10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2008

Commission File Number 1-7375

COMMERCE GROUP CORP.

(Exact name of registrant as specified in its charter)

        WISCONSIN

      39-6050862

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6001 North 91st Street

Milwaukee, Wisconsin 53225-1795

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (414) 462-5310

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

          Name of each exchange on which registered

Common Shares $0.10 par value

         Pink Sheets

Common Shares $0.10 par value

         Over the Counter Bulletin Board (OTCBB)

Common Shares $0.10 par value

Berlin-Bremen Stock Exchange (C9G)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  __

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [x]

Indicate by check mark whether the Registrant is an accelerated file (as defined in Rule 12b-2 of the Exchange Act).   Yes  __   No  x

The aggregate market value of the 21,662,899 registrant’s common shares held by nonaffiliates of the registrant based on the closing sale price of the OTC BB on March 31, 2008 was approximately $6,932,128.

At March 31, 2008, there were 30,715,869 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of Form 10-K is incorporated herein by reference to the registrant’s definitive Proxy Statement relating to its 2008 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes  __   No  x

1

COMMERCE GROUP CORP.

2008 FORM 10-K ANNUAL REPORT

For the Fiscal Year Ended March 31, 2008

TABLE OF CONTENTS

Page

PART I

Item 1.

Business

  3

Item 2.

Properties

16

Item 3.

Legal Proceedings

29

Item 4.

Submission of Matters to a Vote of Security Holders

30

Item 4(a).

Executive Officers and Managers of the Company

30

PART II

Item 5.

Market for the Company’s Common Stock and Related Stockholders’ Matters

32

Item 6.

Selected Financial Data

35

Item 7.

Management’s Discussion and Analysis of Financial Condition

and Results of  Operations

36

Item 7(a).

Quantitative and Qualitative Disclosures About Market Risk

48

Item 8.

Financial Statements and Supplementary Data

50

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

82

Item 9(a).

Controls and Procedures

82

Item 9(b)

Other Information

83

PART III

Item 10.

Directors and Executive Officers of the Registrant

83

Item 11.

Executive Compensation

83

Item 12.

Security Ownership of Certain Beneficial Owners and Management

83

Item 13.

Certain Relationships and Related Transactions

83

Item 14.

Principal Accounting Fees and Services

83

PART IV

Item 15.

Exhibits, Financial Statement Schedules and Reports on Form 8-K

84

Subsidiaries

Consent of Chisholm, Bierwolf & Nilson, LLC

Certification Pursuant to Section 302

Certification Pursuant to Section 302

Certification Pursuant to Section 906

Certification Pursuant to Section 906

2

PART I

Item 1.  Business

Glossary of Selected Mining Terms

Cut-off Grade	The minimum grade of ore used to establish reserves.
Doré	Unrefined gold and silver bullion consisting of approximately 90% precious metals that will be further refined to almost pure metal.
Development Stage	A “development stage” project is one which is undergoing preparation of an established commercially mineable deposit for its extraction but which is not yet in production.  This stage occurs after completion of a feasibility study.
Exploration Stage	An “exploration stage” prospect is one which is not in either the development or production stage.
Fault	A surface or zone of rock fracture along which there has been displacement.
Feasibility Study	An engineering study designed to define the technical, economic, and legal viability of a mining project with a high degree of reliability.
Formation	A distinct layer of sedimentary rock of similar composition.
Grade	The metal content of ore, usually expressed in troy ounces per ton (2,000 pounds) or in grams per ton or metric tons which contain 2,204.6 pounds or 1,000 kilograms.  This report refers to ounces per ton.
Heap Leaching	A method of recovering gold or other precious metals from a heap of ore placed on an impervious pad, whereby a dilute leaching solution is allowed to percolate through the heap, dissolving the precious metal, which is subsequently captured and recovered.
Mineralized Material	The term “mineralized material” refers to material that is not included in the reserve as it does not meet all of the criteria for adequate demonstration for economic or legal extraction.
Mining	Mining is the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product.  Exploration continues during the mining process and, in many cases, mineral reserves are expanded during the life of the mine operations as the exploration potential of the deposit is realized.

3

Net Smelter Return Royalty	A defined percentage of the gross revenue from a resource extraction operation, less a proportionate share or transportation, insurance, and processing costs.
Outcrop	That part of a geologic formation or structure that appears at the surface of the earth.
Probable Reserves	Reserves for which quantity and grade and/or quality are computed from information similar to that used for Proven Reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced.  The degree of assurance, although lower than that for Proven Reserves, is high enough to assume continuity between points of observation.
Production Stage	A “production stage” project is actively engaged in the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product.
Proven Reserves	Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well-defined that size, shape, depth and mineral content of reserves are well established.
Reclamation	The process of returning land to another use after mining is completed.
Recoverable	That portion of metal contained in ore that can be extracted by processing.
Reserves	That part of a mineral deposit which could be economically and legally extracted or produced at the time of reserve determination.
Run-of-Mine	Mined ore of a size that can be processed without further crushing.
Strip Ratio	The ratio between tonnage of waste and ore in an open pit mine.
Waste	Barren rock or mineralized material that is too low in grade to be economically processed.

4

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995.

The matters discussed in this annual report on Form 10-K, when not historical matters, are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein.  Such forward-looking statements include, among others, scoping and feasibility studies for the San Sebastian Gold Mine, mineralized material estimates, potential residual production levels, future expenditures, cash requirement predictions and the ability to finance continuing operations.  Factors that could cause actual results to differ materially from these forward-looking statements include, among others, the factors described in this annual report on Form 10-K.   Many of these factors are beyond our ability to control or predict.  We disclaim any intent or obligation to update our forward-looking statements, whether as a result of receiving new information, the occurrence of future events, or otherwise.

General

Commerce Group Corp. (“Commerce,” the “Company,” and/or the “Registrant” and reference to these identifications such as “we,” “our,” and “us” may be used herein to refer to Commerce or to any or all of wholly-owned subsidiaries of Commerce) is one of the only precious metals company that has produced gold and silver in the past twenty or more years in the Republic of El Salvador, Central America.  Starting in 1968, for periods during the 1970's and 1980's Commerce was operative in the exploration, exploitation, development, and production of precious metals in El Salvador.  It continues to be operative in the exploration of precious metals in El Salvador while it seeks funding for exploitation, development, and production.  Commerce’s objectives have been to obtain the permission of the Government of El Salvador to continue the exploitation of mi neralized material at SSGM and to obtain a sufficient amount of funds to operate and expand its San Cristobal Mill and Plant and to commence an open-pit, heap-leach operation at its SSGM to produce gold at a profit.  It has also planned to broaden its exploration targets as the opportunity to discover more gold and silver is evident.  

Simultaneously, Commerce has been seeking a compatible acquisition, merger, or other business arrangement.  Since the death of Commerce’s long-time Chairman Edward L. Machulak on October 21, 2007, the Company has been directing most of its efforts toward finding a compatible acquisition, merger, or other business arrangement.  On March 7, 2008, Commerce and Manti Holdings, LLC (Manti) entered into an agreement in which Manti was given an exclusive thirty-day option to conduct a review of Commerce’s San Sebastian property, with a view toward a pre-defined transaction.  The general terms of the understanding reached between Commerce and Manti were stated in Exhibit 99.1 of Commerce’s Form 8-K filed on March 11, 2008.  Since then, Manti’s personnel have met with environmental groups and representatives of the El Salvadoran government and have visited Commerce’s mining properties to c ollect data and make an evaluation.  Their investigation is ongoing.  A determination to proceed has not yet been made.

Commerce has been a Wisconsin-chartered corporation since its merger from a State of Delaware corporation on April 1, 1999, and its corporate headquarters since its inception have been based in Milwaukee, Wisconsin.  Commerce was organized in 1962 and its common shares have been publicly traded since 1968.  The Company’s shares have been trading on the Over the Counter Bulletin Board (OTCBB) under the trade symbol CGCO.OB, on the Pink Sheets under the trade symbol of CGCO.PK, and on the Berlin-Bremen Stock Exchange under the trade symbol of C9G since October 2006.  The organizational chart on the following page reflects the mining organization and the mining activities in El Salvador as of March 31, 2008.  

Company’s Website

Commerce has a website located at http://www.commercegroupcorp.com.  This website can be used to access recent new releases, U.S. Securities and Exchange Commission filings, the Company’s Annual Report, Proxy Statement, Board Committee Charter, and other items of interest.  The contents of the Company’s website are not incorporated into this document.  The U.S. Securities and Exchange Commission filings, including supplemental schedules and exhibits can also be accessed free of charge through the U.S. Securities and Exchange Commission’s website at:  http://www.sec.gov.

Precious Metal Mining

Commerce continues to be involved in the exploration of gold and silver mines in the Republic of El Salvador, Central America, through its Commerce/Sanseb Joint Venture (“Joint Venture”).  Commerce holds a nearly 100% interest in the Joint Venture which is the operator of the San Sebastian Gold Mine (“SSGM”).

Commerce’s objective is to enhance the value of its shares by realizing profits from the production and sale of gold and silver, cash flow, and by locating, developing and exploiting gold/silver ore reserves.

In 1987 Commerce, through Misanse, was granted the 304-acre SSGM exploitation concession by the El Salvadoran Department of Hydrocarbons and Mines.  This concession was renewed on May 20, 2004.  On March 3, 2003, Commerce received the New San Sebastian Exploration License.  It commenced exploring targeted areas in this 41-square kilometer area (10,374 acres), which includes three formerly-operated mines and encompasses the SSGM.  On or about September 13, 2006, the El Salvador Ministry of the Environment delivered to Commerce’s El Salvadoran legal counsel its revocation of the environmental permits issued for the SSGM exploitation concession and the SCMP.  This Company’s legal counsel on December 6, 2006, filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice two complaints relating to this matter.  (See the Company’s discussion in the sect ion entitled “Environmental Matters.”)  These legal proceedings are pending.

The Government of El Salvador on May 25, 2004 granted the Nueva Esparta Exploration License which consists of 45 square kilometers of area (11,115 acres) and includes eight formerly-operated gold and silver mines.  This exploration area which abuts the New San Sebastian Exploration License area further enhances the potential to locate and evaluate gold and silver ore reserves through the exploration of the eleven formerly-operated gold and silver mines located in both exploration areas.  The concession and exploration map is included in this report.

Commerce’s current goal is to find an investor to assume control of mining operations with sufficient capital to in time produce 100,000 ounces of gold per year and to simultaneously develop gold/silver ore reserves.  The Company expects that production will occur by developing an open-pit, heap-leach operation on the SSGM site and by acquiring additional mill and related equipment which will increase the capacity of the processing of its higher grade virgin mineralized material at the San Cristobal Mill and Plant (“SCMP”).  The SSGM heap-leach operation should have the capability of producing (through processing a higher volume of gold mineralized material beginning with 2,000 tons and in time increasing to 6,000 tons per day) significantly more gold than what can be produced at the SCMP, which has a present capacity of processing 200 tons of gold mineralized material per day.  Commerce will al so continue to explore areas contiguous to the SSGM site and in its vast exploration license areas.

5

Operations

On December 31, 1999, there was significant concern about the price of gold declining to $250 an ounce with a strong indication that the price per ounce would continue to decrease.  With this in mind, the Joint Venture decided to temporarily suspend its processing of gold at its SCMP.  In order to preserve the integrity of the SCMP equipment, it was necessary for the Company to have adequate funds to retrofit, restore, rehabilitate, and expand its mill and plant.  The initial resumption of producing gold was accomplished with the SCMP used equipment that the Joint Venture purchased on February 23, 1993. Even though the Joint Venture has maintained this mill and plant on a continuous basis, certain basic structural components are worn out and need to be replaced, retrofitted or overhauled.  Concurrent with the decision to suspend processing gold mineralized material was the awareness to increase efficiency by expanding the SCMP facilities from the existing 200-ton-per-day capacity to a 500-ton-per-day operation.  From March 31, 1995 through December 31, 1999 when production was suspended, 22,710 ounces of bullion containing 13,305 ounces of gold and 4,667 ounces of silver were mined at the SSGM and then sold at the respective current world market price.

Although the financial statements presented herein reflect that the SSGM is the only one of the Company’s mining properties which has generated revenues, there are strong indications of commercial gold/silver mineralized material present at some of the other gold mine sites.

In the past, the Company’s geologists have estimated that the SSGM has the following mineralized material:

SSGM Mineralized Material

GOLD Mineralized Material (03/31/07)	Tons	Estimated Gold Grade (OPT)	Estimated Gold Ounces(1)
Virgin material (includes 960,000 tons of dump material)	14,404,096	0.081	1,166,732
Stope fill (estimated)	1,000,000	0.340	340,000
Estimated other mineralized material and open pit	122,815,134	0.016	1,948,748
Total estimated mineralized material	138,219,230	0.025	3,455,480

⁽¹⁾

The estimated recoverable ounces of gold by processing are: SCMP, 85% to 95%; heap leach, 65% to 70%.  Because the Company does not have a final feasibility study completed within the past five years, a determination that the property contains valid reserve estimates is not possible at this time.

SSGM Joint Venture Arrangements

Commerce acquired 82 1/2% of the authorized and issued common shares of San Sebastian Gold Mines, Inc. (“Sanseb”), a Nevada corporation formed on September 4, 1968.  Approximately 200 unrelated shareholders hold the balance of Sanseb’s shares.  From 1969 forward, Commerce has provided substantially all of the capital required to develop a mining operation at the SSGM, to fund exploration, and to acquire, refurbish and operate the SCMP.

6

On September 22, 1987, Commerce and Sanseb entered into a joint venture agreement (named the “Commerce/Sanseb Joint Venture” and sometimes referred to herein as the “Joint Venture”) to formalize the relationship between Commerce and Sanseb with respect to the mining venture and to divide profits.  The terms of this agreement authorize Commerce to supervise and control all of the business affairs of the Joint Venture.  Under this agreement 90% of the net pre-tax profits of the Joint Venture will be distributed to Commerce and ten percent to Sanseb, and because Commerce owns 82 1/2% of the authorized and issued shares of Sanseb, Commerce in effect has an over 98% interest in the activities of the Joint Venture.  In order to maintain current accounting between Commerce and Sanseb, the interest charges to Sanseb on advances made by Commerce are kept separately.  T herefore, when profits are earned, the recorded interest due to Commerce will be paid from the cash distributions due and payable to Sanseb.

The Joint Venture leases the SSGM from the Company’s 52%-owned subsidiary, Mineral San Sebastian, S.A. de C.V. (“Misanse”), an El Salvadoran corporation.  On January 14, 2003, the Company entered into an amended and renewed 30-year lease agreement with Mineral San Sebastian Sociedad Anomina de Capital Variable (Misanse) pursuant to the approval of the Misanse shareholders and Misanse directors at a meeting held on January 12, 2003.  The renewed lease is for a period of time commencing and coinciding with the date that the Company received its Renewed San Sebastian Gold Mine Exploitation Concession, hereinafter identified as the “Renewed SSGM,” from the Ministry of Economy’s Director of El Salvador Department of Hydrocarbons and Mines (DHM).  The lease is automatically extendible for one or more equal periods.  The Company will pay to Misanse for the rental of this real estate the sum of five percent of the sales of the gold and silver produced from this real estate, however, the payment will not be less than $343.00 per month.  The Company has the right to assign this lease without prior notice or permission from Misanse.  This lease is pledged as collateral for loans made to related parties (Item 8. Financial Statements and Supplementary Data, Note 7).  The Misanse shareholders and directors have acknowledged, approved and confirmed at this shareholders’ meeting the total amount owed to Commerce for funds provided to obtain and maintain this lease agreement and concession.

