    ****Balance,
      February 28, 2003
    
    29,741,158
    
    $
    59,482
    
    3,820
    
    $
    3Issuance
      of common share optionsCommon
      shares issued upon exercise of stock options
    
    88,450,000
    
    176,900Issuance
      of common shares for cash
    
    117,600
    
    235Common
      shares issued for services
    
    15,639,285
    
    31,279Common
      shares issued for acquisition
    
    2,197,802
    
    4,396Common
      shares issued for compensation
    
    4,949,979
    
    9,900Forgiveness
      of debt with a related partyPreferred
      shares issued for Series B dividends
    
    
    
    
    
    226Loan
      cost from issuance of common stockAmortization
      of loan costNet
      lossBalance,
      February 29 2004
    
    141,095,824
    
    $
    282,192
    
    4,046
    
    $
    3Issuance
      of common share optionsCommon
      shares issued upon exercise of stock options
    
    28,800,000
    
    
    57,600Issuance
      of common shares for cash
    
    1,775,000
    
    
    3,550Common
      shares issued in satisfaction of common stock payable
    
    7,106,402
    
    
    14,213Common
      shares issued for services
    
    4,000,000
    
    
    8,000Amortization
      of loan costNet
      loss182,777,226
    
    $
    365,555
    
    4,046
    
    $
    3
 
 **Additional**
      **Paid-In**
      **Capital**
    
    **Stock**
      **Subscription**
      **Receivable**
    
    **Accumulated**
      **Deficit**
    
    **Treasury**
      **Stock**
    
    **Loan**
      **Costs**
    
    **Common**
      **Stock**
      **Payable**
    
    **Total**$15,233,137
    $
    (10,000
    )$
    (11,918,918
    )$
    (265,526
    )$
    (61,875
    )
    
    $
    3,036,303291,805
    
    
    
    
    
    
    
    
    
    
    
    291,8051,473,570
    
    
    
    
    
    
    
    
    
    
    
    1,650,4704,765
    
    
    
    
    
    
    
    
    
    
    
    5,00079,296
    
    
    
    
    
    
    
    
    
    $
    120,809
    
    231,38425,604
    
    
    
    
    
    
    
    
    
    
    
    30,000116,325
    
    
    
    
    
    
    
    
    
    
    
    126,22566,525
    
    
    
    
    
    
    
    
    
    
    
    66,525(247,033
    )
    
    
    (247,033
    )118,868
    
    
    
    118,868(1,644,144
    )
    
    
    
    
    
    
    (1,644,144
    )$
    17,291,027
    
    $
    (10,000
    )
    $
    (13,563,062
    )
    $
    (265,526
    )
    $
    (190,040
    )
    $
    120,809
    
    $
    3,665,40368,042
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,042461,144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    518,74436,310
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,860106,596
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120,809
    )72,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,000108,593
    
    
    
    
    
    108,593(1,278,889
    )
    
    
    
    
    
    
    
    
    
    
    (1,278,889
    )$
    18,035,119
    
    $
    (10,000
    )
    $
    (14,841,951
    )
    $
    (265,526)
    
    $
    (81,447
    )
    
    
    
    $
    3,201,7535
 
 *The
accompanying notes are an integral part of the consolidated financial
statements*
 
 15
 
 American
Commerce Solutions, Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
 
 
 **Years
      Ended**
      **February
      28,**
      **2005**
    
    **Years
      Ended**
      **February
      29,**
      **2004****Operating
      activities:**Net
      loss
    
    $
    (1,278,889
    )
    $
    (1,644,144
    )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Depreciation
      and amortization
    
    437,729
    
    339,959Stock
      issued for services and compensation
    
    80,000
    
    361,009Options
      issued to consultants and employees
    
    68,042
    2
    291,805Loss
      on involuntary conversion of assets
    
    32,898Gain
      on forgiveness of debt
    
    
    
    (11,295
    )Increase
      in allowance for doubtful accounts
    
    1,614
    
    (213
    ))Decrease
      (increase) in:Accounts
      receivables
    
    35,920
    
    48,860Inventories
    
    (24,704
    )
    (23,559
    )Other
      receivables and other assets
    
    (74,734
    )
    (63,672
    )Increase
      (decrease) in:Accounts
      payable and accrued expenses
    
    173,262
    
    52,064Deferred
      income
    
    (47)
    
    (18,759
    ))Total
      adjustments
    
    729,980
    
    976,199Net
      cash used by operating activities
    
    (548,909)
    
    (667,945
    )**Investing
      activities:**Decrease
      (increase) in other receivables
    
    83,225
    
    (363,926
    ))Proceeds
      from sale of assets
    
    26,500Acquisition
      of property and equipment
    
    (77,247
    )
    (51,769
    )Net
      cash provided (used) by investing activities
    
    32,478
    
    (415,695
    ))**Financing
      activities:**Increase
      (decrease) in checks drawn in excess of bank balance
    
    
    
    (14,187
    ))Increase
      in due from factor
    
    22,706
    
    (55,657
    )Proceeds
      from notes payable and long-term debt
    
    69,955
    
    89,159Principal
      payments on notes payable and capital leases
    
    (213,677
    )
    (603,195
    )Proceeds
      from advances from stockholders
    
    62,986
    
    80,330Proceeds
      from issuance of common stock
    
    39,860
    
    5,000Exercise
      of stock options and warrants
    
    518,744
    
    1,647,070Net
      cash provided by financing activities
    
    500,574
    
    1,148,520**Net
      (decrease) increase in cash**
    
    (15,857
    ))))
    64,880**Cash,
      beginning of period**
    
    79,363
    
    14,483**Cash,
      end of period**
    
    $
    63,506
    
    $
    79,363**Supplemental
      disclosures of cash flow information and noncash investing and financing
      activities:**Cash
      paid during the period for interest
    
    $
    120,838
    
    $
    43,443
 
 During
the year ended February 28, 2005 the Company acquired equipment and inventory
valued at $768,826 and $6,208, respectively, and received forgiveness of
payables of $73,616 owed to the supplier. In exchange for the assets and
forgiveness of payables, the Company assigned receivables $131,658, forgave debt
$273,376 and issued notes payable of $443,616.
 
 During
the year ended February 28, 2005, the Company satisfied the common stock payable
of $120,809 by issuing 7,106,402 shares of common stock.
 
 Also,
during the year ended February 28, 2005, the Company purchased two vehicles for
in exchange for notes payable of $47,800.
 
 During
the year ended February 29, 2004, a related party forgave an outstanding payable
to the company which resulted in a
 gain on
the forgiveness of debt of $66,525. This gain was recorded as a capital
contribution.
 
 16
 During
the year ended February 29, 2004, the Company purchased 100 percent of the
outstanding common stock of Chariot
 Manufacturing,
Inc. for $360,000 which consisted of the assignment of a note receivable valued
at $150,000, issuance of
 $30,000
worth of common stock and the incurrence of a note payable for $180,000. The
fair value of the assets acquired at
 the
acquisition date are as follows:
 Equipment
    
    $
    170,000Intangible
      assets
    
    
    190,000Assets
      acquired
    
    $
    360,000
 During
the year ended February 29, 2004, the Company transferred $16,794 from inventory
to equipment held for lease.
 
 
 *The
accompanying notes are an integral part of the consolidated financial
statements.*
 
 
 **American
Commerce Solutions, Inc. and Subsidiaries**
 ****
 **Notes
to Consolidated Financial Statements**
 ****
 **As
of February 28, 2005 and for the**
 **Years
Ended February 28, 2005 and February 29, 2004**
 
 
 **1.
BACKGROUND INFORMATION**
 
 American
Commerce Solutions, Inc. was incorporated in Rhode Island in 1991 under the name
Jaque Dubois, Inc., and was re-incorporated in Delaware in 1994. In July 1995,
Jaque Dubois, Inc. changed its name to JD American Workwear, Inc. In December
2000, the stockholders voted at the annual stockholders meeting to change the
name of JD American Workwear, Inc. to American Commerce Solutions, Inc. (the
"Company").
 
 The
Company is primarily a holding company with two wholly owned subsidiaries;
International Machine and Welding, Inc. is engaged in the machining and
fabrication of parts used in industry, and parts sales and service for heavy
construction equipment; Chariot Manufacturing Company, Inc., which was acquired
on October 11, 2003 from a related party, manufactures motorcycle trailers with
fiberglass bodies.
 
 **2.
GOING CONCERN**
 
 The
Company has incurred substantial operating losses since inception and has used
approximately $548,900 of cash in operations for the year ended February 28,
2005. The Company recorded losses from continuing operations of $1,278,889 and
$1,644,144 for the years ended February 28, 2005 and February 29, 2004,
respectively. Current liabilities exceed current assets by $2,032,763 at
February 28, 2005. Additionally, the Company is in default on several notes
payable. The ability of the Company to continue as a going concern is dependent
upon its ability to reverse negative operating trends, raise additional capital,
and obtain debt financing.
 
 Management
has revised its business strategy to include expansion into other lines of
business through the acquisition of other companies in exchange for the
Company's stock. Management is currently negotiating new debt financing, the
proceeds from which would be used to settle outstanding debts at more favorable
terms, to finance operations, and to complete additional business acquisitions.
However, there can be no assurance that the Company will be able to raise
capital, obtain debt financing, or improve operating results sufficiently to
continue as a going concern.
 
 The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary if the Company
is unable to continue as a going concern.
 
 **3.
SIGNIFICANT ACCOUNTING POLICIES**
 
 The
significant accounting policies followed are:
 
 The
accompanying consolidated financial statements include the activity of the
Company and its wholly owned subsidiaries. All intercompany transactions have
been eliminated in consolidation.
 
 The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
 
 Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of accounts receivable. Accounts receivable consist of
billed services or products. The Company records an allowance for doubtful
accounts to allow for any amounts that may not be recoverable, which is based on
an analysis of the Company's prior collection experience, customer credit
worthiness, and current economic trends. Based on management's review of
accounts receivable, an allowance for doubtful accounts of $6,591 is considered
adequate at February 28, 2005. Receivables are determined to be past due based
on payment terms of original invoices. The Company does not charge significant
amounts of interest on past due receivables. There were no receivables on
non-accrual of interest status at February 28, 2005.
 
 The
Company follows SFAS No. 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities” to account for its
factoring of accounts receivable by selling and assigning all rights, title, and
interest to certain of the Company's accounts receivable. The Company receives
80% of all approved invoices sold to the Factoring Company, which assumes the
credit risk. Based on the Factoring Company’s collections of these invoices the
Company may receive additional consideration of up to 18%. The Company records
the 80% as payment against the invoices sold and records 18% as an amount due
from Factoring Company. Once the invoice exceeds 120 days outstanding, the
remaining 18% of the receivable is recorded as expense.
 
 Inventories
are stated at the lower of cost or market. Cost is determined on a standard cost
basis that approximates the first-in, first-out method; market is determined
based on net realizable value. Appropriate consideration is given to
obsolescence, excessive levels, deterioration, and other factors in evaluating
net realizable value.
 
 17
 Property
and equipment are stated at cost. Depreciation and amortization expense are
calculated using the straight-line and accelerated methods of accounting over
the following estimated useful lives of the assets:
 
 Building
      and improvements
    15
      - 39 yearsMachine
      and equipment
    5 -
      30 yearsOffice
      furniture and equipment
    5 -
      10 yearsTrucks
      and vehicles
    5 -
      7 years
 Maintenance
and repairs are charged to operations when incurred. Betterments and renewals
are capitalized. When property and equipment are sold or otherwise disposed of,
the asset account and related accumulated depreciation account are relieved, and
any gain or loss is included in operations.
 
 Acquired
identifiable intangible assets with a cost of approximately $190,000 consist of
values assigned to brand recognition, customer list and web site of Chariot
Manufacturing Company, Inc. These intangibles are amortized on a straight-line
method over 5 years. During the year ended February 28, 2005, approximately
$38,000 was recognized as amortization expense related to these identifiable
intangible assets.
 
 Direct
costs incurred with the issuance of notes payable are deferred and amortized
over the life of the guaranty. As of February 28, 2005 and February 29, 2004,
the Company incurred amortization expense of $108,593 and $118,868,
respectively.
 
 The
Company records amounts billed to customers for shipping and handling costs as
sales revenue. Costs incurred by the Company for shipping and handling are
included in cost of sales.
 
 Sales are
recorded when products, repairs, or parts are delivered to the customer.
Provisions for discounts and rebates to customers, estimated returns,
allowances, and other adjustments are provided for in the same period the
related sales are recorded. No products or parts are delivered with any
contingencies except for defects.
 
 The
Company has adopted SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS No. 144 addresses the financial accounting and
reporting for the impairment of long-lived assets, excluding goodwill and
intangible assets, to be held and used or disposed of. The adoption of SFAS No.
144 did not have an impact on the Company's financial position or results of
operations. In accordance with SFAS No. 144, the carrying values of long-lived
assets are periodically reviewed by the Company and impairments would be
recognized if the expected future operating non-discounted cash flows derived
from an asset were less than its carrying value and if the carrying value is
more than the fair value of the asset. At February 28, 2005, the Company did not
have any asset that it considered impaired.
 
 The
Company has adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123) SFAS No. 123 provides
that expense equal to the fair value of all stock-based awards on the date of
grant be recognized over the vesting period. Alternatively, this statement
allows entities to continue to apply the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB Opinion
No. 25), whereby compensation expense is recorded on the date the options are
granted to employees equal to the excess of the market price of the underlying
stock over the exercise price. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma disclosure of the
provisions of SFAS No. 123.
 
 At
February 28, 2005, the Company has two stock-based employee compensation plans,
all of which have been approved by the shareholders. The Company accounts for
those plans under the recognition and measurement principles of Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and
related Interpretations. The Company recognized $45,600 and $205,800 for the
year February 28, 2005 and February 29, 2004, respectively, in stock-based
employee compensation cost which is reflected in net loss. The following table
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of FASB Statement 123, “Accounting
for Stock-Based Compensation”, to stock-based employee
compensation.
 
 **Years
      Ended****February
      28,**
      **2005**
    
    **February
      29,**
      **2004**Net
      loss, as reported
    
    $
    (1,278,889
    )
    $
    (1,644,144
    )Deduct:
      Additional stock based employee compensation expense determined under fair
      value based methods for all awards, net of taxes
    
    (0
    )
    (150,668
    )Pro
      forma net loss
    
    $
    (1,278,889
    )
    $
    (1,794,812
    )Net
      loss per share:As
      reported
    
    $
    (.01
    )
    $
    (.02
    )Pro
      forma
    
    $
    (.01
    )
    $
    (.02
    )
 
 In
determining the pro forma amounts above, the value of each grant is estimated at
the grant date using the Black-Scholes option model with the following weighted
average assumptions
  **2005**
    **2004**Dividend
      rate of
    0%
    0%Risk-free
      interest rate
    1.98
    1.04%Expected
      lives
    exercised
      immediately
    .08
      yearsExpected
      price volatility
    156%
    168%
 Net loss
per common share is computed by dividing net loss to common stockholders by the
weighted average number of shares of common stock outstanding for each fiscal
year. Common stock equivalents are not considered in loss years because they are
anti-dilutive. For the years ended February 28, 2005 and February 29, 2004,
362,500 common stock options were not considered in calculating diluted loss per
share as effects would be anti-dilutive.
 
 Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management. The respective carrying value of
certain on-balance-sheet financial instruments approximated their fair values.
These financial instruments include cash, accounts receivable, accounts payable,
and accrued expenses. Fair values were assumed to approximate carrying values
for these financial instruments since they are short-term in nature and their
carrying amounts approximate fair values or they are receivable or payable on
demand. The fair value of the Company's notes payable is estimated based upon
the quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities and
approximates the carrying amounts of the notes.
 
 Advertising
costs (except for costs associated with direct-response advertising) are charged
to operations when incurred. The costs of direct-response advertising are
capitalized and amortized over the period during which future benefits are
expected to be received. Advertising expense for the years ended February 28,
2005 and February 29, 2004 were $6,561 and $7,241, respectively.
 
 Deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the consolidated financial
statements carrying amounts of existing assets and liabilities and their
respective income tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized as income in the period that included the enactment date.
 
 The
Company records stock as issued at the time consideration is received or the
obligation is incurred.
 