The Joint Venture is registered as an operating entity to do business in the State of Wisconsin, U.S.A. and in the Republic of El Salvador, Central America.  The Joint Venture Agreement authorizes Commerce to execute agreements on behalf of the Joint Venture.

Organizational Structure and Mining Projects

The consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries, and its Commerce/Sanseb Joint Venture, but it excludes its 52% ownership of Mineral San Sebastian S.A. de C.V.  Upon consolidation, all intercompany balances and transactions are eliminated.

		Charter/Joint Venture
Included in the Consolidated Statements	% Ownership	Place	Date
Homespan Realty Co., Inc. (“Homespan”)	100.0	Wisconsin	02/12/1959
Ecomm Group Inc. (“Ecomm”)	100.0	Wisconsin	06/24/1974
San Luis Estates, Inc. (“SLE”)	100.0	Colorado	11/09/1970
San Sebastian Gold Mines, Inc. (“Sanseb”)	82.5	Nevada	09/04/1968
Universal Developers, Inc.  (“UDI”)	100.0	Wisconsin	09/28/1964
Commerce/Sanseb Joint Venture (“Joint Venture”)	90.0	Wisconsin & El Salvador	09/22/1987
Not included in the Consolidated Statements
Mineral San Sebastian, S.A. de C.V.  (“Misanse”)	52.0	El Salvador	05/08/1960

7

Commerce was originally formed as a Wisconsin corporation (September 14, 1962).  It then merged into a Delaware corporation on July 26, 1971 and on April 1, 1999 it merged back into a Wisconsin corporation.  It owns 52% of Misanse, an El Salvadoran corporation that was formed on May 8, 1960, reinstated on January 25, 1975 and reincorporated on October 22, 1993.  Misanse previously had a mining concession with the government of El Salvador and is the owner of the SSGM real estate.  At that time, Misanse had assigned the mining concession to Commerce Group Corp. and San Sebastian Gold Mines, Inc., the mining operator formed on September 22, 1987 and known as the Commerce/Sanseb Joint Venture (Joint Venture).  The Joint Venture has the right to operate the SCMP (the gold processing plant acquired on February 23, 1993).  It conducted exploration and operations at the SSGM s tarting in October 1968; it mined and sold gold from 1972 through March 1978 and from April 1, 1995 through December 1999.  Commerce also owns 82 1/2% of the San Sebastian Gold Mines, Inc. (SSGM) which was chartered as a Nevada corporation on September 4, 1968.

Starting in 2003 the Joint Venture has performed exploration at the La Lola Mine, the Santa Lucia Mine, the Tabanco Mine, and the Montemayor Mine, and from 2005 the La Joya Mine, which are included in the New San Sebastian Exploration and the Nueva Esparta Exploration License areas.

The Company’s current exploration program is being conducted under the guidance of Luis Alfonso Limay, with direction from the Chairman and the Board of Directors.  Mr. Limay has been with the Company since 1986.  He is a geologist and mining engineer.  He was appointed to the position of Project and Mine Manager in October 1986, and became the Manager of El Salvador operations in March 1995.  As such, Mr. Limay is responsible for managing the daily operations of the Joint Venture.  As of March 2008 he supervised a staff of approximately forty persons in El Salvador.

From 2003 to the present the Joint Venture has been performing limited exploration at the La Lola Mine, the Santa Lucia Mine, the Tabanco Mine, and the Montemayor Mine, and since 2005 also at the La Joya Mine. Exploration has been minimized because, as previously disclosed, the Company’s environmental permits have been revoked and the Company is not able to do drilling.  The Company is doing some trenching and initial exploration at the five listed sites, and is doing limited exploration of its other properties.  The Company anticipates that in the near future the Country of El Salvador will complete its revision of its environmental laws and permit more extensive exploration.

The Government of El Salvador has issued the Modesto mining concession to others. Commerce’s attorneys have challenged the legality of the issuance of this concession. Commerce, through its Chairman, owns certain properties believed to be crucial to the Modesto Mine.  It plans to apply for concessions on the Modesto property that it owns.  Although the sub surface rights belong to the Government of El Salvador, access to the surface rights must be obtained from the landowner.

All of the mines mentioned, including the eleven mines in the two exploration license areas, were formerly mined and did produce gold and/or silver.  In addition to the channel trenching, test pit holes, and underground adit openings, the Joint Venture had its own diamond drilling rig and had contracted with others to explore the above-described SSGM potential targets in depth.  All of the mining properties appear to have promising geologic prospects, alterations, and historical records that bear evidence that all have been mined and at one time in the past produced gold/silver.

8

World Gold Market Price, Customers and Competition

Since the Joint Venture was in operation and mined gold on a curbed start-up basis, its revenues, profitability and cash flow were greatly influenced by the world market price of gold.  The gold world market price is generally influenced by basic supply and demand fundamentals.  The price of gold/silver is unpredictable, volatile, can fluctuate widely and is affected by numerous factors beyond the Company’s control, including, but not limited to, expectations for inflation, the relative strength of the United States’ dollar in relation to other major worldwide currencies, political and economic conditions, central bank sales or purchases, inflation, production costs in major gold-producing regions, and other factors.  The supply and demand for gold can also greatly affect the price of gold.  The Company has not and does not expect in the foreseeable future to engage in hedging or other similar t ransactions to minimize the risk of fluctuations in gold prices or currencies.  The Company’s past practice has been to sell its gold and silver at the world market spot prices.  Gold and silver can be sold on numerous markets throughout the world, and the market price is readily ascertainable for such precious metals.  There are many worldwide refiners and smelters available to refine these precious metals.  Refined gold and silver can also be sold to a large number of precious metal dealers on a competitive basis.  When it was producing doré, the Joint Venture’s SCMP sold the doré to a refinery located in the United States.  During the past five years the average annual spot market price of gold has fluctuated between $276 and $725 an ounce.

At this time the Joint Venture believes that, due to its current financial capacity, it may not be a major gold producer based on the size of larger existing gold mining companies.  At this time the Company believes no single gold-producing company could have a large impact to offset either the price or supply of gold in the world market.  There are many mining entities in the world producing gold.  Many of these companies have substantially greater technical and financial resources and larger gold ore reserves than the Company.  The Company believes that the expertise of the Joint Venture’s experienced key personnel, its ability to train its employees, its low overhead, its gold mineralized material, its accessibility to the mine, its infrastructure, and its projected low cost of production may allow it to compete effectively and to produce reasonable profits.

The profitability and viability of the Joint Venture is dependent upon, not only the price of gold in the world market (which can be unstable), but also upon the political stability of El Salvador, the cooperation of the Government of El Salvador in issuing needed environmental and other permits, and the availability of adequate funding for either the SCMP operation or the SSGM open-pit, heap-leaching operation and for the exploration projects.

As of this date, inflation, currency, interest rate fluctuations, and political instability have not had a material impact on the Company or its results of operations.

Seasonality

Seasonality does not have a material impact on the Company’s operations, but the rainy season in El Salvador (May through November) can subdue production.

9

Environmental Matters

The Company’s operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which the Company operates.  Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, product safety, occupational health and the production, handling, storage, use and disposal of hazardous materials to prevent material environmental or other damage, and to limit the financial liability which could result from such events.  However, some risk of environmental or other damage is inherent in the business of the Company, as it is with other companies engaged in similar businesses.

Since the Company has been granted the Renewed SSGM exploitation concession from the DHM, it is required to maintain environmental permits.  The issuance of these permits is under the jurisdiction of the El Salvador Ministry of Environment and Natural Resources Office (MARN).  On October 15, 2002, MARN issued an environmental permit under Resolution 474-2002 for the SCMP.  On October 20, 2002, MARN issued an environmental permit under Resolution 493-2002 for the Renewed SSGM Exploitation concession.  Financial security bond(s) were submitted as required.

Since the Government of El Salvador (GOES) has established a new Mining Law effective February 1996, its exploration, exploitation, development, and production programs are subject to environmental protection.  The GOES has established the Office of the El Salvador Ministry of Environment and Natural Resources (MARN).  In order to comply with mining law, the Company was required to obtain environmental permits.  On October 15, 2002, an environmental permit under MARN Resolution 474-2002 was issued for the SCMP.  On October 21, 2002, an environmental permit under MARN Resolution 493-2002 was issued pertaining to the SSGM exploitation concession.  This permit was renewed for a three-year period with the issuance of Resolution No. 3026-003-2006 dated January 4, 2006.

On or about September 13, 2006, without any prior notice, the El Salvador Ministry of Environment’s office delivered to Commerce’s El Salvadoran legal counsel, its revocation of the MARN Resolution dated July 6, 2006 which included its San Sebastian Gold Mine Exploitation and San Cristobal Mill and Plant environmental permits.  These were the only permits of their kind issued in the Republic of El Salvador.  The Company’s El Salvadoran legal counsel, after reviewing the two letters (one for the SSGM exploitation concession and the other for the SCMP), concluded that the revocation of these permits was arbitrary, illegal and unconstitutional and he so stated in his September 20, 2006 letter to the Ministry of Environment’s office; a second letter was submitted by our legal counsel as the Ministry of Environment’s office requested a response to the first letter.

On or about December 6, 2006, the Company’s legal counsel filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice two complaints against the revocation of the environmental permits: one for the San Sebastian Gold Mine and the other for the San Cristobal Mill and Plant.  In these complaints the attorney filed the Company’s following defense:

1.

Violation of the Right to a Hearing and Due Process – pursuant to Articles 88 and 93 of the Environmental Law.  On January 4, 2006 under MARN Resolution No. 3026-003-2006, the environmental permit was extended.

2.

Lack of legal foundation for the sanction – the Company was not in production, therefore, it could not be in violation.  This fact was verified by a written MARN report after a site inspection on June 23, 2006.

3.

Excess of Authority – besides revoking the environmental permit, MARN ordered the closing of operations which said determination and authority are under the jurisdiction of the El Salvador Ministry of Economy’s office.

Environmental regulations add to the cost and time needed to bring new mines into production and add to operating and closure costs for mines already in operation.  As the Company places more mines into production, the costs associated with regulatory compliance can be expected to increase.  Such costs are a normal cost of doing business in the mining industry, and may require significant capital and operating expenditures in the future.  The Company’s policy is to adhere to the El Salvador environmental standards.  The Company cannot accurately predict or estimate the impact of any future laws or regulations developed in El Salvador that would affect the Company’s operations.

All operations by the Company involving the exploration or the production of minerals are subject to existing laws and regulations relating to exploration procedures, safety precautions, employee health and safety, air quality standards, pollution of water sources, waste materials, odor, noise, dust and other environmental protection requirements adopted by the El Salvador governmental authorities.  The Company was required to prepare and present to such authorities data pertaining to the effect or impact that any proposed exploration or production of minerals may have upon the environment.  The requirements imposed by any such authorities may be costly, time consuming and may delay operations.  Future legislation and regulations designed to protect the environment, as well as future interpretations of existing laws and regulations, may require substantial increases in equipment and operating costs to the Comp any and delays, interruptions, or a termination of operations.  The Company cannot accurately predict or estimate the impact of any such future laws or regulations, or future interpretations of existing laws and regulations, on its operations.

Republic of El Salvador, Central America Information Sources

The most current information about El Salvador can be obtained from the following sources:

1.

General information can be obtained through the Internet from the following websites: http://www.usinfo.org.sv/eng/irc/svlinks.html and http://www.dirla.com/elsalvador2.html.

2.

The U.S. Embassy in El Salvador can also be contacted at Final Boulevard Santa Elena Sur, Urbanización Santa Elena, Antiguo Cuscatlán, La Libertad, El Salvador, telephone (011) 503-278-4444 and fax (011) 503-278-6011 or at its website: http://www.elsalvador.org/home.nsf/consularinfo.

Operations, Other Than Mining

Commerce independently and through its partially and wholly-owned subsidiaries conducted other business activities, which at present are suspended.  Previous operations consisted of the following:  (1) land acquisition and real estate development through its wholly-owned subsidiaries, San Luis Estates, Inc. (“SLE”) and Universal Developers, Inc. (“UDI”); (2) real estate sales, through its wholly-owned subsidiary, Homespan Realty Co., Inc. (“Homespan”); and (3) advertising and various businesses, including Internet-related businesses, through its subsidiary, Ecomm Group Inc. (“Ecomm”).

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Land Acquisition, Development, Ownership and Real Estate Sales

During the past years, the Company has substantially diminished its activities in the business of real estate development conducted principally through its subsidiaries San Luis Estates, Inc. (“SLE”), a Colorado corporation, and Universal Developers, Inc. (“UDI”), a Wisconsin corporation.  At present, all activities are suspended.

Misanse, the Company’s majority-owned subsidiary (52%) owns the SSGM real estate consisting of approximately 1,470 acres.  This real estate is located approximately two and one-half miles northwest of the city of Santa Rosa de Lima, off of the Pan American Highway (a four-lane, first-class highway), about 108 miles southeast of the capital city of San Salvador, El Salvador, and is about 11 miles west from the border of the Country of Honduras.  It is also about 26 miles from the city of La Union which has railroad and port facilities.  The Company, on January 14, 2003, renewed its lease into a long-term lease arrangement with Misanse.

The Company also leases approximately 166 acres of real estate on which it has its SCMP and plans to process mineralized material on this site.  These facilities are located on the Pan American Highway, near the City of El Divisadero.

The Company, through its Chairman, owns approximately 63 acres of land on the Modesto Mine site which is located due north of the city of Paisnal and approximately 19 miles north of San Salvador, the capital city of El Salvador.  This real estate is pledged as collateral for funds advanced to the Company.  The Company also has permission from a number of property owners to explore, exploit and develop the Montemayor Mine in the Department of Morazan.

Reference is made to “Item 2.  Properties,” for additional information.

Homespan, the local real estate marketing subsidiary of the Company, is presently inactive.  It has no significant activity and is not material to the Company’s operation.

Employees

As of March 31, 2008, the Company and its wholly-owned subsidiaries employed approximately 40  full-time persons in El Salvador, which number may adjust seasonally.  The Company also employs up to four persons, including part-time help, in the United States.  None of the Company’s employees are covered by collective bargaining agreements.

Patents, Trademarks, Licenses, Franchises, Concessions & Government Contracts

Other than concessions, licenses and interests in mining properties granted by the Government of El Salvador and permission from private landowners, the Company does not own any material patents, trademarks, licenses, franchises or non-mining concessions.

Significant Customers

The Company presently has no individual significant customers in which the loss of one or more would have an adverse effect on any segment of its operations or from whom the Company has received more than ten percent of its consolidated revenues, except for the sale of gold when the Joint Venture was mining gold.  The gold in doré form was refined and then sold at the world market spot price to a refinery located in the United States.  Given the marketability and liquidity of the precious metals sold and because of the large source of qualified buyers of gold and silver, the Company believes that a loss of its customers could be quickly replaced without any adverse affect.

Miscellaneous

Backlog orders at this time are not significant to either the Company’s or its majority-owned subsidiaries’ areas of operations, nor at this time is any portion of their operations subject to renegotiation of profits or termination of contracts at the election of the United States’ Government.

At this time, neither the Company nor its majority-owned subsidiaries conduct any material research and development activities, except as indicated in this report with respect to the Joint Venture and its mining exploration programs in the Republic of El Salvador, Central America.

The Company believes that the United States federal, state and local provisions regulating the discharge of materials into the environment should not have a substantial effect on the capital expenditures, earnings or competitive position of the Company or any of its majority-owned subsidiaries as the Company does not have any mining activity in the United States.

Item 2.  Properties:  Mining Properties

The significant mining properties in which Commerce Group Corp. or the Joint Venture has an interest are summarized below.  All  of the properties are located in the Republic of El Salvador, Central America.  

1.

San Sebastian Gold Mine

Property Description	San Sebastian Gold Mine located two and one-half miles northwest of the city of Santa Rosa de Lima and the Pan American Highway
Nature of Interest	Mineral concession consisting of 100% ownership of the precious metals extracted from this mine.  Environmental permit has been revoked but legal challenge is pending.
Date Interest was Acquired	1968
Cost of Interest	5% of the gross precious metal proceeds or $343 a month whichever is higher.
Amount of Funds to Make Property Operational	This is dependent on the scale of production that management decides to perform.  The amount of investment could be from $5 million to $100 million.
Date Mine will be Operational	It was in operation on a curbed production  basis from March 31, 1995 until December 31, 1999 when operations were suspended due to the need to overhaul, repair, restore and expand the SCMP facilities and due to the low price of gold.

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2.

Modesto Mine

Property Description	Modesto Mine located near the city of Paisnal and about 19 miles north of San Salvador, the capital city.
Nature of Interest	Land ownership only through the Company’s Chairman.
Date Interest was Acquired	September 1993
Cost of Interest	No cost for interest.
Amount of Funds to Make Property Operational	Not applicable.
Date Mine will be Operational	Not applicable.

3.

San Cristobal Mill and Plant

Property Description	San Cristobal Mill and Plant located on the Pan American Highway west of the city of El Divisadero.
Nature of Interest	Mill and Plant owned by Joint Venture.  The real estate is owned by an agency of the Government of El Salvador.  Environmental permit has been revoked but legal challenge is pending.
Date Interest was Acquired	Equipment was acquired on February 23, 1993; lease was acquired on November 12, 1993.
Cost of Interest	Equipment purchased and extensive retrofitting was and continues to be performed.  The cost of the investment through March 31, 2008, including the crushing system located at the San Sebastian Gold Mine, is  $6,956,540.
Amount of Funds to Make Property Operational	To expand the plant, including a crushing system to a capacity of 500 tons per day; an estimated sum of up to $4 million may be required, all dependent on whether new or used equipment will be purchased.
Date Mine will be Operational	Curbed production commenced March 1995; operations suspended on December 31, 1999 until the existing equipment is overhauled, repaired, restored and expansion of the SCMP facilities are completed, and dependent on the price of gold and restoration of the environmental permit.

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4.

New San Sebastian Exploration License

Property Description	New San Sebastian Exploration License consisting of 41 square kilometers.
Nature of Interest	Exploration license issued by the Government of El Salvador for the precious metals.
Date Interest was Acquired	February 2003
Cost of Interest	Undetermined until negotiated with the surface rights’ owners.
Amount of Funds to Make Property Operational	Undetermined until preliminary exploration at an estimated cost of $2 million is completed.
Date Mine will be Operational	Undetermined until exploration is completed.

5.

Nueva Esparta Exploration License

Property Description	Nueva Esparta Exploration License consisting of 45 square kilometers.
Nature of Interest	Exploration license issued by the Government of El Salvador for the precious metals.
Date Interest was Acquired	May 2004
Cost of Interest	Undetermined until negotiated with the surface rights’ owners.
Amount of Funds to Make Property Operational	Undetermined until preliminary exploration at an estimated cost of $2 million is completed.
Date Mine will be Operational	Undetermined until exploration is completed.

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The San Sebastian Gold Mine

General Location and Accessibility

The SSGM is situated on a mountainous tract of land owned by Misanse consisting of approximately 1,470 acres of explored and unexplored mining prospects.  The SSGM is located approximately three miles off of the Pan American Highway, northwest of the city of Santa Rosa de Lima in the Department of La Union, El Salvador. The tract is typical of the numerous volcanic mountains of the coastal range of southeastern El Salvador.  The topography is mountainous with elevations ranging from 300 to 1,500 feet above sea level. The mountain slopes are steep, the gulches are well defined, and the drainage is excellent.

There is good roadway access to the SSGM site.  The reconstruction of the Pan American Highway from two lanes to four lanes (from the city of San Salvador to the Honduran border) has been completed.  The city of Santa Rosa de Lima (approximately three miles from the SSGM) is one of the larger cities in the Eastern Zone.  The SSGM is approximately 30 miles from the city of San Miguel, which is El Salvador’s third largest city, and approximately 108 miles southeast of El Salvador’s capital city, San Salvador. SSGM is also approximately 26 miles from the city of La Union which has port and railroad facilities. Major United States’ commercial airlines provide daily scheduled flights to the Comalapa Airport which is located on the outskirts of the city of San Salvador.

SSGM Mineralized Material

GOLD Mineralized Material (03/31/07)	Tons	Estimated Gold Grade (OPT)	Estimated Gold Ounces(1)
Virgin material (includes 960,000 tons of dump material)	14,404,096	0.081	1,166,732
Stope fill (estimated)	1,000,000	0.340	340,000
Estimated other mineralized material and open pit	122,815,134	0.016	1,948,748
Total estimated mineralized material	138,219,230	0.025	3,455,480

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The estimated recoverable ounces of gold by processing are: SCMP, 85% to 95%; heap leach, 65% to 70%.  Because the Company does not have a final feasibility study completed within the past five years, a determination that the property contains valid reserve estimates is not possible at this time.

The dump material and stope fill at the SSGM are the by-products of past mining operations.  The dump material was mined in the past in the search for higher grades of gold ore and piled to the side of past excavations as it was considered at that time to be too low of a grade of ore to process economically; however, it was reserved for future processing when the price of gold is at a level to process it profitably.  The stope fill that was available was in the past (1900 era) considered to be too low of a grade of mineralized material to process economically, therefore it was primarily used to fill the voids in the underground workings to accommodate the extraction of the higher grade of gold mineralized material in the past SSGM mining activities.  Virgin material, as the term is used in this report, is mineralized material which is on the surface and readily available for processing; it also includes the un developed underground mineralized material.

At the turn of the twentieth century, the SSGM was rated as one of the richest gold mines in the world. The United Nations’ 1969 Mineral Survey Report states that “unquestionably the San Sebastian deposit was the jewel of the El Salvador mining industry and one of the most prolific gold mines in Central America.”

The Company estimates that at the SSGM it has 14.4 million tons of virgin mineralized material, including the dump waste material.  The Company plans to use an open-pit mining method and will truck the lower grade mineralized material to one or more heap-leaching pads developed at the SSGM site.  The use of open-pit mining and heap-leaching techniques will enable the Company to process a higher volume of low grade mineralized material than can be processed at the SCMP.  The Company plans to continue to operate the SCMP after developing a leach-pad operation at the SSGM, using the facility to process the higher grade mineralized material it encounters in the course of mining at the SSGM.  The milling operation at the SCMP is expected to return a higher rate of gold recovery than can be expected from heap-leaching techniques.

Approximately 960,000 tons of dump material present at the SSGM site, with grades estimated from 0.082 to 0.178 ounces of gold per ton, have been combined with the virgin ore mineralized material.  The Company’s consulting geologist who has confirmed that about seven percent of the stope fill had been removed and processed during the 1973-1978 period made an analysis of the underground stope fill material.  It is estimated that the grade of the stope fill averages 0.34 ounces of gold per ton.  It is estimated that there are about one million tons available for SCMP treatment from the underground operations.  It is necessary to remove the material which has caved in the adits to reach the stope fill areas, or it eventually will be encountered in the open-pit operations.

The Company’s geologists estimated the gold content of the mineralized material by calculating the gold content in an area consisting of 3,300 lineal feet in length, 825 lineal feet in width, and 660 feet in depth, to determine the volume.  To support these additional reserves, this Company, since July 1987, has completed the following in the SSGM site:  116,121 lineal feet of 22 miles of surface trenching; 2,162 lineal feet of test pit hole excavation; 42,372 lineal feet of underground adit workings; and more than 19,775 feet of diamond core and reverse circulation drilling.  A total of 78,441 fire assays were completed at the Company’s laboratory through 2004.  Also, there were more than 30 miles of former adit excavations. These samples, extending the diamond core and reverse circulation drilling, reflected a grade of 0.025.  Samples from the 30 miles of former underground workings were assayed through 2004.

All residue from the contemplated operations will be stockpiled for potential future processing dependent upon the price of gold, improvements in technology, and the depletion of higher grade material.

Misanse Mining Lease

The Company (previously through the Joint Venture) leases the SSGM from Mineral San Sebastian, S.A. de C.V. (“Misanse”), an El Salvadoran corporation.  The Company owns 52% of the total of Misanse’s issued and outstanding shares.  About 100 El Salvador, Central American and United States’ citizens own the balance of the shares.  (Reference is made to Item 8.  Financial Statements and Supplementary Data, Note 7, for related party interests.)

SSGM Mining Lease

On January 14, 2003, the Company entered into an amended and renewed lease agreement with Mineral San Sebastian Sociedad Anomina de Capital Variable (Misanse) pursuant to the approval of the Misanse shareholders and directors at a shareholders’ meeting and thereafter at a directors’ meeting both held on January 12, 2003.  The renewed lease is for a period to coincide with the term of its Renewed SSGM concession, which it received on August 29, 2003 from the DHM.  It was automatically amended on May 20, 2004 to coincide with the extension of the term of the Renewed SSGM Exploitation Concession from 20 to 30 years.  The lease is automatically extendible for one or more equal periods.  The Company will pay to Misanse for the rental of this real estate the sum of five percent of the sales of the gold and silver produced from this real estate, however, the payment will not be less than $343.00 per mo nth.  The Company has the right to assign this lease without prior notice or permission from Misanse.  This lease is pledged as collateral for loans made to related parties (Item 8.  Financial Statements and Supplementary Data, Note 7).  

Misanse Mineral Concession-Government of El Salvador

In El Salvador, the rights to minerals below the sub-surface are vested with the government.  The government through concessions grants mineral rights.  Reference is made to the San Sebastian Gold Mine map and the exploration and exploitation maps included in this report.

On January 27, 1987, the Government of El Salvador granted a right to the SSGM mining concession (“concession”) to Misanse which was subject to the performance of the El Salvador Mining Law requirements.  These rights were simultaneously assigned to the Joint Venture.

On July 23, 1987, the Government of El Salvador delivered and granted to Misanse, possession of the mining concession.  At that time this provided the right to extract minerals and export gold and silver for a term of 25 years (plus a 25-year renewal option) beginning on the first day of production from the real estate which encompasses the SSGM owned by Misanse.  Misanse assigned this concession to the Joint Venture.

Effective February 1996, the Government of El Salvador passed a law which required mining companies to pay to it three percent of its gross gold sale receipts and an additional one percent is to be paid to the El Salvador municipality which has jurisdiction of the mine site.  As of July 2001, a series of revisions to the El Salvador Mining Law were made.  A principal change is that the fee payable to the GOES has been reduced to two percent of the gross gold and silver receipts.

Renewed San Sebastian Gold Mine Exploitation Concession under El Salvador Agreement Number 591 dated May 20, 2004 and delivered on June 4, 2004 (Renewed SSGM) - approximately 1.2306 square kilometers (304 acres) located in the Department of La Union, El Salvador, Central America

On September 6, 2002, at a meeting held with the El Salvadoran Minister of Economy and the Department of Hydrocarbons and Mines (DHM), it was agreed to submit an application for the Renewed SSGM concession for a 30-year term and to simultaneously cancel the concession obtained on July 23, 1987.  On September 26, 2002, the Company filed this application.  On February 28, 2003 (received March 3, 2003) the DHM admitted to the receipt of the application and the Company proceeded to file public notices as required by Article 40 of the El Salvadoran Mining Law and its Reform (MLIR).  On April 16, 2003, the Company’s El Salvadoran legal counsel filed with the DHM notice that it believed that it complied with the requirements of Article 40, and that there were no objections; and requested that the DHM make its inspection as required by MLIR Article 42.  An inspection by the DHM was made. The Company then pro vided a bond which was required by the DHM to protect third parties against any damage caused from the mining operations, and it simultaneously paid the annual surface tax.  On August 29, 2003 the Office of the Ministry of Economy formally presented the Company with a twenty-year Renewed SSGM concession which was dated August 18, 2003.  On May 20, 2004 (delivered June 4, 2004) the Government of El Salvador under this Agreement Number 591 extended the exploitation concession for a period of thirty (30) years.  This Renewed SSGM concession replaces the collateral that the same parties held with the previous concession.

On or about September 13, 2006, the El Salvador Ministry of the Environment delivered to Commerce’s El Salvadoran legal counsel its revocation of the environmental permits issued for the SSGM and SCMP.  This Company’s legal counsel on December 6, 2006, filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice two complaints relating to this matter.  (See the Company’s discussion in the section entitled “Environmental Matters.”) These legal proceedings are pending.

New San Sebastian Exploration License under El Salvador Resolution Number 27 - approximately 40.7694 square kilometers (10,070 acres) located in the Departments of La Union and Morazan, El Salvador, Central America

On October 20, 2002, the Company applied to the Government of El Salvador through the DHM for the New San Sebastian Exploration License, which covers an area of 41 square kilometers and includes approximately 1.2306 square kilometers of the Renewed SSGM concession.  The New San Sebastian Exploration License area is in the jurisdiction of the City of Santa Rosa de Lima in the Department of La Union, Republic of El Salvador, Central America. On February 24, 2003, the DHM issued the New San Sebastian Exploration License for a period of four years starting from the date of December 27, 2003, following the notification of this resolution which was received on March 3, 2003.  The New San Sebastian Exploration License may be extended for two two-year periods, or for a total of eight years.  This license is in the process of being renewed for a period of four years.  Besides the San Sebastian Gold Mine, th e following three other formerly operative gold and silver mines are included in the New San Sebastian Exploration License area:  the La Lola Mine, the Tabanco Mine, and the Santa Lucia Mine. Historical data reflects the following:

A French company operated the La Lola Mine in 1920; they developed two quartz veins, which were named La Lola and Buena Vista.  From 1950 through 1953, Mr. Amadeo Tinetti produced 1,850 ounces of gold and 66,000 ounces of silver.

The Tabanco Mine is south of the La Lola Mine.  Records evidence and local citizens confirm that several levels of mining occurred.  Isolated rich ore shoots reported to contain sulfides and silver chloride were encountered.  The oxidized sulfide ore was mined from a width of three to six feet with a grade of 0.50 ounces per ton of gold and five ounces of silver.  Records reflect that the Herrera family produced gold and silver beginning in the year 1780.