 In
December 2004, the Financial Accounting Standards Board (‘FASB”) issued
SFAS No. 123R, “ *Share-Based
Payment* ” (“SFAS
No. 123R”), which requires, among other things, that all share-based
payments to employees, including grants of stock options, be measured at their
grant-date fair value and expensed in the consolidated financial statements. The
accounting provisions of SFAS No. 123R are effective at the beginning of
the fiscal year that begins after December 15, 2005; therefore, the Company is
required to adopt SFAS No. 123R in the first quarter of the fiscal year
ended 2007. The pro forma disclosures previously permitted under SFAS
No. 123 will no longer be an alternative to financial statement
recognition. Management does not believe that the adoption of SFAS No. 123R
will have a material effect on the financial condition, results of operations or
cash flows.
  In
December 2004, the FASB issued SFAS No. 153, *Exchanges
of Nonmonetary Assets, an amendment of APB Opinion No. 29.* The
guidance in APB Opinion No. 29, *Accounting
for Nonmonetary Transactions,* is based
on the principle that exchanges of nonmonetary assets should be measured based
on fair value of the assets exchanged. The guidance included certain exceptions
to that principle. The statement amends Opinion No. 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general exception for nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the
exchange. This statement shall be effective for nonmonetary exchanges occurring
in fiscal periods beginning after June 15, 2005. The Company does not believe
that the adoption of this statement will have a material effect on its financial
statements.
 
 In
November 2004, the Financial Accounting Standards Board issued statement of
Financial Accounting Standard No. 151, “Inventory Costs”. The new Standard
amends Accounting Research Bulletin No. 43, “Inventory Pricing,” to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material. This Statement requires that those items be
recognized as current-period charges and requires that allocation of fixed
production overheads to the cost of conversion be based on the normal capacity
of the production facilities. This Statement is effective for fiscal years
beginning after June 15, 2005. We do not expect the adoption of this Statement
to have a material impact on our financial condition or results of operations.
 
 In
June 2004, the EITF reached a consensus on Issue No. 02-14,
“ *Whether
an Investor Should Apply the Equity Method of Accounting to Investments Other
Than Common Stock* .” EITF
02-14 addresses whether the equity method of accounting should be applied to
investments when an investor does not have an investment in voting common stock
of an investee but exercises significant influence through other means. EITF
02-14 states that an investor should only apply the equity method of accounting
when it has investments in either common stock or in-substance common stock of a
corporation, provided that the investor has the ability to exercise significant
influence over the operating and financial policies of the investee. The
effective date of EITF 02-14 is the first reporting period beginning after
September 15, 2004. The adoption of EITF No. 02-14 did not have a
material impact on the financial condition, results of operations or cash flows
of the Company.
 
 **4.
ACCOUNTS RECEIVABLE, FACTORED**
 ****
 During
the year ended February 28, 2005, the Company factored receivables of
approximately $1,720,700. In connection with the factoring agreement, the
Company incurred fees of approximately $62,100 and $49,800 during the years
ended February 28, 2005 and February 29, 2004, respectively. As of February 28,
2005, certain vendors had remitted $23,047 to the Company on factored
receivables, the Company has recorded this amount as due to the factor and is
included in accrued expenses on the accompanying consolidated balance sheet. Any
and all of the Company’s indebtedness and obligations to the Factoring Company
is guaranteed by two stockholders and collateralized by the Company’s inventory
and fixed assets.
 
 **5.
INVENTORIES**
 Inventories
      consist of the following at February 28, 2005:Work-in-process
    $31,141Finished
      goods
    85,071Raw
      materials
    25,095-----------Total
      inventories
    $141,307===========
 19
 **6.
PROPERTY AND EQUIPMENT**
 Property
      and equipment at February 28, 2005 consist of:Land
    $
      186,045Building
      and improvements
    2,774,805Machinery
      and equipment
    3,458,666Office
      furniture and equipment
    67,543Trucks
      and automobiles
    377,184Equipment
      held for lease
    178,761-----------7,043,004Less
      accumulated depreciation
    1,525,901--------------$
      5,517,103===========
  Depreciation
expense for the years ended February 28, 2005 and February 29, 2004 was $399,729
and $325,181, respectively.
 
 **7.**  **INTANGIBLE
ASSETS**
 
 The
following is a summary of intangible assets at February 28 2005****
    
    
    **Gross
      Amount**
    
    
    **Accumulated
      Amortization**Web
      Site
    
    $
    86,125
    
    $
    23,924Brand
      Recognition
    
    
    59,455
    
    
    16,515Customer
      List
    
    
    44,420
    
    
    12,339$
    190,000
    
    $
    52,778
Amortization
expense for the years ended February 28, 2005 and February 29, 2004 was $38,000
and $14,778; respectively, and estimated amortization expense for each of the
ensuing years through February 28, 2009 is $38,000, $38,000, $38,000 and
$23,222, respectively.
 
 **8.
NOTE RECEIVABLE**
 
 A note
receivable of $43,651, included in other receivables at February 28, 2005, has
10% interest is unsecured and due on demand.
 
 20
 **9.
NOTES PAYABLE**
 
 Notes
payable at February 28, 2005 consist of:
 Notes
      payable to the parents of the former president of the
Company,
      stockholders;
      10% interest, past maturity, unsecured
    $
    185,291Notes
      payable to the parents and sister of the former president of
      the
      Company;
      stockholders; 10% interest; past maturity; unsecured
    
    31,697Note
      payable; 7% interest; past maturity; unsecured
    
    25,000Note
      payable; 10% interest; past maturity; unsecured
    
    80,000Note
      payable; asset acquisition; related party; no interest; due on
      demand;
      unsecured
    
    3,000Note
      payable; acquisition; related party; 8% interest; due July 1, 2009,
      collateralized
      by
      15,000,000 shares of common stock
    
    335,383Note
      payable; related party; no interest; due July 1, 2005,
      unsecured
    
    37,433Note
      payable; related party; 10% interest; due on demand;
    unsecured
    
    6,122Note
      payable; related party; 10% interest; due on demand;
    unsecured
    
    11,625Note
      payable; related party; 8% interest; monthly principal and interest
      payment
      of
      $950; matures March 2005, secured by a vehicle
    
    18,435Note
      payable; related party; 15% interest; due on demand;
    unsecured
    
    2,500Note
      payable; related party; 10% interest; due on demand;
    unsecured
    
    9,654Note
      payable; related party; no interest; due on demand;
    unsecured
    
    22,760Note
      payable; related party; 18% interest; due on demand;
    unsecured
    
    1,070Note
      payable; 10% interest; due on demand; past maturity;
    unsecured
    
    40,000Note
      payable; related party; 18% interest; due on demand;
    unsecured
    
    4,200Note
      payable; related party; 15% interest; due on demand;
    unsecured
    
    1,100Notes
      payable; related party; 10 - 15% interest; due on demand;
      unsecured
    
    29,157Notes
      payable, individual, matured May 2001, interest payable in the
      amount
      of
      $10,000, in addition to principal, unsecured
    
    10,000Note
      payable; 6.50% interest; due 2010; secured by vehicle
    
    24,105Note
      payable, related party, 8% interest; due on demand;
    unsecured
    
    64,383Note
      payable; 9.0% interest; monthly principal and interest payment
      of
      $670;
      matures April 1, 2006; collateralized by a vehicle
    
    9,089Convertible
      subordinated notes due to investors; 11% interest; the notes
      are
      subordinate in rights of payment to all indebtedness of the
      Company
      outstanding as of August 15, 1995 or to be incurred in the
      Future;
      matured September 30, 1998; unsecured
    
    37,500Note
      payable to Internal Revenue Service pursuant to a Chapter 11
      reorganization
      plan; 8% interest; secured by tax lien; monthly payments
      of
      $1,500 of principal and interest; matures on May 25, 2006
    
    337,509Note
      payable to a financial institution; 7.5% interest; monthly principal
      and
      interest
      payments of $8,166; collateralized by fixed assets, key man
      life
      insurance
      policy and 1,000,000 shares of common stock owned by a
      stockholder;
      guaranteed by a stockholder; due December 29, 2005
    
    800,8312,127,844Less
      current portion
    
    (1,456,070)$
    671,774
 
 As of
February 28, 2005, the notes payable listed above include $409,488 which are
currently in default.
 
 The
aggregate principal maturing in subsequent years are:
 
 Year
      EndingFebruary
      28,2006
    
    $
    1,456,0702007
    
    
    328,0192008
    
    
    5,4192009
    
    
    5,7822010
    
    
    332,554$
    2,127,844
 The above
notes payable to related parties in the amount of $760,810 are not necessarily
indicative of the terms and amounts that would have been incurred had comparable
agreements been made with independent parties.
 
 21
 **10.
COMMITMENTS AND CONTINGENCIES**
 
 The
Company has an employment agreement with a key employee, the terms of which
expired in fiscal year 2004. Such agreement, which has been revised from time to
time, provides for a minimum salary level, adjusted annually for cost of living
increases, normal employment benefits, automobile allowances, stock options, as
well as bonuses, which may contain minimum and incentive components. The Company
is currently renegotiating this employment agreement, and the employee is
continuing to work under the original agreement on a month to month
basis.
 