In the Tepeyac vein very high-grade ore in one to two foot widths was encountered.  A United Nation’s team performed sampling and reported that in a sulfide bearing zone they found 0.31 ounces of gold and 4.52 ounces of silver in a 4.9 foot wide vein.  The footwall host rock assayed at 0.22 ounces of gold and 41.29 ounces of silver.  This footwall rock area location was not specifically identified, but the result lends strength to the recommendation that in any further sampling or mapping of veins in the epithermal environment, close attention will be directed to the wall rock.

The third mine in this exploration area is the Santa Lucia Mine in which Mr. Humberto Perla developed a 100 meter wide underground vein.  This vein is the west continuation of the Granadilla and the Año Nuevo veins located about two miles west of the SSGM property.

Nueva Esparta Exploration License (Nueva Esparta) Resolution Number 271 - 45 square kilometers (11,115 acres) located in the Departments of La Union and Morazan, El Salvador, Central America

On or about October 20, 2002, the Company filed an application with the Government of El Salvador through the DHM for the Nueva Esparta, which consists of 45 square kilometers north and adjacent to the New San Sebastian Exploration License area.  This rectangular area is in the Departments of La Union (east) and Morazan (west) and in the jurisdiction of the City of Santa Rosa de Lima, El Salvador, Central America.  On May 25, 2004 (received June 4, 2004) the Government of El Salvador under Resolution Number 271 issued the exploration license for a period of four years with a right to request an additional four year extension.  An important observation is that these mines form a belt of mineralization following a fault line from the SSGM to the Montemayor Mine for a distance of approximately five miles.  Included in the Nueva Esparta are eight other formerly-operated gold and silver mines known as:  t he Grande Mine, the Las Piñas Mine, the Oro Mine, the Montemayor Mine, the Bañadero Mine, the Carrizal Mine, the La Joya Mine and the Copetillo Mine.  Historical data reflects the following:

The Montemayor Mine has records that show that an English company commenced production of precious metals sometime about 1860.  A report prepared by Mr. Fleury in 1878 stated that the area assayed approximately 48 ounces of silver and 0.85 ounces of gold per ton.  Six underground workings were developed, but no records are available.  A United Nation’s report reflects a possible grade of twelve ounces of silver and 0.29 ounces of gold from a section of the Montemayor vein stope.  The Montañita, Tempique, Guarumo, Santa Gertrudis and El Indio vein findings support expanded exploration.  The Company performed preliminary exploration in the Montemayor Mine area from 1995 through 1997.  Its findings from the ore samples were very positive and encouraged additional exploration.  Exploration will consist of locating workable ore within the known structures through mapping and sampling o f vein outcrops and reopening, mapping and sampling of underground work.

The El Bañadero Mine is located near the Montemayor Mine.  When in production, most of the mineralized material processed at the Montemayor mill came from this area and the quality of the precious metals appeared to have the highest values.  The veins identified in the area are the Saravia, Borbollon, Caraguito 1 to 3, Eulalio and the Miserocordia.

At the La Joya Mine the Company, during previous exploration, discovered three parallel wide quartz veins averaging in width from six feet to twenty-seven feet running northwest by southeast dipping at 42 degrees southwest.  More exploration will be concentrated in this tract.

El Jimenito and Santa Teresa are two wide veins that the Company found at the Carrizal Mine. They are 1,920 to 2,560 feet apart.  The local residents recollect that free gold was found in the Santa Teresa Vein Adit.  This mine is located between the La Joya and Copetillo Mines.

One vein was discovered at the Copetillo Mine in an underground adit.  It was developed into two sublevels connected to the south with one 100-foot shaft.  Residents recall seeing free gold in the Canton Copetillo.

The Las Piñas Mine is located in the Canton Las Cañas and was in operation in 1935.  It was developed for a five-year, 100-ton-per-day mill and plant.  Records show that the average grade of silver was 5.10 ounces per ton and that the grade of gold averaged 0.06 ounces per ton.

The La Joya Mine is located in the Canton La Joya.  Records relating to activities were not preserved.  While exploring the region, Commerce found three parallel wide quartz veins ranging from six to 25 feet running northwest to southeast for a distance of over one mile.  The grass roots exploration suggests that this is an area with great ore potential.

At this time there is no available information about the Oro Mine.  It is a short distance south of the Montemayor Mine.  This should be a good exploration target.

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16

SSGM Current Status

The Company, through its Joint Venture is in the exploration stage.  The Company has been seeking funding to purchase equipment, to purchase inventory, and to use for working capital for its on-site proposed open-pit, heap-leaching operation.  As an alternate, the Company has been considering a joint venture, merger, acquisition, or any other mutually agreed upon business arrangement.

The Company’s main objective and plan through the Joint Venture has been to operate a moderate tonnage, low-grade, open-pit, heap-leaching operation to mine gold on its SSGM site.  Dependent on the funding, the grade of mineralized material, and the tonnage processed, it anticipated producing more than 56,000 ounces of gold from its open-pit, heap-leaching operation during the first twelve full operating months and then gradually increasing the average annual production of gold to 113,000 ounces.

The Company’s plans have included placing its SCMP into production. Although it would be a low tonnage operation, the Company believes that it would be profitable since the present price of gold is over $600 an ounce.

Since the death of Commerce’s long-time Chairman Edward L. Machulak on October 21, 2007, the Company has been directing most of its efforts toward finding a compatible acquisition, merger, or other business arrangement.

Proposed SSGM Open-Pit, Heap-Leaching Operation

The Joint Venture has placed the SCMP into a maintenance position until it receives the funds that it requires or enters into a business arrangement, and receives permission from MARN to resume operations.  It expects that $19 million or more is needed to commence an open-pit, heap-leaching operation at the SSGM site.  These funds are required to install the crushing system and plant, to purchase mining equipment, and for working capital. The Joint Venture may be able to lease this equipment.  When these funds are available, the Joint Venture intends to start processing gold mineralized material from its open pit at a production level of 2,000 tons per day (expected 50,000 ounces annually).  During the second year, the production level plans are to expand production to 3,000 tons per day (the funds for this expansion could be generated from profits, with an expectation of 56,000 ounces annually).  An increase to process 4,000 tons of gold mineralized material per day would take place during the third year with an expectation of producing 75,000 ounces annually and another expansion to process 6,000 tons per day would take place at the beginning of the fifth year (with an expectation of producing 113,000 ounces annually); all funds for this expansion should be available through a combination of earned profits, borrowings, equity sales, or other creative sources. With the anticipated production volume, there is more than a nine-year supply of gold mineralized material and it is believed that a substantial amount of gold ore can be proven during the production period to continue operating at the same levels for a much longer period.

The Company’s geologists have defined a body of mineralized material estimated to consist of 138 million tons of gold mineralized material at an estimated grade of 0.025 ounces of gold per ton.  This reflects a potential of 3.4 million ounces of gold and about 400,000 ounces of silver from this planned open-pit, heap-leaching operation.  It would take about 64 years to process this body of gold mineralized material at a production capacity of 6,000 tons per day.

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SSGM Ownership of the Property

Misanse, a Salvadoran corporation, owns the San Sebastian Gold Mine real estate consisting of approximately 1,470 acres.  The Company owns 52% of Misanse common shares that are issued and outstanding.

Modesto Mine

Modesto Mine Location

The Modesto Mine is located due north of the town of El Paisnal, approximately 19 miles north of the capital city, San Salvador, in the Republic of El Salvador, Central America.

Modesto Mine Present Status

The Joint Venture suspended exploration activities at this site in July 1997 as the Government of El Salvador awarded the concession of the property to another mining company.  The Company believes that, through its Chairman, it owns the title to key property; therefore permission from the Company will be required before entry can be made by others.

Montemayor Mine (“Montemayor”)

The Joint Venture has obtained permission from a number of property owners to enter their property for the purpose of exploring, exploiting and developing the property and then, if feasible, to mine and extract minerals from this property.  The Company believes that this real estate contains the “heart” of the mine.  Montemayor is located about 14 miles northeast of the SCMP, six miles northwest of the SSGM and about two and one-half miles east of the city of San Francisco Gotera in the Department of Morazan, Republic of El Salvador.  Historical records evidence that the potential for the Montemayor to become an exploration and development silver-gold producing prospect is excellent.

San Cristobal Mill and Plant (“SCMP”) Recovery and Processing System

SCMP Location

SCMP is located near the city of El Divisadero (bordering the Pan American Highway), and is approximately 13 miles east of the city of San Miguel, the third largest city in the Republic of El Salvador, Central America.

SCMP Lease Agreement

Although the Joint Venture owns the mill, plant and related equipment, it does not own the land and certain buildings.

On November 12, 1993, the Joint Venture entered into an agreement with Corporacion Salvadorena de Inversiones (“Corsain”), an El Salvadoran governmental agency, to lease for a period of ten years (expiring November 12, 2003), approximately 166 acres of land and buildings on which its gold processing mill, plant and related equipment (the SCMP) are located, and which is approximately 15 miles west of the SSGM site.  The basic annual lease payment was U.S. $11,500, payable annually in advance, unless otherwise amended, and subject to an annual increase based on the annual United States’ inflation rate.  As agreed, a security deposit of U.S. $11,500 was paid on the same date and this deposit was subject to increases based on any United States’ inflationary rate adjustments.

On April 26, 2004, a three-year lease, which includes an automatic additional three-year extension subject to Corsain’s review, was executed by and between Corsain and the Company.  This lease is retroactive to November 12, 2003 and the monthly lease payments are $1,418.51 plus the El Salvadoran added value tax.  The lease is subject to an annual increase based on the U.S. annual inflationary rate adjustments.  The SCMP is strategically located to process mineralized material from other mining projects.

On March 25, 2008 a nineteen-month lease retroactive to November 12, 2006 was executed by and between Corsain and the Company.  The total lease payment for this nineteen-month period is $18,608.21.  Reference is made to Exhibit 10.16 for a copy of this lease.  The lease was renewed on June 12, 2008 for a six-month period to expire on December 11, 2008.

SCMP Mill and Plant Process Description

Current Status

The SCMP (a precious metal cyanidation carbon-in-leach system) has a capacity of processing up to 200 tons of virgin mineralized material per day.  The following units of operation are required: crushing, grinding, thickening, agitated leaching and recovery of precious metals via a carbon-in-leach (CIL) system.

The SCMP has been designed to process up to 500 tons of virgin mineralized material per day.  The SCMP operations were suspended as of December 31, 1999, as the plant, equipment, and facilities have been placed on a care and maintenance status until such time as the Company has sufficient funds to complete a major overhaul in order to place it into operating condition to increase the SCMP’s processing capacity from 200 to 500 tons per day and at a time the price of gold is stabilized to assure a profit.

On or about September 13, 2006, the El Salvador Ministry of the Environment delivered to Commerce’s El Salvadoran legal counsel its revocation of the environmental permits issued for the SSGM and SCMP.  This Company’s legal counsel on December 6, 2006, filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice two complaints relating to this matter.  (See the Company’s discussion in the section entitled “Environmental Matters.”) These legal proceedings are pending.  

SCMP Project Operating Plan

Current and Anticipated Schedule

Development, consisting primarily of expansive road and site improvements to the mine and mill sites, mill equipment modifications and the development and hauling of virgin mineralized material has taken place in the past.  Initial processing from April 1, 1995 was from the SSGM tailings. After the SSGM tailings’ resource was exhausted, virgin gold mineralized material was excavated from the SSGM surface (Coseguina area) and hauled to the SCMP site for processing.

The other sources of gold mineralized material from the SSGM to be used at the SCMP operation will be obtained from the stope fill or higher grade gold mineralized material after obtaining access via the underground workings or from the surface.  This gold mineralized material will have to be crushed and pulverized, which increases the cost, but is expected to yield a 90% or higher recovery. The income, dependent on the market price of gold, from the higher grade and recovery of gold, is expected to be substantially more than the cost involved, providing that the world gold market price does not decline to a level of unprofitability.

In the past, the gold mineralized material from the SSGM open-pit was loaded onto 20-25 ton dump trucks for transport to the SCMP.  Trucks then hauled the gold mineralized material on the Pan American Highway approximately 15 miles from the SSGM.  Mine employees were responsible for the mining activities including the determination of areas to be excavated, trucking and loading operations, head sampling and sample analysis.

The gold mineralized material was received at the SCMP where it was weighed, logged, and sampled.  Weighing was performed utilizing a conveyor belt scale and/or a truck scale located on the SCMP site. The excess gold mineralized material was then unloaded at the SCMP site and stockpiled in an area which was developed to allow storage of more than 50,000 tons.

Environmental Matters

Reference is made to San Sebastian Gold Mine “Environmental Matters.”  The same information applies.  On March 15, 2006, the Office of the El Salvadoran Ministry of Environment and Natural Resources (MARN) issued an environmental permit (Resolution 3026-003-2006) relative to the Renewed SSGM Exploitation Concession and the San Cristobal Mill and Plant.  On or about September 13, 2006, MARN revoked both permits.  For more details, reference is made to page 12, “Environmental Matters” and to Item 3.  Litigation.

The Joint Venture Laboratories (Lab)

The Joint Venture has two laboratories:  one located at the SCMP facilities and the other on real estate owned by the Company near the SSGM site.  A total of 78,441 samples of exploration fire assays were logged through 2004.  This total does not include the assays that were performed for production purposes.  Assay work has not been performed at the laboratories since 2004.

Corporate Headquarters

The Company leases approximately 4,032 square feet of office space for its corporate headquarters on the second floor of the building known as the General Building located at 6001 North 91st Street, Milwaukee, Wisconsin, at a monthly rental charge of $2,789 on a month-to-month basis.  The lessor is General Lumber & Supply Co., Inc. (“General Lumber”), a Wisconsin corporation.  The Company’s late President, Edward L. Machulak, owns 55% of the common stock of General Lumber. Edward L. Machulak disclaims any interest in the balance of General Lumber common stock which is owned by relatives, his wife, and a trust formed for the benefit of his children.  In addition, the Company shares proportionately any increase in real property taxes and any increase in general fire and extended coverage insurance on the property.  In lieu of cash payment, the Lessor has agreed to apply the monthly rental payments owed to the secured open-ended, on-demand promissory note(s) due to it.

Item 3.  Legal Proceedings

There is no pending litigation in the United States.  However, in the Republic of El Salvador, Central America, the Company’s El Salvadoran legal counsel on December 6, 2006, filed a complaint with the El Salvadoran Supreme Court Administrative Division claiming that the El Salvadoran Office of the Ministry of Environment and Natural Resources, (MARN) has revoked its El Salvadoran environmental permits for mining exploitation, without any prior notice, without a right to a hearing and without the right of due process, based on misguided assertions, and contrary to El Salvadoran law.  In addition, the Company’s legal counsel stated that there is a lack of legal foundation for the sanctions and excess authority exercised by MARN.  For more details, reference is made to page 12, “Environmental Matters.”

Item 4.  Submission of Matters to a Vote of Security Holders

No matters were brought to a vote of security holders in the fourth quarter ended March 31, 2008.