 The
Company has a consulting agreement with an individual which continues
indefinitely. Such agreement, which may be revised from time to time, provides
for a monthly compensation of $1,500, $18,000 annually.
 
 **11.
CONVERTIBLE PREFERRED STOCK**
 
 Holders
of Series A convertible preferred stock vote on a converted basis with the
common stockholders on all matters to be brought to a vote of the stockholders.
Each share of Series A convertible preferred stock can be converted into 1,289
shares of common stock. Dividends are payable in kind at the Company's option at
a rate of ten percent annually. Payments of annual dividends have been deferred
by the Company's Board of Directors on the outstanding Series A shares because
of losses sustained by the Company. As of February 28, 2005, preferred dividends
in arrears amounted to $118,377, or $1,161 per share.
 
 The
Series B convertible preferred stock has rights to receive cumulative six
percent in kind dividends in preference to the payment of dividends on all other
shares of capital stock of the Company. No dividends may be declared or paid on
any other shares of stock until the full amount of the cumulative dividends on
the Series B preferred stock has been paid. Each share of Series B convertible
preferred stock can be converted into 1,000 shares of common stock. Cumulative
unpaid dividends amounted to $240,227 at February 28, 2005. Dividends may be
paid in stock through May 31, 2004 at a conversion rate of $1000.00 per share.
For the year ended February 29, 2004, 226 shares of preferred stock were issued
to settle dividends of $226,437.
 
 Holders
of Series B preferred stock vote on a converted basis with the common
stockholders on all matters to be brought to a vote of the stockholders. The
Series B preferred stockholders are entitled to elect one director out of the
seven authorized directors of the Company's board. If certain events occur or do
not occur, such as the failure to pay dividends to the Series B preferred
stockholders, the holders of the Series B preferred stock are entitled to elect
the smallest number of directors that will constitute a majority of the
authorized number of directors, immediately upon giving written
notice.
 
 **12.
CAPITALIZATION**
 
 During
the year ended February 29, 2004, the Company amended its articles of
incorporation, increasing the number of authorized shares of common stock from
30,000,000 to 350,000,000.
 
 On July
10, 2002, the Company adopted a Non-Qualified Option/Stock Appreciation Rights
Plan that authorizes 7,000,000 shares of common stock for grant to key
management employees or consultants. Options granted under the plan must be
exercised within ten years of the date of grant. The exercise price of options
shall not be less than par value and shall be determined by the Stock Option
Plan Committee and the Board of Directors. As of February 28, 2005, the Company
has 57,400 options available for future issuance under this plan.
 
 During
the year ended February 29, 2004, the Company adopted an employee stock
incentive plan (the "Plan") that authorizes up to 20,000,000 shares of common
stock for grants of both incentive stock options and non-qualified stock options
to designated officers, employees, and certain non-employees. Effective July
2003, October 2003 and August 2004, the Company amended this plan to include an
additional 20,000,000, 25,000,000 and 20,000,000 shares of common stock,
respectively. Effective December 2004, the Company amended the plan to reduce
the number of shares of common stock by 7,000,000 shares. Options granted under
the Plan must be exercised within 10 years of the date of grant. The exercise
price of options granted may not be less than 85 percent of the fair market
value of the stock. As of February 28, 2005, the Company has 7,000,000 options
available for future issuance under this plan.
 
 During
the year ended February 29, 2004, the Company also adopted a non-employee
directors and consultants retainer stock plan. This plan authorizes up to
5,000,000 shares of common stock to be issued in the amount of compensation for
services to directors and consultants at the deemed issuance price of not less
than 85 percent of the fair market value of the stock. Effective July 2003,
October 2003 and December 2004, the Company amended this plan to include an
additional 1,000,000, 15,000,000 and 7,000,000 shares of common stock,
respectively. As of February 28, 2005, the Company has 7,000,000 options
available for future issuance under this plan.
 
 A summary
of the Company's stock option activity is as follows:
 Weighted-AverageNumber
    Exercise
      Priceof
      Shares
    Per
      ShareOptions
      outstanding, February 28, 2003
    262,500
    0.36Granted
    88,550,000
    0.02Exercised
    (88,450,000)
    0.02Expired,
      forfeited
    0
    0.00Options
      outstanding, February 29, 2004
    362,500
    0.27Granted
    28,800,000
    0.02Exercised
    (28,800,000)
    0.02Expired,
      forfeited
    0
    0.00Options
      outstanding, February 28, 2005
    362,500
    0.27
 The
following table summarizes information about options outstanding and exercisable
as of February 28, 2005:
 
 22
 **Outstanding
      Options**
    
    **Exercisable
      Options****Range
      of**
      **Exercise
      Price**
    
    **Number**
      **Outstanding**
    
    **Weighted
      Average**
      **Remaining
      Life**
    
    **Weighted
      Average**
      **Price**
    
    **Weighted
      Average**
      **Remaining Life**
    
    **Number**
      **Exercisable**
    
    **Weighted
      Average**
      **Price**$0.04-$0.57
    
    362,500
    
    7.29
      years
    
    $
    0.27
    
    7.29
      years
    
    362,500
    
    $
    0.27
 
 The
weighted average estimated fair value of stock options granted during 2005 and
2004 was $0.02 and $0.02 per share, respectively.
 
 **13.
INCOME TAXES**
 
 The
Company has incurred significant operating losses since its inception and,
therefore, no tax liabilities have been incurred for the periods presented. The
amount of unused tax losses available to carry forward and apply against taxable
income in future years totaled approximately $17,422,000. The loss carry
forwards expire beginning in 2007. Due to the Company's continued losses,
management has established a valuation allowance equal to the amount of deferred
tax asset because it is more likely than not that the Company will not realize
this benefit.
 
 Temporary
differences giving rise to the deferred tax asset are as follows:
 
 Unused
      operating loss carry forward
    
    $
    6,169,300Excess
      depreciation for tax purposes over the amount for financial reporting
      purposes
    
    (807,600
    )Other
    
    23,5005,385,200Valuation
      allowance
    
    (5,385,200
    )$
    0
 
 The
valuation allowance increased by $454,700 during the year ended February 28,
2005. Differences between the federal benefit computed at a statutory rate and
the Company’s effective tax rate and provision are as follows for the years
ended February 28, 2005 and February 29, 2004:
 
 2005
    
    
    2004Statutory
      benefit
    $
    (435,000)
    
    $
    (619,000
    )State
      tax benefit, net of federal effect
    
    (45,000)
    
    (60,000
    )Non-deductible
      expenses
    
    25,300
    
    9,200Increase
      in deferred income tax valuation allowance
    
    454,700
    
    669,800$
    0
    
    $
    0
 
 The
Internal Revenue Code contains provisions that may limit the net operating loss
carry forwards available for use in any given year if significant changes in
ownership interest of the Company occur.
 
 **14.
RELATED PARTY TRANSACTIONS**
 
 During
the year ended February 28, 2005 and February 29, 2004, two executives who are
stockholders of the Company deferred approximately $107,000 and $112,000,
respectively, of compensation earned during the year. The balance due to
stockholders at February 28, 2005 totaled $321,710. The amounts are unsecured,
non-interest bearing, and have no specific repayment terms.
 
 During
February 28, 2005 and February 29, 2004, the Company issued 4,737,601 and
3,299,986 shares of common stock, respectively, to a related company valued at
$80,540 and $84,150, respectively, for a pledge of assets and guarantee of a
loan. This related company is 100 percent owned by the president and chief
executive officer of the Company. Also during the year ended February 29, 2004,
the Company issued 15,139,285 shares of common stock to a related company valued
at $105,975 in settlement of a payable to an unrelated party.
 
 On
October 11, 2003, the Company acquired 100 percent of the outstanding common
stock of Chariot Manufacturing Company, Inc. from a related party for $360,000.
As part of this transaction, the Company issued the related company 2,197,802
shares of common stock valued at $30,000. This related company is 100 percent
owned by the president and chief executive officer of the Company.
 
 During
February 28, 2005 and February 29, 2004, the Company issued 2,368,801 and
1,649,993 shares of common stock, respectively, to a related party valued at
$40,270 and $42,075, respectively, for a pledge of assets and guarantee of a
loan.
 
 The above
amounts are not necessarily indicative of the amounts that would have been
incurred had comparable transactions been entered into with independent
parties.
 