Item 4(a).  Executive Officers and Managers of the Company

Listed below are the names, ages and positions of the executive officers and managers of the Company and their business experience during the past five or more years.  All officers are elected at the annual meeting of the directors, which is usually held after the annual shareholders’ meeting.

Name	Age as of March 31, 2008	Executive Offices Held With Company (1)	Period Served In Office (2)
Edward A. Machulak	56	President and Chief Executive Officer Temporary Chairman Executive Vice President Secretary Assistant Secretary	10/26/07 to present 10/21/07 to 10/26/07 10/16/92 to 10/26/07 1/12/87 to 10/26/07 4/15/86 to 1/12/87
Sidney Sodos	70	Vice President and Treasurer	10/26/07 to present
John H. Curry	67	Executive Vice President	10/26/07 to present
Luis A. Limay	66	Project and Mine Manager Manager of El Salvador Operations	10/86 to 1995 03/95 to present

(1)

There have never been any undisclosed arrangements or understandings between any Executive Officer and any other person pursuant to which any Executive Officer was elected as an Executive Officer.

(2)

Executive Officers are elected by the Directors for a term expiring at the Directors’ Annual Meeting and/or hold such positions until their successors have been elected and have qualified.

Family Relationships

Edward A. Machulak, presently a Director, Member of the Directors’ Executive Committee, Director-Emeritus, President and Chief Executive Officer is the brother of the legal counsel for the Company,   Attorney John E. Machulak of the law firm of Machulak, Robertson & Sodos, S.C.

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Officers’ and Key Management’s Experience

The business experience of each of the Directors, Officers, and Key Management is as follows:

Edward A. Machulak  is a Director and holds the following Company positions:  Director as of October 28, 1985; a member of the Directors’ Executive Committee as of March 11, 1991; Director-Emeritus since October 28, 2000; Temporary Chairman as of October 21, 2007 and President and Chief Executive Officer as of October 26, 2007.  He was the Executive Vice President from October 16, 1992 through October 26, 2007; the Secretary from January 12, 1987 through October 26, 2007; and the Assistant Secretary from April 15, 1986 through January 12, 1987.

He is also a Director, President and Treasurer of Homespan Realty Co., Inc. and San Luis Estates, Inc.; and is a Director and President of San Sebastian Gold Mines, Inc.  He has been a Director and Secretary of Ecomm Group Inc. and was elected President on May 17, 2000.

His business experience is as follows:  Director and Corporate Secretary of General Lumber & Supply Co., Inc., a building material wholesale and retail distribution center from April 1, 1970 to November 1983; Director and President of Gamco, Inc., a marketing and advertising company, from November 1983 to present; Director and President of Circular Marketing, Inc., an advertising and marketing business, from March 1986 to present; Director and President of MacPak, an Internet developer from September 26, 1996 to present; Director and President of Edjo, Ltd., a company involved in the development, subdividing and sale of land and real estate from June 7, 1973 to present; Director and President of Landpak, Inc., a corporation which owns, operates, manages and sells real estate from September 1985 to present; and he was involved in other corporate real estate ventures and business activities.

Sidney Sodos is a Director and holds the following Company positions:   Director as of February 9, 1998; and Vice President and Treasurer as of October 26, 2007.  

His business experience is as follows:  He was the senior member of the law firm of Sodos & Kafkas, S.C. and on July 1, 2003 he became a member of the law firm of Machulak, Robertson & Sodos, S.C.  He is licensed and has practiced law in the federal and state courts in the State of Wisconsin for a period of more than 39 years.  He specializes in corporate litigation and media law.  He was the Executive Director of the American Federation of Television and Radio Artists in the States of Wisconsin and Illinois (1974-1981).  He served as a member of the North Shore East Water Trust, a division of a local municipality.  He also was a moderator of a radio program (WTMJ Milwaukee, Wisconsin) "The Law and Sometimes Justice."

John H. Curry is a Director and holds the following Company positions:   Director as of October 18, 2002 and Executive Vice President as of October 26, 2007.

His business experience is as follows:  He is an economist and was an economic advisor to the U.S. Government during more than 23 years in the Foreign Service working in U.S. Embassies abroad.  He has broad financial and management executive skills in the public and private sector with knowledge and experience in dealing with international financial organizations.  He has extensive experience with foreign governments, including international economic policy and trade relations, as well as familiarity with energy and mining markets, and has the ability to operate effectively in foreign cultures.  He qualifies as an audit committee financial expert.

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From 1993 to February 2003, he was the Assistant Director of Marketing and Chief Economist for Watanabe and Associates, Inc. and related firms CKC and KSK.  On a part-time basis, he worked from December 2000 to December 2003 as an analyst and writer on international trade and economics for the website of the Summit of the Americas Center at Florida International University.  From 1989 to 1993 he was employed by AmeriSecurities Corp., Continental Sales Company and Latine-Europe Corporation performing securities sales and marketing in Latin America and the Caribbean.  From 1966 to 1989 he was employed by the U.S. Department of State -  Foreign Service in various capacities, but primarily as an Economic Counselor for the U.S. Embassies in Mexico, Tunisia, Bolivia, Nicaragua, Costa Rica, El Salvador and Portugal.  He then retired from the service.

He earned a Master of Arts in Applied Economics from the University of Michigan and a Bachelor of Arts in International Studies from Ohio State University.  He also completed graduate courses in economics at the University of Detroit and accounting courses at Wayne State University, as well as many short courses with the Foreign Service Institute, Department of State, Washington, D.C.  He is fluent in Spanish and has a working knowledge of Portuguese.

Luis Alfonso Limay was appointed to the position of Project and Mine Manager in October 1986 and is responsible for managing the daily affairs of the Joint Venture.  During March 1995, Mr. Limay was appointed to the position of Manager of El Salvador operations which supersedes his position as Project and Mine Manager.  Mr. Limay also was employed by Sanseb from 1977 through March 1978 as its chief geologist. He obtained degrees in geology and engineering from the National University of San Marlos, Lima, Peru, and the University of Toronto.  He was employed as chief geologist by Rosario Resources in a Honduran underground mining operation and he held the same position with Canadian Javelin, a silver mining company that formerly operated in El Salvador.

PART II

Item 5.  Market for the Company’s Common Stock and Related Stockholders’ Matters

(a)  Principal Market and Common Stock Price

The Company continues to be listed on the Over the Counter Bulletin Board (OTCBB) under the trade symbol CGCO.OB and on the Pink Sheets under the trade symbol CGCO.PK.  Since October 21, 2005 its shares were traded on the Berlin-Bremen Stock Exchange under the trade symbol C9G.  Prior to this time, the common shares were traded since 1968 on the Over the Counter, American Stock Exchange, Boston Stock Exchange and on the Nasdaq Smallcap.

The following table reflects the range of high and low trade prices of the common shares as reported by the OTCBB for the period ended March 31, 2008 and 2007, as well as the highest and lowest trade price during each quarter through the period ended March 31, 2008.  The closing price on May 30, 2008 was $.30 a share.

For the period ended	March 31, 2008		March 31, 2007
	High	High	High	Low
First quarter ending June 30	$0.40	$0.10	$0.22	$0.07
Second quarter ending September 30	$0.15	$0.09	$0.15	$0.07
Third quarter ending December 31	$0.30	$0.05	$0.12	$0.05
Fourth quarter ending March 31	$0.51	$0.16	$0.14	$0.12

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(b)  Approximate Number of Holders of Common Shares

As of March 31, 2008, the Company believes that the common shares were held by approximately 3,600 shareholders; it is estimated that over 95% are United States’ residents.

As of March 31, 2008, the Company’s transfer agent and registrar certified that there were 1,594 shareholders of record.  The number of shareholders of the Company who beneficially own shares in nominee or “street name” or through similar arrangements are estimated by the Company to be approximately 1,300.

As of March 31, 2008, there were issued and outstanding: (a) 30,715,869 shares of common stock; (b) no stock options were issued or outstanding to purchase common stock; and (c) no preferred shares or stock options are issued and outstanding.

(c)  Equity Compensation Plans

None.

(d)  Dividend History

Subject to the rights of holders of any outstanding series of preferred shares to receive preferential dividends, and to other applicable restrictions and limitations, holders of shares of common shares are entitled to receive dividends if and when declared by the Board of Directors out of funds legally available.  No dividends were payable during the last fiscal year ended March 31, 2008.  The declaration of future dividends will be determined by the Board of Directors in light of the Company’s earnings, cash requirements and other relevant considerations.

21

(e)  Performance Graph

The following Performance Graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

Research Data Group, Inc. of San Francisco, California prepared the Company's Performance Graph.  With the premise that $100 had been invested on March 31, 2003, by the purchase of the Company's shares, it then compares the Company's performance through March 31, 2008, against two measurements:  the NASDAQ Composite and the Company’s selected Peer Group.  The graph also assumes the reinvestment of dividends, if any, for each measurement period. The information shown on the chart below is an historical record of the Company’s stock market price, does not reflect the value of the mineralized material, and it is not indicative of the Company’s future performance.  The ten companies that comprise the Peer Group are as follows:  Atlas Minerals Inc.; Breakwater Resources Ltd.; Caledonia Mining Corp.; Campbell Resources Inc.; Cassidy Gold Corp.; Central Minera Corporation; Earth Sciences Inc.; Golden Eagle International Inc.; Namibian Minerals Corp.; and Nord Resources Corp.  The Company’s securities were not eligible for continued quotation on the Over the Counter Bulletin Board (OTCBB) effective January 21, 2005 until the eligibility was reinstated on September 30, 2005.

The Broad Market Index chosen was the NASDAQ Composite Index.  

Source: Research Data Group, Inc. San Francisco, CA.

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(f)  Issue of Securities to Directors and Officers

During the fourth quarter ended March 31, 2008, the Company issued 78,182 of its Form S-8 common shares to its Directors in payment for fees, 31,818 common shares in payment for its annual Officer’s compensation; 29,773 common shares to a Director for services rendered, and 762,500 common shares in payment of accrued salaries.

Item 6.  Selected Financial Data

The following table presents certain selected financial information regarding the Company’s financial condition and results over the past five years:

		Year Ended March 31 -------------------------------------------------------------------------------------------
	2008		2007 (Restated)	2006 (Restated)	2005 (Restated)	2004 (Restated)
Income statement data
Total revenue	$                0		$                0	$                0	$                 0	$                 0
Income (loss) from continuing operations	$(3,052,198)		$(2,616,821)	$(2,209,424)	$(1,921,455)	$(1,671,086)
Income (loss) from continuing operations per share:
Basic and diluted	$         (.011)		$         (.010)	$           (.09)	$         (.09)	$           (.08)
Weighted average shares -    basic and diluted	28,401,086		25,457,052	23,834,988	22,581,814	21,089,812
Cash dividends per common share	$                 0		$                 0	$                 0	$                 0	$                 0
Balance sheet data
Working capital*1	$     545,618		$     605,787	$     798,753	$     496,977	$     504,882
Total assets	$26,485,002		$25,889,065	$25,236,806	$24,559,123	$24,151,447
Short-term obligations*1	$25,006,311		$21,790,176	$18,851,934	$16,178,620	$13,981,516
Long-term obligations	$                0		$                0	$                0	$                0	$                0
Shareholders’ equity	$  1,478,691		$  4,098,889	$  6,384,872	$  8,380,503	$10,169,931

^*1

Although the majority of the short-term obligations are due on demand, some of these obligations have the attributes of being long-term as most of the debt is due to most of the related parties who have not called for a payment except for nominal amounts of their short-term loans during the past five or more years.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides information on the results of operations for each of the three years ended March 31, 2008, 2007 and 2006 and the financial condition, liquidity and capital resources for March 31, 2008 and 2007.  The financial statements of the Company and the notes thereto contain detailed information that should be referred to in conjunction with this discussion.

Overview

Today Commerce is a company with substantial gold and silver mineralized material and a great potential for locating and exploiting gold and silver ore reserves.  The Company is in the precious metals exploration business with all of its mines presently located in the Republic of El Salvador, Central America.  The Company’s objective and goals are to increase shareholder value by finding a compatible acquisition, merger or other business arrangement by which gold and silver ore reserves within the concession/license areas granted to the Company by the Government of El Salvador (GOES) will be identified, developed and processed.  Substantial capital expenditures are required to find, develop and process gold ore.  The Company’s geologists and engineers believe that it has potentially significant precious metal reserves which can be identified and developed by continuous and expanded exploration.  The Company will strive to have its properties operated in an efficient manner to maximize the cash flow and earnings.  The strategies to accomplish these goals include, whether by Commerce or through an arrangement with another respected company, commencement of production of gold and silver when adequate funding is available, locating and identifying gold and silver ore reserves by a more aggressive exploration program, continuing the good relationship established over the past 38 years with its employees, continuing its relationship with the El Salvadoran Government, earning profits and respecting the citizens surrounding its mining properties.

The Company is determined to obtain the permissions needed from El Salvador and to enter into a business arrangement through which gold will be produced at its  San Cristobal Mill and Plant facilities and an open-pit, heap-leach operation constructed on its San Sebastian Gold Mine site which is located approximately two and one half miles off of the Pan American highway northwest of the City of Santa Rosa de Lima in the Department of La Union, El Salvador.

All of the Company’s mining interests are located in the Republic of El Salvador, Central America, in the Departments of La Union and Morazan.  Our geologists have made the following estimates of mineralized material:

SSGM Mineralized Material

GOLD Mineralized Material (03/31/07)	Tons	Estimated Gold Grade (OPT)	Estimated Gold Ounces(1)
Virgin material (includes 960,000 tons of dump material)	14,404,096	0.081	1,166,732
Stope fill (estimated)	1,000,000	0.340	340,000
Estimated other mineralized material and open pit	122,815,134	0.016	1,948,748
Total estimated mineralized material	138,219,230	0.025	3,455,480

⁽¹⁾

The estimated recoverable ounces of gold by processing are: SCMP, 85% to 95%; heap leach, 65% to 70%.  Because the Company does not have a final feasibility study completed within the past five years, a determination that the property contains valid reserve estimates is not possible at this time.

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Exploitation/Exploration	Department or	Acres
Concessions/Licenses	Location	Exploitation	Exploration	Total
Renewed San Sebastian Gold Mine	La Union	304	1,394	1,698
New San Sebastian Gold Mine	La Union/Morazan		8,372	8,372
Nueva Esparta	La Union/Morazan	___	11,115	11,115
Total Acreage

The San Sebastian Gold Mine has four contiguous target areas in the 10,070 acre area (1,573 square miles):  the San Sebastian Gold Mine; the Coseguina Hill; the San Juan Hill; and the El Salazar area.  Most of the exploration has been conducted on the San Sebastian Gold Mine, the Coseguina Hill and the El Salazar area.  Very little exploration has been performed on the San Juan Hill.  The prospects of finding commercial grades of ore potentially at the recent gold price is above average.  A large part of the San Sebastian Exploration License area remains unexplored.  Also included in the New San Sebastian Exploration License area are four formerly-operated mines.  They are:  the San Sebastian Gold Mine; the La Lola Mine; the Tabanco Mine; and the Santa Lucia Mine.

The Nueva Esparta Exploration License area consists of 11,115 acres (17.36 square miles) of land to explore.  Included in the exploration area are eight formerly-operated gold and silver mines: the Grande Mine; the Las Pinas Mine; the Oro Mine; the Montemayor Mine; the Banadero Mine; the Carrizal Mine, the La Joya Mine and the Copetillo Mine.  At the La Joya – Montemayor Mine, the Company discovered a surface vein that as of this writing is over one and one half miles in length and about five to over thirty feet in width.  This area is targeted to be one of the first areas to be drilled.

Potential Reserves and Mineralized Material

In the past, the Company has reported possible mineral reserves of up to 3.4 million ounces of gold as part of its San Sebastian Gold Mine and has reported mineralized material on a number of its properties. Because the Company does not have a final feasibility study completed within the past five years, a determination that the property contains valid reserve estimates is not possible at this time.

There are a number of uncertainties inherent in estimating quantities of mineralized material, including many factors beyond the Company’s control. Mineralized material estimates and estimates of gold content are based upon engineering evaluations of assay values derived from samplings of drill-holes and other openings.  Additionally, declines in the market price of gold may render certain mineralized materials containing relatively lower grades of mineralization uneconomic to mine at this time.  Further, availability of permits, changes in operating and capital costs, and other factors could materially and adversely affect estimates of commercially useful mineralized material .  The Company uses its mineralized material estimates and estimates of gold content in determining the unit basis for mine depreciation and amortization of closure costs.  Changes in estimates could significantly affect these items.

It is expected that the carbon-in-leach process will be used to produce gold at the SSGM.  As the solution percolates through the heap, gold is dissolved from the mineralized material into solution.  This solution is collected and processed with activated carbon, which precipitates the gold out of solution and onto the carbon.  Through the subsequent processes of acid washing and pressure stripping, the gold is returned to a solution in a more highly concentrated state.  This concentrated solution of gold is then processed in an electrowinning circuit, which re-precipitates the gold onto cathodes for melting into gold doré bars.

When the Company was in production certain estimates regarding this overall process were required for inventory accounting and reporting of gold estimates, the most significant of which are the amount and timing of gold to be recovered.  Although the Company can calculate with reasonable certainty the tonnage and grades of gold mineralized material placed under the mill process system and laboratory analysis, the recovery and timing factors are influenced by the grade of the mineralized material under leach and the particular mineralogy of a deposit being mined.  The Company’s estimates are based on laboratory leaching models which approximate the recovery from gold mineralized material under leach.  From this data the Company has estimated the amount of gold that can be recovered and the time it will take for recovery.  When the Company is in production, the Company will continually monitor the actu al monthly and cumulative recovery from the carbon-in-leach process as a check against the laboratory models.

The Company has no revenues because it is not in production and it requires funds to purchase the necessary equipment, inventory and working capital to commence processing the mineralized material The Company is determined to find a business arrangement that will enable production to commence. It plans to joint venture, merge, be acquired or enter into a business combination that will benefit all parties concerned.

The Company believes that at least $30 million (net) in funding is needed for the expansion of exploration opportunities and to resume production of gold and silver from its San Sebastian Gold Mine located near the City of Santa Rosa de Lima, Republic of El Salvador, Central America.  The Company expects that the $30 million would be used as follows:

To resume the production of gold and silver at its San Cristobal Mill and Plant using its higher grade mineralized material, its funding needs amount to (average expected annual production 12,000 ounces of gold)	U.S.   $4 million net
To set up an open-pit, heap-leach operation at the San Sebastian Gold Mine site (average expected annual production for the first seven years and thereafter, 100,000 ounces of gold)	U.S. $19 million net
For preliminary exploration for a part or for all of the 10,000 acres of the New San Sebastian Exploration License area consisting of three former mine operations up to	U.S.   $2 million net
For preliminary exploration for a part or for all of the 11,000 acres of the Nueva Esparta Exploration License area consisting of eight former mine operations up to	U.S.   $2 million net
Contingent fund availability, inflation costs and for accelerating the above projects	U.S.   $3 million net
Total	U.S. $30 million net

All of the Company’s mines are located in the Republic of El Salvador, Central America.  The Government of El Salvador (GOES) via the Ministry of Economy’s office has issued the following three concessions/licenses:

1.

On or about May 20, 2004, the Renewed San Sebastian Gold Mine Exploitation Concession (Renewed SSGM) was issued by the GOES for a period of 30 years.  This gives the Company the right to extract and process mineralized material to produce gold and silver from the San Sebastian Gold Mine site.  The Company’s geologists have estimated that there are approximately 1.2 million ounces of gold/silver in the 14.4 million tons of mineralized material and they have estimated that there are an additional 340,000 ounces of gold/silver contained in the one million tons of stope fill.  Because the Company does not have a final feasibility study completed within the past five years, a determination that the property contains valid reserve estimates is not possible at this time.  On or about September 13, 2006, the El Salvador Ministry of the Environment delivered to Commerce’s El Salvadoran legal counsel its revocation of the environmental permits issued for the SSGM exploitation concession and the SCMP.  This Company’s legal counsel on December 6, 2006, filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice two complaints relating to this matter.  (See the Company’s discussion in the section entitled “Environmental Matters.”) These legal proceedings are pending.

2.

On or about February 27, 2003, the GOES granted to the Company the New San Sebastian Exploration License (New San Sebastian Exploration License) consisting of approximately 10,070 acres which encompass the Renewed SSGM Exploitation Concession.  This exploration license is in the process of being renewed.  This license gives the right to exploration of the subsurface in this area.  In this area there are three formerly operated mines:  La Lola Mine, Santa Lucia Mine and Tabanco Mine.  Presently the Company is performing exploration work at the Tabanco and La Lola Mine area.

3.

On May 25, 2004 the GOES granted to the Company the Nueva Esparta Exploration License consisting of 11,115 acres of area to explore.  This exploration license area abuts the New San Sebastian Exploration License area and it has eight formerly operated gold/silver mines:  the Grande Mine, the Las Piñas Mine, the Oro Mine, the Montemayor Mine, the Bañadero Mine, the Carrizal Mine, the La Joya Mine and the Copetillo Mine.  The Company did exploration work on the Montemayor Mine from 1995 - 1997 and it has resumed its exploration work in these mines.

The Company is a U.S. Wisconsin chartered corporation engaged in exploration for gold and silver, with its primary asset being the San Sebastian Gold Mine (SSGM).  The SSGM is located in the Republic of El Salvador, Central America and produced over one million ounces of gold during the 1900-1917 period.  The Company became involved as an investor and then as a majority owner. Gold and silver was mined from mid-1972 through the first quarter of 1978.  Mining ceased due to the civil unrest in El Salvador.  A peace pact was entered into in December 1992 conditioned upon meeting the terms and conditions of this peace agreement during a three-year period.  Mining of gold and silver commenced on April 1, 1995 and the operations were suspended during the first quarter of 2000 due to the low selling price of gold (lowest price about $252) at that time and the ne ed to retrofit, restore and expand the San Cristobal Mill and Plant (SCMP).  The Company presently is seeking permission from MARN and funding to restore the SCMP and to set up an open-pit, heap-leach operation at the SSGM site.  Its alternative is to joint venture or to enter into a merger or other business combination.

Financing Activities, Liquidity and Capital Resources

The Company wants to proceed with its plan to re-start its San Cristobal Mill and Plant operations, but it will require financing for the expansion of its production capacity from 200 to 500 tons per day and to retrofit this plant.  In order to obtain funding there are multiple sources which could include private equity investment, public equity offering, debt, and other forms of creative funding approaches.

Additional equipment has to be purchased, delivered and installed and the SCMP has to be retrofitted, overhauled and its production capacity should be expanded.

The Company will endeavor to commence an open-pit, heap-leaching operation at the SSGM as there is a substantial amount of gold mineralized material that grades less than 0.04 ounces per ton.  The Company’s engineers had estimated that a 2,000 ton-per-day open-pit, heap-leach, start-up operation should produce approximately 1,280 ounces of gold per month.  It is necessary to raise adequate funds from outside sources for this operation; the amount required is dependent on the targeted daily volume of production.

The Company estimates that it will need up to U.S. $19 million to start a 2,000 ton-per-day open-pit, heap-leaching operation.  Eventually the production capacity would be increased in stages to 6,000 tons per day so that annual production could be 113,000 ounces of gold at the SSGM.  The use of the $19,000,000 proceeds is as follows: $8,745,000 for mining equipment and the completion of erecting a crushing system; $4,010,560 for the processing equipment and site and infrastructure costs; and a sum of $6,244,440 is to be used for working capital.  The once depressed price of gold has substantially increased during the last two years.  The Company’s incredibly low common share market price is a major deterrent in raising cash for the Company’s programs.

The Company continues to be cognizant of its cash liquidity problem until it is able to produce adequate profits from its SSGM gold production.  It will attempt to obtain sufficient funds to assist the Joint Venture in placing the SSGM into production.  In order to continue obtaining funds to conduct the Joint Venture’s exploration and proposed exploitation, development, and expansion programs, and the production of gold from the SSGM open-pit, heap-leaching operation, it is necessary for the Company to obtain funds from outside sources.  The Company may have to borrow funds by issuing open-ended, secured, on-demand or unsecured promissory notes, by selling its shares to its directors, officers and other interested accredited investors, or by entering into a joint venture, merging, or developing an acceptable form of a business combination with others.

During the past, the Joint Venture was engaged in exploration programs designed to locate and evaluate gold ore reserves.  The prospects of locating and evaluating gold reserves are positive.  The Company believes that the past invested funds significantly contributed to the value of the SSGM and to the value of its other mining prospects as the results of the exploratory efforts evidence the potential for substantial gold ore reserves.  The Company was unable to obtain sufficient funds during this fiscal year to complete the modification and expansion of the SCMP or for its open-pit, heap-leach operation.  However, the Company did invest funds during this fiscal period, which were used to progress the erection of the cone crushing system, to maintain the SCMP, and to continue exploration.

The Company continues to rely on its directors, officers, related parties and others for its funding needs.  The Company believes that it may be able to obtain such short-term and/or equity funds as are required from similar sources as it has in the past.  It further believes that the funding needed to proceed with the continued exploration of the other exploration targets for the purpose of identifying potential gold ore reserves will be greatly enhanced if the price of gold stays at the current or higher level.  These exploration programs will involve airborne geophysics, stream chemistry, geological mapping, trenching, drilling, etc.  The Joint Venture believes that it may be able to joint venture or enter into other business arrangements to share these exploration costs with other entities.

24

Debt

Most of the debt is owed to related parties as follows:

	Related Parties	Others	Total
Accounts payable - Commerce	$    131,348	$     2,406	$    133,754
Accounts payable - Comseb	246,439		246,439
Notes payable and accrued interest	19,433,730	334,038	19,767,768
Accruals – salaries	3,514,131		3,514,131
Accruals – legal fees	454,444		454,444
Accruals – other – Commerce	671,600	218,176	889,776
Total		$554,620

Although the majority of the short-term obligations are due on demand, most of the obligations have the attributes of being long-term obligations as most of the debt is due to related parties who have not called for payment during the past five or more years.

Cash Deposits and Surety Bonds

The Company was required to provide cash deposits or surety bonds in connection with obtaining its mining concession and environmental permits.

El Salvador Ministry of Environment Requirements:

The El Salvador Ministry of Economy exploitation concession for the Renewed San Sebastian Gold Mine Exploitation Concession No. 591 dated May 20, 2004 required a three-year, third-party liability guarantee (bond) which was renewed commencing on February 17, 2006 through February 17, 2009 in the sum of $42,857.14.  It was issued by Seguros del Pacifico, S.A., an El Salvadoran bonding and insurance company.

a.

A bond in an amount of $771.49 is required in connection with the environmental permit issued on October 15, 2002 under MARN Resolution No. 474-2002 for the San Cristobal Mill and Plant. This bond was originally issued on October 15, 2003 for a period of three years.  The environmental permit was revoked without notice, cause, or reason by MARN Resolution No. 3249-779-2006 dated July 5, 2006.  The notice was first delivered to the Company on or about September 13, 2006.  As a result of the revocation, the bond was returned in 2007.

b.

A bond in an amount of $14,428.68 is required in connection with the environmental permits issued on October 20, 2002 under MARN Resolution No. 493-2002 for the Renewed San Sebastian Gold Mine Exploitation concession.  This permit was renewed on March 15, 2006 for a term of three years and an audit by MARN was made.  The environmental permit was revalidated on June 23, 2006.  MARN delivered its revocation of the environmental permit, Resolution No. 3026-783-2006 dated July 6, 2006 on or about September 13, 2006.  As a result of the revocation, the bond was returned in 2007.

On or about December 6, 2006, the Company’s El Salvadoran attorney filed a complaint against the Ministry of Environment with the Honorable Court of Administrative Litigation of the Supreme Court of Justice stating that the Ministry of Environment violated the right of a notice, hearing and due process, that there is a lack of legal foundation for the sanctions, use of excess authority, and contrary to the El Salvadoran law.

Results of Operation for the Fiscal Year Ended March 31, 2008 Compared to March 31, 2007

There are no revenues as the Company has suspended its gold production until it is able to enter into a business arrangement or is able to procure the funds it requires to rehabilitate, retrofit, overhaul, and expand its SCMP to commence an open-pit, heap-leach gold producing operation at the SSGM site.  The price of gold has stabilized at a price level that could assure a profitable operation.  The Company recorded a net loss of $3,052,198 or $.11 cents per share for its fiscal year ended March 31, 2008.  This compares to a net loss of $2,616,821 or $.10 cents per share for the fiscal year ended March 31, 2007.  

There was no current or deferred provision for income taxes during the fiscal period ended March 31, 2008 or 2007.  Additionally, even though the Company has an operating tax loss carry forward, the Company has previously recorded a net deferred tax asset due to an assessment of the “more likely than not” realization criteria required by the Statement of Financial Accounting Standards No. 109, Accounting for Taxes.

Since the Company was not in production, inflation did not have a material impact on operations in the fiscal years ended March 31, 2008 or 2007.  The Company does not anticipate that inflation will have a material impact on continuing operations during the next fiscal year unless the Company is producing gold and silver.

The costs for fuel will be a significant operating expense when production commences.  It is expected that continued high fuel costs and increased costs of hiring and retaining qualified mining personnel with the required specialized skills to operate and manage a mining operation will have a potential significant impact on continuing operations in the future.

Interest expense in the sum of $2,915,959 was recorded by the Company during this fiscal period compared to $2,443,624 for the same period in 2007, and in the past it was eliminated with the interest income earned from the Joint Venture.  As stated above, the interest expense is now included in the net loss.

Almost all of the costs and expenses incurred by the Company are allocated and charged to the Joint Venture.  The Joint Venture capitalizes the costs and expenses (excluding the interest expense) and will continue to do so until such time when it is in production.  At the time production commences, these capitalized costs will be charged as an expense based on a per unit basis.  If the prospect of gold production becomes unlikely, all of these costs will be written off in the year that this occurs.