 **16.
ACQUISITION**
 
 On
October 11, 2003, the Company acquired 100 percent of the outstanding common
stock of Chariot Manufacturing Company, Inc. from a related party for $360,000.
The acquisition was financed through the assignment of a note receivable valued
at $150,000, the issuance of $30,000 worth of common stock and a note payable
for $180,000. As Chariot Manufacturing Company, Inc. manufactures motorcycle
trailers with fiberglass bodies, it provides a vehicle for the Company to enter
the fiberglass manufacturing market. The operations of the Chariot from October
11, 2003 are included in the consolidated financial statements.
 
 23
 The
following table summarizes the estimated fair values of the assets acquired at
the date of acquisition, there were no outstanding liabilities.
 Equipment
    
    $
    170,000Intangible
      assets
    
    
    190,000Total
      assets acquired
    
    $
    360,000
 
 Of the
$190,000 of acquired intangible assets, $59,455 was assigned to brand
recognition, $44,420 was assigned to customer list and $86,125 was assigned to
the web site development. These intangible assets are being amortized over an
average useful life of 5 years.
 
 The
following are pro forma amounts for the year ended February 29, 2004 (unaudited)
assuming the acquisition was made on March 1, 2003:
 Net
      sales
    
    $
    2,256,573Net
      loss
    
    $
    (1,289,219
    )Net
      loss per common share
    
    $
    (.02
    )
 
 The year
ended February 29, 2004, includes a nonrecurring gain on the disposal of assets
of $380,444.
 **17.
ACQUISITION OF ASSETS**
 
 During
the year ended February 28, 2005, the Company entered into a purchase agreement
to acquire certain assets, including equipment and inventory from a supplier for
$848,650. The Company acquired equipment and inventory valued at $768,826 and
$6,208, respectively, and received forgiveness of payables of $73,616 owed to
the supplier. In exchange for the assets and forgiveness of payables, the
Company assigned receivables $131,658, forgave debt of $273,376 and issued notes
payable of $443,616.
 
 **18.
SEGMENT INFORMATION**
 
 The
Company has two reportable segments during 2005 and 2004; manufacturing and
fiberglass. Although both of these segments are in the manufacturing industry,
they provide different types of products and services and each segment is
subject to different marketing, production and technology strategies. Therefore,
for the years ended February 28, 2005 and February 29, 2004 the Company has
included segment reporting.
 
 For the
year ended February 28, 2005, information regarding operations by segment are as
follows: **Manufacturing**
    
    **Fiberglass**
    
    **Other**
    
    **Total**Revenue
    
    $
    2,371,771
    
    $
    381,862
    
    
    
    $
    2,753,633Interest
      expense
    
    $
    101,016
    
    $
    0
    
    $
    62,242
    
    $
    163,258Depreciation
    
    $
    326,638
    
    $
    72,401
    
    $
    690
    
    $
    399,729Net
      (loss)
    
    $
    (254,983
    )
    $
    (282,827
    )
    $
    (741,079
    )
    $
    (1,278,889
    )Property
      and equipment, net of accumulated depreciation
    
    $
    4,633,551
    
    $
    881,080
    
    $
    2,472
    
    $
    5,517,103Segment
      assets
    
    $
    5,313,193
    
    $
    1,067,433
    
    $
    81,240
    
    $
    6,461,866
 
 For the
year ended February 29, 2004, information regarding operations by segment are as
follows:**Manufacturing**
    
    **Fiberglass**
    
    **Other**
    
    **Total**Revenue
    
    $
    2,067,455
    
    $
    16,750
    
    
    
    $
    2,084,205Interest
      expense
    
    $
    133,485
    
    $
    0
    
    $
    55,430
    
    $
    188,915Depreciation
    
    $
    318,282
    
    $
    6,611
    
    $
    288
    
    $
    325,181Net
      (loss)
    
    $
    (201,316
    )
    $
    (35,402
    )
    $
    (1,407,426
    )
    $
    (1,644,144
    )Property
      and equipment, net of accumulated depreciation
    
    $
    4,992,486
    
    $
    163,389
    
    $
    3,162
    
    $
    5,159,037Segment
      assets
    
    $
    5,647,695
    
    $
    353,779
    
    $
    386,003
    
    $
    6,387,477
 
 Segment
1, manufacturing, consists of International Machine and Welding, Inc. and
derives its revenues from machining operations, sale of parts and service.
Segment 2, fiberglass, consists of Chariot Manufacturing Company, Inc. and
derives its revenues from the manufacture, sale and service of fiberglass
trailers.
 
 24
 The
manufacturing segment, International Machine and Welding, Inc. has a broad and
diverse base of customers. The segment does not rely on any single customer, the
loss of which would have a material adverse effect on the segment. However, this
segment does generate a significant amount of revenues from sales and services
provided to three different industries. For the year ended February 28, 2005,
the construction industry accounted for approximately 44% of the segment's
revenues, while the industrial and mining industries accounted for approximately
39% and 17%, respectively, of the segment's total revenues.
 
 Although
the division does not rely on a single customer, during the year ended February
28, 2005, three of the Company’s customers accounted for approximately 48% of
total revenues. These customers were Vehicare 23%, Mosaic Phosphates 16% and
Dixie Southern 9%.
 ****
 **ITEM 8.**  **CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND**
 
 **FINANCIAL
DISCLOSURE**
 
 NONE
 
 **ITEM 8A.**  **CONTROLS
AND PROCEDURES**
 
 Evaluation
of disclosure controls and procedures .
 
 Under the
supervision and with the participation of our Management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operations of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as of June 30, 2004. Based on this evaluation,
our principal executive officer and principal financial officer concluded that
our disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
(“SEC”) reports is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms relating to American Commerce
Solutions, Inc., and was made known to them by others within those entities,
particularly during the period when this report was being prepared.
 
 There
were no significant changes in the Company’s Internal Controls or in other
factors that have materially affected, or are reasonably likely to affect,
Internal Controls over financial reporting during the most recent fiscal year.
 
 **ITEM 8B**  **OTHER
INFORMATION**
 
 None
  **Part III**
 **ITEM 9.**  **DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT**
 
 The
following table sets forth information about each person who serves as an
executive officer or director of the Company:
 
 Name    Age   Positions
with the Company
 ---------    -----   ----------------------------------
 
 Robert E.
Maxwell  69   Chairman
of the Board and Director
 
 Frank D.
Puissegur  45   Chief
Financial Officer and Director
 
 Daniel L.
Hefner  54   Chief
Executive Officer, President and Director
 
 Directors
of the Company hold office until the earlier of the next annual meeting of the
stockholders and until their successors have been duly elected and qualified, or
their death, resignation, or removal. Two board members were elected to two-year
terms at the annual stockholders meeting held January 21, 2003. Robert Maxwell
and Daniel Hefner were elected to a two-year term. On March 5, 2002 in consent
action by shareholders, Norman Birmingham was elected to a two-year term, but
subsequently resigned the position. Our officers are elected annually by the
board of directors to hold office until the next annual meeting of our board and
their successors have been duly elected and qualified. There are no family
relationships between any of our officers and directors. Set forth below is a
description of the business experience during the past five years or more and
biographical information for directors and executive officers identified
above:
 
 Mr.
Maxwell has been a director and the Chairman of the Board of Directors of the
Company since June 2000. Mr. Maxwell serves as a consultant to International
Machine and Welding, Inc., a subsidiary of the Company. He was the
owner/operator of Florida Machine and Welding, Inc., located in Bartow, Florida,
for the past 24 years until the sale of its assets in June 2000. Mr. Maxwell has
served on various bank and charitable boards of directors.
 
 Mr.
Puissegur joined the Company in June 2001 as Chief Financial Officer and
Director. He became a Certified public Accountant with his certificate from the
State of Florida and the creation of a sole practitioner office in 1982. The
practice grew and has evolved into its current form as the partnership of
Puissegur, Finch, & Slivinski, P.A., a full service accounting firm. He is a
member of the American and Florida Institutes of Certified Public Accountants
and the National and Polk County Estate Planning Councils. The American
Institute of Tax Studies has awarded Mr. Puissegur the designation of "Certified
Tax Professional." He also holds the designation from the State of Florida as a
Certified Family Mediator.
 