Results of Operation for the Fiscal Year Ended March 31, 2007 Compared to March 31, 2006

There are no revenues as the Company has suspended its gold production until it is able to enter into a business arrangement or is able to procure the funds it requires to rehabilitate, retrofit, overhaul, and expand its SCMP to commence an open-pit, heap-leach gold producing operation at the SSGM site.  The price of gold has stabilized at a price level that could assure a profitable operation.  The Company recorded a net loss of $2,616,821 or $.10 cents per share for its fiscal year ended March 31, 2007.  This compares to a net loss of $2,209,424 or $.09 cents per share for the fiscal year ended March 31, 2006.  

There was no current or deferred provision for income taxes during the fiscal period ended March 31, 2008 or 2007.  Additionally, even though the Company has an operating tax loss carry forward, the Company has previously recorded a net deferred tax asset due to an assessment of the “more likely than not” realization criteria required by the Statement of Financial Accounting Standards No. 109, Accounting for Taxes.

Since the Company was not in production, inflation did not have a material impact on operations in the fiscal years ended March 31, 2008 or 2007.  The Company does not anticipate that inflation will have a material impact on continuing operations during the next fiscal year unless the Company is producing gold and silver.

The costs for fuel will be a significant operating expense when production commences.  It is expected that continued high fuel costs and increased costs of hiring and retaining qualified mining personnel with the required specialized skills to operate and manage a mining operation will have a potential significant impact on continuing operations in the future.

Interest expense in the sum of $2,443,624 was recorded by the Company during this fiscal period compared to $2,047,339 for the same period in 2006, and in the past it was eliminated with the interest income earned from the Joint Venture.  As stated above, the interest expense is now included in the net loss.

Almost all of the costs and expenses incurred by the Company are allocated and charged to the Joint Venture.  The Joint Venture capitalizes the costs and expenses (excluding the interest expense) and will continue to do so until such time when it is in production.  At the time production commences, these capitalized costs will be charged as an expense based on a per unit basis.  If the prospect of gold production becomes unlikely, all of these costs will be written off in the year that this occurs.

Critical Accounting Policies and Estimates

The ensuing discussion and analysis of financial condition and results of operations are based on the Company’s consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America and contained within this report on S.E.C. Form 10-K.  Certain amounts included in or affecting the Company’s financial statements and related disclosures must be estimated, requiring that certain assumptions be made with respect to values or conditions which cannot be made with certainty at the time the financial statements are prepared.  Therefore, the reported amounts of the Company’s assets and liabilities, revenues and expenses, and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates.  The more significant areas requiring the use of management estimates and assumptions relate to mine ral reserves that are the basis for future cash flow estimates and units-of-production amortization determination; recoverability and timing of gold production from the heap-leaching process; environmental, reclamation and closure obligations; asset impairments (including estimates of future cash flows); useful lives and residual values of intangible assets; fair value of financial instruments; valuation allowances for deferred tax assets; non monetary transactions; and contingencies and litigation.  The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following significant assumptions and estimates affect its more critical practices and accounting policies used in the preparation of its consolidated financial statements.

A critical accounting policy is one that is important to the portrayal of the Company’s financial condition and results, and requires the Company to make difficult subjective and/or complex judgments.  Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown.  The Company believes the following accounting policies are critical policies; accounting for its gold ore reserves, environmental liabilities, income taxes and asset retirement obligations.

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions for the reporting period and as of the financial statement date.  These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenues and expenses.  Actual results could differ from those amounts.

Gold ore reserves include reserves that represent estimated quantities of gold in which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reserves under existing economic and operating conditions.  The gold ore reserves are based on estimates prepared by geology and mining consultants and are used to calculate depreciation, depletion and amortization (DD&A) and determine if any potential impairment exists related to the recorded value of the Company’s gold ore reserves.  Decline in the market price of gold may render certain reserves containing relatively lower grade of mineralization uneconomic to mine.  Changes in capital and operating costs including other factors could materially and adversely affect ore reserves.

The Company reviews, on an as needed basis, its estimates of costs of compliance with environmental laws and the cleanup of various sites, including sites in which governmental agencies have designated the Company as a potentially responsible party.  When it is probable that obligations have been incurred and where a minimum cost or a reasonable estimate of the actual costs of compliance or remediation can be determined, the applicable amount is accrued.  Actual costs can differ from estimates due to changes in laws and regulations, discovery and analysis of site conditions and changes in technology.

The Company makes certain estimates, which may include various tax planning strategies, in determining taxable income, the timing of deductions and the utilization of tax attributes, which can differ from estimates due to changes in laws and regulations, discovery and analysis of site conditions and changes in technology.

Management is required to make judgments based on historical experience and future expectations on the future abandonment cost, net of salvage value, of its mining properties and equipment.  The Company reviews its estimate of the future obligation periodically and will accrue the estimated obligation based on the SFAS No. 143 “Account for Asset Retirement Obligations.”

From time to time, the Company will estimate ore reserves, if any, when it is in production.  There are a number of uncertainties inherent in estimating quantities of reserves, including many factors beyond the control of the Company.  Ore reserve estimates are based upon engineering evaluations of assay values derived from samplings of drill holes and other openings.  Additionally, declines in the market price of gold may render certain reserves containing relatively lower grades of mineralization uneconomic to mine.  Further, availability of permits, changes in operating and capital costs, and other factors could materially and adversely affect ore reserves.  The Company utilizes its ore reserve estimates in determining the unit basis for mine depreciation and closure rates, as well as in evaluating mine asset impairments.  Changes in ore reserve estimates could significantly affect these item s.

The Company will assess its producing properties and undeveloped mineral claims and leases for impairment when events or changes in circumstances warrant and at least annually.  For producing properties and equipment, an impairment is recognized when the estimated future cash flows (undiscounted and without interest) expected to result in the use of the asset are less than the carrying amount of that asset.  Measurement of the impairment loss is based on discounted cash flows.  Undeveloped mineral claims and leases are measured on a fair value basis.  Fair value with respect to such mineral interest, pursuant to Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, effective January 1, 2002, would generally be assessed with reference to comparable property sales transactions in the market place.

The Company at least annually plans to assess its properties and undeveloped mineral claims and leases, if any, for impairment when events or changes in circumstances indicate that the properties may be impaired.  For producing properties and equipment, an impairment is recognized when the estimated future cash flows (undiscounted and without interest) expected to result in the use of the asset are less than the carrying amount of that asset.  Measurement of the impairment loss is based on discounted cash flows.  Undeveloped mineral claims and leases are measured on a fair value basis.  Fair value with respect to such mineral interest, pursuant to Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, effective January 1, 2002, would generally be assessed with reference to comparable property sales transaction in the market place.   The expected values associated with potential property development are estimated using the traditional net present value analysis of revenues, costs and capital investment cash flow projections discounted at a risk-adjusted rate reflective to the time periods associated with each possible outcome.  Assumptions underlying future cash flow estimates are subject to risks and uncertainties.  Also, the occurrence of past market transactions does not mean that such comparable amounts would be applicable to the Company’s situation.  Any differences between significant assumptions and market conditions could have a material effect on the fair value estimate.

The financial statements for the fiscal years ended March 31, 2008, 2007 and prior years reflect and include Commerce Group Corp.’s subsidiaries and the Commerce Group Corp./Sanseb Joint Venture (Joint Venture) on a consolidated basis.  Previously, the Company reported the investment in the Joint Venture as advances to the Joint Venture and the Company’s advances included the interest earned on these advances in anticipation of the interest being reimbursed.  Now these advances are restated and combined with the Company’s Consolidated Financial Statements.  Although the elimination of interest income reduces the retained earnings, it does not eliminate the interest charged by and earned by the Company which is due and payable to it and which is maintained additionally with a separate accounting.  At such time when the profits from the gold mining operation are distributed, the interest earn ed on these advances will be paid first to the Company pursuant to an agreement entered into by the joint venture parties.

For the fiscal year ended March 31, 2008, the Company was able to segregate the disbursements to the Joint Venture to identify the category to be charged.  Reference is made to Item 8.  Financial Statements and Supplementary Data, Note 2, for additional details.

Gold Mineralized Material (03/31/08)	Tons	Estimated Average Gold Grade (OPT)	Estimated Gold Ounces(1)
Mineralized material virgin (includes 960,000 tons of dump material)	14,404,096	0.081	1,166,732
Stope fill (estimated)	1,000,000	0.340	340,000
Estimated other mineralized material and open pit	122,815,134	0.016	1,948,748
Total estimated mineralized material	138,219,230	0.025	3,455,480

⁽¹⁾

The estimated recoverable ounces of gold by processing are: SCMP, 85% to 95%; heap leach, 65% to 70%.  Because the Company does not have a final feasibility study completed within the past five years, a determination that the property contains valid reserve estimates is not possible at this time.

Precious Metal Mining Strategy

The Company processed gold from 1972 through March 1978 at the SSGM site and from March 31, 1995 through December 31, 1999 at its SCMP.  Its SCMP consisted primarily of used equipment that had been installed at its leased site by a previous mining company.  The used processing equipment was acquired by the Joint Venture on February 23, 1993, and the SCMP operations were officially suspended as of March 31, 2000.  During this period, the price of gold suffered a severe decline.

Although while in operation at the SCMP site the Company has on a continuous basis repaired, maintained, modified, and restored the equipment, it presently lacks sufficient funds to retrofit and to expand the SCMP facilities.

The Company has temporarily suspended its gold processing until such time as it has obtained the necessary permission from MARN to proceed and has obtained adequate funds for the retrofitting, rehabilitation, restoration, overhauling, and most importantly for the expansion of the SCMP facilities.  During the last two fiscal periods, the price of gold has increased to a level to place the SCMP operation into a profitable position.

The Company has a number of non-exclusive independent consulting agreements for the purpose of raising the sum of up to U.S. $30 million.  The funds are to be used to purchase and install equipment, perform site development, working capital for the SSGM open-pit, heap-leaching operation, for the retrofit and expansion of the Joint Venture’s SCMP, and for continuing and expanding its exploration programs.

Through December 1999, the Joint Venture produced gold primarily from processing the SSGM tailings and from the virgin mineralized material it was excavating from its SSGM open pit.  The gold was processed at its SCMP facility which is located approximately 15 miles from the SSGM site.  It is contemplating the installation of a pilot open-pit, heap-leaching gold-processing system on the SSGM site.  The cone crushing system is being maintained at this site.  It also is continuing limited activities.  The Modesto Mine is inactive.  Most of the mining properties are located in the Departments of La Union and Morazan in the Republic of El Salvador, Central America.

The Joint Venture will continue its attempts to commence its processing of gold from the SSGM site.  Its objectives are to have an expanded complementary operation while continuing its endeavor to obtain sufficient funds for the SSGM open-pit, heap-leach operation.  The Company’s main objective and plan, through the Joint Venture, is to operate at the SSGM site, a moderate tonnage, low-grade, open-pit, heap-leaching, gold-producing mine.  It intends to commence this gold-mining operation as soon as the necessary permission is obtained from MARN and adequate funding is in place, providing the gold price remains at or above the current price level.  Dependent on the grade of gold mineralized material processed and the funds it is able to obtain, it then anticipates producing annually approximately 10,000 ounces of gold from the SCMP operation and eventually up to 113,000 ounces of gold from its SSGM op en-pit, heap-leaching operation.  The Joint Venture continues on a limited basis to conduct an exploration program to locate and evaluate gold ore reserves at the SSGM.  Since it has the New San Sebastian Exploration License and the Nueva Esparta Exploration License, it is exploring the Mina Lola, the Tabanco Mine, the Santa Lucia Mine, the Montemayor Mine, the La Joya Mine and the Bañadero Mine.

The Company processed gold at the SSGM site from 1972-1978 and the Joint Venture processed gold from March 1995 through December 1999 at the SCMP through a start-up or preliminary operation, which was a forerunner of its greater goals.  The Company’s revenues, profitability and cash flow are greatly influenced by the price of gold.  Gold prices fluctuate widely and are affected by numerous factors which will be beyond the Company’s control, such as, expectations for inflation, the strength of the U.S. dollar, overproduction of gold, global and regional demand, acts of terrorism, or political and economic conditions, or for that matter, many other reasons.  The combined effect of these and other factors is difficult; perhaps impossible to predict.  Should the market price of gold fall below the Company’s production costs and remain at such level for any sustained period, the Company could ex perience losses.

The Company believes that neither it, nor any other competitor, has a material effect on the precious metal markets nor that the price it will receive for its production is dependent upon world market conditions over which it has no control.

Employees

As of March 31, 2008, the Joint Venture employed approximately 40 full-time persons in El Salvador to perform its limited exploration program; to complete the erection of the cone crushing system, to provide 24-hour seven-day-a-week security at three different sites; to provide engineering, geology, drafting, and computer-related services; and to handle the administration of its activities.  None of the employees are covered by any collective bargaining agreements.  It has developed a harmonious relationship with its employees, and it believes that at one time in the past, it was one of the largest single non-agricultural employers in the El Salvador Eastern Zone.  Also, the Company employs up to four persons, including part-time help, in the United States.  Since the Joint Venture has laid off most of its employees, the Joint Venture had to pay their severance pay and other benefits, therefore from time to time it sold and continues to sell the Company’s common shares which were issued to the Commerce Group Corp. Employee Benefit Account.  El Salvador employees are entitled to receive severance pay, which is based on one month’s pay for each year of employment.

Related Party Loans, Obligations and Transactions

The related party transactions are included in detail in the Notes to the Consolidated Financial Statements.

Efforts to Obtain Capital

Since the concession/licenses were granted, and through the present time, substantial effort is exercised by the Directors and Officers in attempting to secure funding through various sources, all with the purpose to expand the operations of the SCMP, to construct an open-pit heap-leach operation at the SSGM site, and to continue the exploration of its other El Salvadoran mining prospects.  In more than one instance, the Company has encountered difficulty in negotiating reasonable terms and conditions.

The Company, Sanseb, and the Joint Venture consider the past political situation in the Republic of El Salvador to have been unstable, and believe that the final peace declaration on December 16, 1992, has put an end to the conflict.  Even though many years have passed, the stigma of the past unfavorable political status in the Republic of El Salvador exists and therefore certain investors continue to be apprehensive to invest the funds required.  However, as explained in this report, the Company was able to obtain a sum of funds to invest in the expansion and retrofitting of its SCMP and for the exploration of its other mining prospects.  The decline in the Company’s common stock market price places the Company in a situation of substantially diluting its common shares in order to raise equity capital.  The Company believes that it will be able to obtain adequate financing to conduct its operations from the same sources as in the past.  There are no assurances that funds will be available, except at this time, there continues to be a greater world-wide interest in the ownership of gold.  The price of gold is at a favorable height which should encourage investors to invest in gold mining companies.

25

Environmental Regulations

The Company’s mining operations are subject to the El Salvador environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which the Company operates.  Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, product safety, occupational health and the production, handling, storage, use and disposal of hazardous materials to prevent material environmental or other damage, and to limit the financial liability which could result from such events.  However, some risk of environmental or other damage is inherent in the business of the Company, as it is with other companies engaged in similar businesses.