 
 Mr.
Hefner has been President of the Company since September, 2002 and Chief
Executive Officer since March 2002. He previously served as Executive Vice
President from June 2000 to June 2001 and as interim President from June 2001
through February 2002. Mr. Hefner has been a director of the Company since June
2000. Mr. Hefner formerly served as President International Machine and Welding,
Inc. He also serves as President of International Commerce and Finance, Inc. an
investment/consulting company for manufacturing and technology companies, and he
has held this position since August 1999. Mr. Hefner has been active for the
past twelve years as an independent consultant to individuals or business
seeking to begin operations or to create turnarounds of existing business.
During the same period, Mr. Hefner also operated his own independent real estate
brokerage operation where he served as President and Chief Executive Officer.
From March to October 1999, Mr. Hefner was Chief Operating Officer for Chronicle
Communications, Inc. (OTCBB: CRNC), a Tampa based printer. CRNC filed bankruptcy
protection under Chapter 11 of the Federal Bankruptcy Code two months after Mr.
Hefner's departure.
 
 25
 AUDIT
COMMITTEE
 
 The Audit
Committee consists of Frank Puissegur, Andrew Mueller and Robert Maxwell. The
Audit Committee selects the independent auditors; reviews the results and scope
of the audit and other services provided by the Company’s independent auditors,
and reviews and evaluates the Company’s internal control functions. The board of
directors has determined that Mr. Mueller is the audit committee “financial
expert”, as such term is defined under federal securities law, and is
independent. Mr. Mueller is an expert by virtue of : (i) education and
experience as a principal financial officer, principal accounting officer,
controller, public accountant or auditor or experience in one or more positions
that involve the performance of similar functions; (ii) experience actively
supervising a principal financial officer, principal accounting officer,
controller, public accountant, auditor or person performing similar functions;
(iii) experience overseeing or assessing the performance of companies or public
accountants with respect to the preparation, auditing or evaluation of financial
statements; and (iv) other relevant experience.
 
 ITEM 10. EXECUTIVE COMPENSATION
 
 The
following summary compensation table sets forth cash and non-cash compensation
awarded, paid or accrued, for the past three fiscal years of the Company's Chief
Executive Officers, and all other, if any, whose total annual compensation
exceeded $100,000 for the past three fiscal years (collectively, the " Named
Executive Officers").
 
 **Annual
      Compensation**
    **Long-Term**
      **Compensation
      Awards**
    **All Other**
      **Compensation**Name
    Fiscal
      Year
    Salary
    Bonus
    Restricted
      Stock Awards
      ($)
      (#)
    Securities
      Underlying OptionsDaniel
      L. Hefner
      CEO
      & President
    2005
      2004
      2003
    $67,492
      $64,896
      $62,400
    15,000
      15,000
    0
      0
      0
    0
      0
      0
    100,000
      100,000
      100,000
    9,000
      10,800
      10,800
 
 No
Executive or employee was compensated over $100,000 for fiscal years 2005, 2004
or 2003.
 
 The
Company does not have any annuity, retirement, pension, deferred or incentive
compensation plan or arrangement under which any executive officers are entitled
to benefits, nor does the Company have any long-term incentive plan pursuant to
which performance units or other forms of compensation are paid. Executive
officers may participate in group life, health and hospitalization plans if and
when such plans are available generally to all employees. All other compensation
consisted solely of health care premiums.
  EMPLOYMENT
AGREEMENTS
 
 The
Company signed an employment agreement with Daniel L. Hefner on June 1, 2000
containing a base salary of $60,000; a minimum cash bonus of $15,000 per year
and a 4% annual increase of the base pay. Stock options are granted on the
signing and June 1 of each contract year at the rate of 100,000 common share
equivalents. The contract also provides for a $750 per month car allowance and
the payment of all insurance, fuel and maintenance costs and all perquisites
related to health, dental, life or disability as may be offered to the executive
management staff. All other provisions of the previous contract related to
capital raises or warrant or exercise revenue were omitted except for the
termination provisions stated above.
 
 DIRECTOR
COMPENSATION
 
 Directors
of the Company who are not employees or consultants do not receive any
compensation for their services as members of the Board of Directors, but are
reimbursed for expenses incurred in connection with their attendance at meetings
of the Board of Directors.
 
 COMPENSATION
COMMITTEE
 
 Robert E.
Maxwell, Daniel L. Hefner and Frank Puissegur are members of the Compensation
Committee, which reviews and makes recommendations with respect to compensation
of officers, employees and consultants, including the granting of options under
the Company's NonQualifying Stock Option Plan approved effective July 10, 2002
and the Employee Stock Incentive Plan approved effective May
27,2003.
 
 NONQUALIFYING
STOCK OPTION PLAN
 
 On July
10, 2002 the Company adopted a Non-qualifying Stock Option/Stock Appreciation
Rights Plan and reserved 7,000,000 common shares of stock for employees officers
and consultants. These options are granted by the Board at their discretion. As
of February 28 ,2005, the Company has 57,400 options available for future
issuance under this plan.
 
 EMPLOYEE
STOCK INCENTIVE PLAN
 
 Effective
May 27, 2003, the Company adopted an employee stock incentive plan (the "Plan")
for the year 2003 that authorizes up to 20,000,000 shares of common stock for
grants of both incentive stock options and non-qualified stock options to
designated officers, employees, and certain non-employees. Effective July 2003,
October 2003 and August 2004, the Company amended this plan to include an
additional 20,000,000, 25,000,000 and 20,000,000 shares of common stock,
respectively. Effective December 2004, the Company amended the plan to reduce
the number of shares of common stock by 7,000,000 shares. Options granted under
the Plan must be exercised within 10 years of the date of grant. The exercise
price of options granted may not be less than 85 percent of the fair market
value of the stock. As of February 28, 2005, the Company has 7,000,000 options
available for future issuance under this plan.
 
 Effective
May 27, 2003, the Company also adopted a non-employee directors and consultants
retainer stock plan for the year 2003. This plan authorizes up to 5,000,000
shares of common stock to be issued in the amount of compensation for services
to directors and consultants at the deemed issuance price of not less than 85%
of the fair market value of the stock. Effective July 2003, October 2003 and
December 2004, the Company amended this plan to include an additional 1,000,000,
15,000,000 and 7,000,000 shares of common stock, respectively. As of February
28, 2005, the Company has 7,000,000 options available for future issuance under
this plan.
 
 At
February 28, 2005, the Company did not have any long-term incentive plans nor
had it awarded any restricted shares to any Named Executive Officer. The table
set forth below contains information with respect to the award of stock options
during the fiscal year ended February 29, 2004 and February 28, 2003 (as there
were no awards of stock options during the fiscal year ended February 28, 2005)
to the Named Executive Officers covered by the Salary Compensation
Table.
 
 26
 OPTION/SAR
GRANTS FOR THE YEARS ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003
 (individual
grants)
 
 **Name**
    
    **Number
      of**
      **Securities**
      **underlying**
      **Options/SAR’s**
      **Granted**
    
    **%
      of Total**
      **Options/SAR’s**
      **Granted
      to**
      **Employees
      in**
      **Fiscal
      Year**
    
    **Exercise**
      **or
      Base**
      **Price**
      **($
      /Sh)**
    
    **Expiration**
      **Date**Daniel
      L. Hefner
    
    100,000
    
    .11
    
    $
    0.04
    
    June
      1, 2008*Daniel
      L. Hefner
    
    100,000
    
    11.76
    
    $
    0.286
    
    June
      1, 2007*Daniel
      L. Hefner
    
    200,000
    
    23.53
    
    $
    0.242
    
    ExercisedBarbara
      Maxwell
    
    200,000
    
    23.53
    
    $
    0.242
    
    ExercisedR.
      Beimel
    
    200,000
    
    23.53
    
    $
    0.242
    
    ExercisedN.
      Birmingham
    
    150,000
    
    17.65
    
    $
    0.242
    
    Exercised
 
 *these
options are exercisable immediately.
 
 
 AGGREGATED
OPTION/SAR EXERCISES IN LAST FISCAL YEAR
 AND
FISCAL YEAR-END OPTION/SAR VALUES
 
 The
following table sets forth, for each Named Executive Officer in the Summary
Compensation Table who holds stock options during fiscal 2005, the number of
stock options held on February 28, 2005 and the realizable gain of stock options
that are "in-the-money."
 
 **Name**
    
    **Shares**
      **Acquired
      or**
      **Exercised
      (#)**
    
    **Value**
      **Realized**
    
    **Number
      of**
      **Securities
      Underlying**
      **Unexercised
      Options**
      **at
      Fiscal Year End**
    
    **Value
      of Unexercised**
      **In-the-Money
      Options**
      **At
      Fiscal Year End****Exercisable**
      **(#)**
    
    **Unexercisable**
      **(#)**
    **Exercisable**
      **$**
    
    **Unexercisable**
      **$**Daniel
      L. Hefner
    
    100,000
    
    0
    
    100,000
    
    0
    
    0
    (1)
    0Daniel
      L. Hefner
    
    100,000
    
    0
    
    100,000
    
    0
    
    0
    (2)
    0
 
 ----------
 (1) Based
upon the closing price of the Common Stock as quoted on the Over
The
 Counter
Bulletin Board on February 29, 2004 of $0.03 per share.
 (2) Based
upon the closing price of the Common Stock as quoted on the Over
The
 Counter
Bulletin Board on February 28, 2003 of $0.06 per share.
 
 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
 
 The
following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock as of February 28, 2005, by:
(i) each director and nominee for director of the Company, (ii) each Named
Executive Officer, (iii) all directors and executive officers of the Company as
a group, and (iv) each person known to the Company beneficially owning more than
5% of the outstanding Common Stock. Except as otherwise indicated, the persons
named in the table have sole voting and investment power with respect to all of
the Common Stock owned by them.
 
 **Name
      and Address or**
      **Number
      in Group**
    
    **Amount
      and Nature of**
      **Beneficial
      Ownership (1)**
    
    **Percentage**
      **of
      Class (2)**Directors
      and Executive OfficersRobert
      E. Maxwell (3)
    
    723,360
    
    ****Frank
      D. Puissegur
    
    0Daniel
      L. Hefner (4)
      1400
      Chamber Dr.
      Bartow,
      FL
    
    42,821,674
    
    30.35
    %All
      Directors and Executive Officers as a Group (3 persons)
    
    43,545,034
    (5)
    30.86
    %International
      Commerce and Finance, Inc. Tampa, FL
    
    39,462,721
    
    27.97
    %
 ----------
 (**) less
than 1%
 
 (1) In
accordance with Rule 13d-3 promulgated pursuant to the Securities Exchange Act
of 1934, a person is deemed to be the beneficial owner of a security for
purposes of the rule if he or she has or shares voting power or dispositive
power with respect to such security or has the right to acquire such ownership
within sixty days. As used herein, "voting power" is the power to vote or to
direct the voting of shares, and "dispositive power" is the power to dispose or
direct the disposition of shares, irrespective of any economic interest
therein.
 27
 (2) In
calculating the percentage ownership for a given individual or group, the number
of shares of Common Stock outstanding includes unissued shares subject to
options, warrants, rights or conversion privileges exercisable within sixty days
held by such individual or group, but are not deemed outstanding by any other
person or group.
 
 (3)
Includes 723,360 shares of Common Stock held by his spouse Barbara Maxwell.
 
 (4)
Includes (a) 300,000 shares of Common Stock, which may be acquired pursuant to
currently exercisable options (b) 3,058,953 shares of Common Stock held
personally and, (c) 39,462,721 shares of Common Stock beneficially owned as the
President of International Commerce and Finance, Inc.
 
 (5)
Includes 300,000 shares of Common Stock subject to options.
 
 The
Company has two classes of preferred stock outstanding comprised of 102 shares
of Series A Preferred Stock and 3,944 shares of Series B Preferred Stock. Each
outstanding class of preferred stock has voting rights and is convertible into
Common Stock. Each share of Series A Preferred Stock converts to 1,289 shares of
Common Stock and votes on an as converted basis. 3,207 shares of Series B
Preferred Stock is convertible into 641,400 shares of Common Stock and 737
Series B Preferred Shares convert into 737,000 shares of Common Stock and votes
on an as converted basis.
 
 Gerald
Hoak, of 235 Deerfield Drive, Pottsville, PA 17901, owner of 20 shares or 19.61%
of Series A Preferred Stock, and Merit Capital Associates, (substantially owned
by Russ and Sylvia Newton) of 1221 Post Road East, Westport, CT 06880 owner of
40 shares or 39.22% of Series A Preferred Stock are the only owners of more than
5% of the class. No director or officer is the beneficial owner of any of the
Series A or Series B Preferred Stock.
 Beneficial
Voting Power Held The
following table sets forth the voting power in the Company's equity securities,
as of February 29, 2004 held by: (i) each director of the Company,(ii) each
Named Executive Officer, (iii) all directors and executive officers as a group,
and (iv) each person known by the Company to own more than 5% of any class of
outstanding equity security of the Company. The voting power set forth in this
table is the beneficial voting power held, directly and indirectly, by such
person as of the date indicated assuming no conversion of the preferred stock
(i.e., includes shares that may be acquired within 60 days by reason of option
or warrant exercise but not those that could be obtained upon conversion of
preferred stock).
 **Name**
    
    **Percent
      of Outstanding**
      **Voting
      Power Held(1)**Directors
      and Executive OfficersRobert
      E. Maxwell
    
    *Frank
      Puissegur
    
    *Daniel
      L. Hefner (2)
    
    30.35
    %All
      directors and executive officers as a group (3 persons)
    
    30.86
    %International
      Commerce and Finance (3)
    
    27.28
    %
 
 ----------
 * Less
than 1%
 
 (1) Based
upon 140,573,824 outstanding shares of common stock, 102 outstanding shares of
Series A Preferred Stock and 3944 outstanding shares of Series B Preferred
Stock. Each share of Common Stock is entitled to one vote per share. Each
outstanding share of Series A Preferred Stock is entitled to 1,289 votes. 3,207
shares of Series B Preferred Stock are entitled to 200 votes per share and 737
shares of Series B Preferred are entitled 1,000 votes each. Accordingly, as of
Feb 28, 2004, the Series A Preferred Stock and Series B Preferred Stock are
entitled to an aggregate of 131,478 votes and 1,378,400 votes, respectively.
Voting rights are calculated in the same manner described in footnote 2 to table
above disclosing the Security Ownership of Management and Certain Beneficial
Owners ("Beneficial Ownership Table"). Totals could exceed 100% due to such
calculations and overlapping beneficial voting rights held between holders as
set forth herein.
 
 (2)
Consisting of 300,000 votes upon exercise of currently exercisable options to
purchase Common Stock, 3,058,953 shares of Common Stock held and 39,462,721
shares of Common Stock beneficially owned as President of International Commerce
and Finance, Inc.
 
 (3)
Consisting of 39,462,721 shares of Common Stock.
 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
 
 STOCKHOLDERS
AGREEMENT
 
 A
Stockholders Agreement dated April 9, 1998 was entered into among ULLICO, the
Company, David N. DeBaene, Annette DeBaene, Norman DeBaene, Thomas Lisi, and
Steve Panneton (each, a "Holder"). The Stockholders Agreement provides that the
Company shall have a right of first refusal before any Holder may transfer any
shares of Common Stock. ULLICO has a right of second refusal and co-sale rights,
if the Company does not elect to buy all of the securities it is offered. If
ULLICO enters into an agreement to transfer, sell or otherwise dispose of all of
its Preferred Stock, Warrants and any Common Stock issued upon conversion or
exercise of the former (such agreement referred to as a "Tag-Along Sale"), each
Holder has the right to participate in the Tag-Along Sale. If ULLICO, alone or
with another person, accepts an offer from any party who is unaffiliated with it
to purchase any of ULLICO's shares which results in such party having the
ability to elect a majority of the Company's Board of Directors, then, at the
request of ULLICO, each Holder shall sell all shares of Common Stock held by
such Holder (referred to as a "Drag-Along Sale").
 
 During
the year ended February 28, 2005 and February 29, 2004, two executives who are
stockholders of the Company deferred approximately $107,000 and $112,000,
respectively, of compensation earned during the year. The balance due to
stockholders at February 28, 2005 totaled $321,710. The amounts are unsecured,
non-interest bearing, and have no specific repayment terms.
 
 During
February 28, 2005 and February 29, 2004, the Company issued 4,737,601 and
3,299,986 shares of common stock, respectively, to a related company valued at
$80,540 and $84,150, respectively, for a pledge of assets and guarantee of a
loan. This related company is 100 percent owned by the president and chief
executive officer of the Company. Also during the year ended February 29, 2004,
the Company issued 15,139,285 shares of common stock to a related company valued
at $105,975 in settlement of a payable to an unrelated party.
 
 On
October 11, 2003, the Company acquired 100 percent of the outstanding common
stock of Chariot Manufacturing Company, Inc. from a related party for $360,000.
As part of this transaction, the Company issued the related company 2,197,802
shares of common stock valued at $30,000. This related company is 100 percent
owned by the president and chief executive officer of the Company.
 
 During
February 28, 2005 and February 29, 2004, the Company issued 2,368,801 and
1,649,993 shares of common stock, respectively, to a related party valued at
$40,270 and $42,075, respectively, for a pledge of assets and guarantee of a
loan.
 
 The above
amounts are not necessarily indicative of the amounts that would have been
incurred had comparable transactions been entered into with independent
parties.
 
 28
 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
 
 List of
Exhibits
 
 (a) The
exhibits that are filed with this report or that are incorporated herein by
reference are set forth in the Exhibit Index below:
 EXHIBIT
      INDEXSequentiallyIncorporated
      Documents
    SEC
      Exhibit Reference
    Numbered------------------------------
    ----------------------------
    ---------------3.1
    Certificate
      of Incorporation of the Registrant,As
      amended As filed with the Registrant'sForm
      SB-2, on October 27, 1995, File No. 33-98486
    N/A3.2
    By-Laws
      of the Registrant, as amendedAs
      filed with the Registrant's Form SB-2 onOctober
      27, 1995, File No. 33-98486
    N/A4.1
    Form
      of Warrant Agreement As filed with theRegistrant's
      Form SB-2, on October 27, 1995,File
      No. 33-98486
    N/A4.2
    Form
      of Warrant of the Registrant issued in theRegistrant’s
      January 1995 Private Placement, Asfiled
      with the Registrant's Form SB-2 on October 27,1995,
      File No. 33-98486
    N/A4.3
    Form
      of Unit Purchase Option issued to Merit CapitalAssociates,
      Inc., As filed with the Registrant's FormSB-2
      on October 27, 1995, File No. 33-98486
    N/A4.4
    Form
      of 11% Convertible Subordinated Note of theRegistrant
      issued in the Registrant’s August 1995Private
      Placement, As filed with the Registrant's FormSB-2
      on October 27, 1995, File No. 33-98486 Placement
    N/A4.5
    Form
      of Warrant of the Registrant issued in theRegistrant’s
      August 1995 Private Placement, As filedwith
      the Registrant's Form SB-2 on October 27, 1995,File
      No. 33-98486
    N/A4.6
    Securities
      Purchase Agreement dated April 9,1998,
      As filed with the Registrant's Form 10KSBon
      June 13, 1999
    N/A4.7
    Certificate
      of Designation of Series B PreferredStock,
      As filed with the Registrant's Form 10 KSBon
      June 13, 1999
    N/A4.8
    Stockholders'
      Agreement dated April 9, 1998,As
      filed with the Registrant's Form 10 KSB onJune
      13, 1999
    N/A4.9
    Registration
      Rights Agreement dated April 9, 1998,As
      filed with the Registrant's Form 10 KSB onJune
      13, 1999
    N/A4.10
    Warrant
      Certificate issued to ULLICO, As filedwith
      the Registrant's Form 10 KSB on June 13, 1999
    N/A4.11
    Escrow
      Agreement As filed with the Registrant'sForm
      10 KSB on June 13, 1999
    N/A4.12
    Certificate
      of Designations of Series A PreferredStock,
      As filed with the Registrant's Form 10-KSBon
      June 11, 1998
    N/A4.13
    Certificate
      of Designation of Series C Preferred Stock,As
      filed with the Registrant's Form 10-KSB onJune
      12, 2000
    N/A294.14
    Amendment
      to the Articles of Incorporation ofJD
      American Workwear, Inc. for name change toAmerican
      Commerce Solutions, Inc. and the increasein
      authorized shares, As filed with the Registrant'sForm10-KSB
      on June 14, 2001
    N/A10.2
    Employment
      Agreement with Steven D. Smith,As
      filed with Registrant's Form 10-KSB on July19,
      2001
    N/A10.3
    Registrant's
      1995 Stock Option Plan, As filed withthe
      Registrant's Form SB-2 on October 27, 1995,File
      No. 33-98486
    N/A10.4
    Form
      of Option Agreement under the Registrant’s1995
      Stock Option Plan, As filed with the Registrant'sForm
      SB-2 on October 27, 1995, File No. 33-98486
    N/A10.5
    Employment
      Agreement with Norman Birmingham,As
      filed with Registrant's Form 10-KSB on June 12, 2000
    N/A10.6
    Consulting
      Agreement with Richard Sullivan, Asfiled
      with Registrant's Form 10-KSB on June 12, 2000
    N/A10.7
    Option
      to Purchase Businesses between Registrantand
      International Commerce and Finance, Inc.,As
      filed with Form 10-KSB on June 12, 2000
    N/A10.8
    Stock
      Purchase Agreement between Registrant andPatina
      Corporation, As filed with Registrant'sForm
      10-KSB on June 12, 2000
    N/A10.9
    Employment
      Agreement with David DeBaeneJanuary
      1, 2001, As filed with Registrant'sForm
      10-KSB on June 12, 2000
    N/A10.10
    Asset
      Sale Agreement Between Registrant andDavid
      N. Debaene June 1, 2001, As filed withRegistrant's
      Form 10-QSB on July 26, 2001
    N/A10.11
    Stock
      Purchase Agreement between Registrantand
      Rhode Island truck and Equipment, Corp.October
      31, 2001, As filed with Registrant'sForm
      10-QSB on December 14, 2001
    N/A10.12
    Employment
      Agreement with Daniel L. Hefnerdated
      June 1, 2000, As filed with the Registrant’sForm
      10-KSB on May 27, 2004
    N/A14
    Code
      of Ethics, As filed with the Registrant’s Form10-QSB
      on May 27, 2004
    N/A31.1
    Certification
      of the Chief Financial Officer Dated May 27, 200531.2
    Certification
      of the Chief Executive Officer dated May 27, 20053032
    Certification
      Pursuant to 18 U.S.C. Section 1350, asAdopted
      Pursuant to Section 906 of the Sarbaenes-Oxley Act of 2002(b)
      Reports on Form 8-KThe
      Company filed Form 8-K on June 10, 2004 to disclose the acquisition of
      Crystal Clear Entertainment, Inc. and its sudsidiary Elite Distribution,
      Inc. from Blue Flame Enterprises, Inc. for a combination of common and
      preferred stock for a total aggregate appraised value of Crystal Clear
      Entertainment, Inc. and its subsidiary.The
      Company filed Form 8-K on July 8, 2004 to disclose the purchase of assets
      of Affordable Fiberglass Group from Kenneth W. McCleave for a combination
      of debt forgiveness, common and preferred stock for a total aggregate
      appraised value of the assets.The
      Company filed Form 8-K on September 14, 2004 to disclose that on September
      10, 2004, the Company and Blue Flame Enterprises, Inc. agreed to rescind
      the acquisition of Crystal Clear Entertainment, Inc. and its subsidiary,
      Elite Distribution, Inc. which was previously reported on a Form 8-K filed
      June 10, 2004.S-8
      Filings included by reference
 ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVCIES
 
 Audit
Fees
 
 During
2005 and 2004, we were billed by our accountants, Pender Newkirk & Company,
approximately $60,700 and $55,500 for audit and review fees associated with our
10-KSB and 10-QSB filings.
 
 Non-Audit
related fees
 
 None
 
 Tax
Fees
 
 During
2005 and 2004 we were billed by our accountants, **Bella,
Hermida, Gillman, Hancock, & Mueller Certified Public
Accountants** approximately $2,500 and $3,500 to prepare our federal and state tax returns.
 
 All
Other Fees
 
 None
 
 Audit
Committee Pre-Approval Process, Policies and Procedures
 
 Our
principal auditors have performed their audit procedures in accordance with
pre-approved policies and procedures established by our Audit Committee. Our
principal auditors have informed our Audit Committee of the scope and nature of
each service provided. With respect to the provisions of services other than
audit, review, or attest services, our principal accountants brought such
services to the attention of our Audit Committee, or one or more members of our
Audit Committee for the members of our Board of Directors to whom authority to
grant such approval had been delegated by the Audit Committee, prior to
commencing such services.
 
 SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 AMERICAN
COMMERCE SOLUTIONS, INC.
 
 
 Date: May
27, 2005  By: /s/
Daniel L. Hefner
 ------------------------------------
 Daniel L.
Hefner, President
 
 Date: May
27, 2005 By: /s/
Frank D. Puissegur
 ------------------------------------ Frank D.
Puissegur, CFO and Chief Accounting
Officer
 
 
 31