The El Salvador Department of Hydrocarbons and Mines (DHM) requires environmental permits to be issued in connection with the issuance of exploitation concessions.  The issuance of these permits are under the jurisdiction of the El Salvador Ministry of Environment and Natural Resources Office (MARN).  On October 15, 2002, MARN issued an environmental permit under Resolution 474-2002 for the SCMP.  On October 20, 2002, MARN issued an environmental permit under Resolution 493-2002 for the Renewed SSGM Exploitation area.  Reference is made to “Cash Deposits and Surety Bonds for an explanation of the lawsuit filed against the El Salvador Ministry of Environment for the revoking of the Company’s environmental license.

Guarantees/Bonds

The Company has provided the Government of El Salvador with the following guarantees: on March 15, 2006 a three-year guarantee (bond) was issued by Seguros del Pacifico on behalf of the Company to the Ministry of Environment and Natural Resources for the Renewed SSGM in the sum of $14,428.68.  As a result of the revocation of the environmental permits, the bond was returned in 2007.

On February 17, 2006, a three-year third party liability guarantee in the sum of $42,857.14 was issued by Seguros del Pacifico on behalf of the Company to the Ministry of Economy’s Office of the Department of Hydrocarbons and Mines.

Dividends

For the foreseeable future, it is anticipated that the Company will use all of its earnings to finance its growth and expansion, therefore, dividends will not be paid to shareholders.

Impact of Inflation

The impact of the United States’ inflation on the Company has not been significant in recent years because of the relatively low rates of inflation and deflation experienced in the United States.

Item 7(a).  Quantitative and Qualitative Disclosures about Market Risk

Commodity Prices

The Company’s future revenues, earnings and cash flow may be strongly influenced by changes in gold prices, which fluctuate widely and over which the Company has no control.  The Company, if market conditions justify, may enter into gold price protection arrangements in the future, if necessary, to ensure that it generates enough cash flow to support its growth and exploration plans and any debt related to the potential financing.

The risks associated with price protection arrangements include opportunity risk by limiting unilateral participation in upward prices; production risk associated with the requirement to deliver physical ounces against a forward commitment; and credit risk associated with counterparties to the hedged transaction.  At present, the Company’s future earnings and cash flow may be significantly impacted by changes in the market price of gold and silver.  Gold and silver prices can fluctuate widely and are affected by numerous factors, such as demand, inflation, interest rates and economic policies to central banks, producer hedging, and the strength of the U.S. dollar relative to other currencies.  During the last five years, the London PM Fix gold price has fluctuated between a low of $342 per ounce in June 2003 and a high of over $1003 per ounce in June 2008.  The Company expects gold to be its primary product in the future, but the Company cannot currently reasonably estimate its future production and therefore it cannot comment on the impact that changes in gold prices could have on its projected pre-tax earnings and cash flows during 2007.

Foreign Currency

The price of gold is denominated in U.S. dollars, and the Company’s current gold production operations and significant properties are located primarily in the Republic of El Salvador.  The Republic of El Salvador converted its money into the U.S. dollar system on January 12, 2001 therefore, the Republic of El Salvador’s national currency is the U.S. dollar.

Cautionary Statement For Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

Some of the statements contained in this report are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expect a stated condition or result to occur.  Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties.  Actual results in each case could differ materially from those currently anticipated in such statements by reason of factors such as production at the Company’s mines, changes in operating costs, changes in general economic conditions and conditions in the financial markets, changes in demand and prices for the products the Company produces, litigation, legislative, environmental and other judicial, regulatory, political and competitive developments in areas in which the Company operates and technological and operational difficulties encountered in connection with mining.  Many of these factors are beyond the Company’s ability to control or predict.  The Company disclaims any intent or obligation to update its forward-looking statements, whether as a result of receiving new information, the occurrence of future events, or otherwise.

26

Item 8.  Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

And Supplementary Financial Data

Page

Report of Independent Registered Public Accounting Firm

51

Financial Statements:

Consolidated Balance Sheets, Years Ended March 31, 2008 and 2007

52

Consolidated Statements of Operations, Years Ended March 31, 2008, 2007 and 2006

53

Consolidated Statements of Changes in Shareholders’ Equity

  Years Ended March 31, 2008, 2007 and 2006

54

Consolidated Statements of Cash Flows, Years Ended March 31, 2008, 2007 and 2006

55

Notes to Consolidated Financial Statements

56

Selected Quarterly Financial Data (Unaudited)

81

Supplementary Financial Data:

Schedules of financial statements other than those listed herein have been omitted since they are either not required, are not applicable, or the required information is included in the financial statements and related notes.

27

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Commerce Group Corp.

Milwaukee, Wisconsin

We have audited the accompanying consolidated balance sheets of Commerce Group Corp. (the Company) as of March 31, 2008, and the related statements of operations, stockholders’ deficit and cash flows for the years ended March 31, 2008, 2007 and 2006.  These consolidated financial statements are the responsibility of the Company’s management.  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 PCAOB (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting.  Our audits 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 consolidated financial statements, assessing the accounting pr inciples used and significant estimates made by management, as well as evaluating the overall consolidated 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 consolidated financial position of Commerce Group Corp. as of March 31, 2008, and the consolidated results of their operations and their cash flows for the years ended March 31, 2008, 2007 and 2006 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 17 to the consolidated financial statements, the Company has a working capital deficit and has suffered recurring operating losses, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 17.  The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Chisholm, Bierwolf & Nilson, LLC

Bountiful, Utah

July 9, 2008

28

COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE

Consolidated Balance Sheets--March 31

			2008				2007 (Restated)
ASSETS
Current assets
	Cash				$         1,308			$         5,031
	Other current assets				233,977			274,553
	Accounts receivable – related				585,647			584,925
	Mining supplies				39,562			39,562
	Prepaid items and deposits				14,932			32,474
	Total current assets				875,426			936,545
	Property, plant and equipment, net				4,846,257			4,693,933
	Mining resources investment				20,763,318			20,258,587
	Total assets				$26,485,002			$25,889,065
	LIABILITIES
Current liabilities
Accounts payable			$     2,406				$      18,379
Accounts payable – related			377,786				349,545
Notes and accrued interest payable to related parties			19,433,730				16,410,397
Notes and accrued interest payable to others			334,038				312,379
Accrued salaries			3,514,131				3,477,568
Accrued legal fees			454,444				415,035
Other accrued expenses – related			471,600				435,600
Other accrued expenses – other			418,176				371,273
Total current liabilities			25,006,311				21,790,176
Total liabilities				$25,006,311			$21,790,176
Commitments and contingencies (Notes 2, 4, 5, 6, 7, 8, 10, 11, 12, 13 & 16)
SHAREHOLDERS' EQUITY
Preferred Stock
Preferred stock, $0.10 par value:
Authorized 250,000 shares;
Issued and outstanding
2008-none; 2007-none			$                 0				$                0
Common stock, $0.10 par value:
Authorized 50,000,000 shares;
Issued and outstanding:
2008 - 30,715,869			3,071,587
2007 - 27,778,596							2,777,860
Capital in excess of par value			19,579,827				19,441,554
Accumulated deficit			(21,172,723)				(18,120,525)
		Total shareholders' equity				1,478,691			4,098,889
		Total liabilities and shareholders' equity				$ 26,485,002			$ 25,889,065

The accompanying notes are an integral part of these consolidated financial statements.

29

COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE

Consolidated Statements of Operations

For the Years Ended March 31

				2008		2007 (Restated)		2006 (Restated)
	Revenues:			$               0		$               0		$               0
	Expenses:
	General and administrative			$    136,239		$    173,197		$    168,585
	Total expenses			136,239		173,197		168,585
	Net loss from operations			(136,239)		(173,197)		(168,585)
Other income			0			0		6,500
		Interest expense			(2,915,959)		(2,443,624)		(2,047,339)
	Net loss before income taxes			(3,052,198)		(2,616,821)		(2,209,424)
	Income tax expense			0		0		0
	Net loss			(3,052,198)		(2,616,821)		(2,209,424)
	Net loss per share basic/diluted			$         (.11)		$         (.10)		$         (.09)
	Weighted average basic/diluted   common shares outstanding			28,401,086		25,457,052		23,834,988

The accompanying notes are an integral part of these consolidated financial statements.

30

COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE

Consolidated Statements of Changes in Shareholders’ Equity

For the Years Ended March 31, 2008,  2007 and 2006

	Common Stock -----------------------------------------------------
		Number of        Shares	Par Value	Capital in Excess of Par Value	Retained Earnings (Deficit)
Balances March 31, 2005		23,823,734	$2,382,373	$19,292,410	$(13,294,280)
Net loss for fiscal year ended March 31, 2006					$  (2,209,424)
Common stock issued for:
Dir./off./employee/services comp.		590,620	59,062	40,652
Payment of debt		601,662	60,167	41,412
Cash		100,000	10,000	2,500	___________
Balances March 31, 2006		25,116,016	$2,511,602	$19,376,974	$(15,503,704)
Net loss for fiscal year ended March 31, 2007					$  (2,616,821)
Common stock issued for:
Dir./off./employee/services comp.		1,107,580	110,758	0
Payment of debt		750,000	75,000	0
Cash		805,000	80,500	64,580	__________
Balances March 31, 2007		27,778,596	$2,777,860	$19,441,554	$(18,120,525)
Net loss for fiscal year ended March 31, 2008					$  (3,052,198)
Common stock issued for:
Dir./off./employee/services comp.		932,273	93,227	108,273
Payment of debt		0	0	0
Cash		2,005,000	200,500	30,000	__________
Balances March 31, 2008		30,715,869	$3,071,587	$19,579,827	$(21,172,723)

The accompanying notes are an integral part of these consolidated financial statements.

31

COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE

Consolidated Statements of Cash Flows

For the Years Ended March 31

	2008	2007 (Restated)	2006 (Restated)
Operating activities:
Net loss	$(3,052,198)	$(2,616,821)	$(2,209,424)
Adjustments to reconcile net loss to net cash provided   by (used in) operating activities:
Common stock issued for Directors’ fees and   for  services rendered	93,227	110,758	99,714
Changes in assets and liabilities:
Decrease (increase) in accounts  receivable and     other current assets	39,854	(34,025)	(22,457)
Decrease (increase) in prepaid items and deposits	17,542	1,323	50,469
Increase (decrease) in accounts payable and     other accrued expenses	12,268	50,573	(15,911)
Increase in accrued interest expense	2,915,959	2,443,624	2,047,339
Increase (decrease) in accrued legal fees	39,409	3,476	78,577
Net cash provided by (used in) operating activities	66,061	(41,092)	28,037
Investing activities:
Investment in mining resources and property,     plant and equipment	(700,201)	(444,762)	(483,696)
Net cash used by investing activities	(700,201)	(444,762)	(483,696)
Financing activities:
Cash received, related party notes payable	429,917	314,502	460,523
Common stock issued for cash	200,500	145,080	12,500
Net cash provided by financing activities	630,417	459,582	473,023
Net increase (decrease) in cash and cash equivalents	(3,723)	(26,272)	17,634
Cash - beg. of year	5,031	31,303	13,669
Cash - end of year	$       1,308	$       5,031	$    31,303

The accompanying notes are an integral part of these consolidated financial statements.

Supplemental disclosures of cash information:

	Year Ended
	March 31, 2008		March 31, 2007
A.  Cash information	Shares	Amount	Shares	Amount
1.  Accrued interest expense		$2,915,959		$2,443,624
2.  Interest expense paid in cash		-		-
3.  Income taxes paid		-		-
B.  Non cash investing and financing
Common stock issued for:
1.  Director fees, officer compensation,             employee benefits and services	932,273	$    93,227	1,107,580	$  110,759
2.  Reducing related party notes payable	-	$        -	750,000	$    75,000

32

COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE

Notes to the Consolidated Financial Statements

March 31, 2008

(1)  The Company and Basis of Presentation of Financial Statements

(a)

Commerce Group Corp., a Wisconsin-based corporation organized in 1962 (“Commerce,” the “Company” and/or “Registrant”) and its 82 1/2%-owned subsidiary, San Sebastian Gold Mines, Inc., a Nevada corporation organized in 1968 (“Sanseb”), have formed the Commerce/Sanseb Joint Venture (“Joint Venture”) for the purpose of performing gold mining, the sale of gold, and related activities, including, but not limited to, exploration, exploitation, development, extraction and processing of precious metals in the Republic of El Salvador, Central America. Reference to Commerce, the Company and/or Registrant, includes all of the Company’s wholly-owned or partially-owned subsidiaries and the Commerce/Sanseb Joint Venture or any one or more of them as the context requires.  In the past, gold bullion was produced (but not on a full production basis) in El Salvador and refined and sold in the United States.  Expansion of exploration is a goal at the San Sebastian Gold Mine (“SSGM”) which is located near the city of Santa Rosa de Lima, El Salvador, Central America, and at the other licensed mining exploration areas neighboring the SSGM site.  Currently expanded exploration is being limited at other mining projects until adequate funding is obtained under acceptable terms and conditions.  All of the mining projects are located in the Republic of El Salvador, Central America.  Commerce is a reporting company and its common shares are traded on the Over-the-Counter Bulletin Board (CGCO.OB), the Pink Sheets (CGCO.PK), and on the Berlin-Bremen Stock Exchange (C9G).

As of March 31, 2000 the Joint Venture had temporarily suspended the San Cristobal Mill and Plant (“SCMP”) operations (operations ceased on December 31, 1999) until such time as it has adequate funds to retrofit, rehabilitate, restore and expand these facilities and its environmental permit is reinstated.

On March 3, 2003, the Company received an exploration license from the Government of El Salvador (GOES) dated February 24, 2003, for the exploration of minerals in an area encompassing the SSGM, consisting of 40.77 square kilometers (10,070 acres).  This expanded area provides the Company with an opportunity to locate and evaluate gold and silver ore reserves. Included in this area are three formerly-operated gold and silver mines:  the La Lola Mine, the Santa Lucia Mine and the Tabanco Mine.  Thus far, from the exploration performed, the results and findings are very encouraging to continue forward with the expansion of the exploration.

On May 20, 2004 (delivered June 4, 2004) the Company was granted an exploitation concession from the GOES consisting of 1.23 square kilometers (304 acres) for the exploitation of the precious metals (the “Renewed San Sebastian Gold Mine Exploitation Concession” or “Renewed SSGM”).

On or about September 13, 2006, the El Salvador Ministry of the Environment delivered to Commerce’s El Salvadoran legal counsel its revocation of the environmental permits issued for the SSGM and SCMP.  This Company’s legal counsel on December 6, 2006, filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice two complaints relating to this matter.  (See the Company’s discussion in the section entitled “Environmental Matters.”) These legal proceedings are pending.

On May 25, 2004 (received June 4, 2004) the GOES issued a second exploration license consisting of 45 square kilometers (11,115 acres) hereinafter referred to as the Nueva Esparta Exploration License.

The Company continues to be cognizant of its cash needs until such time as it is able to produce adequate profits from its SSGM gold production.  It will continue its attempt to obtain sufficient funds to assist the Joint Venture in placing the SSGM into an open-pit, heap-leach production. In order to continue to follow its goal to conduct the Joint Venture’s exploration, exploitation, development expansion programs, and the production of gold from the SSGM open-pit, heap-leaching operation, it is necessary for the Company to obtain funds from outside sources.  The Company may have to borrow funds by issuing open-ended, secured, on-demand or unsecured promissory notes, by selling its shares to its directors, officers and other interested accredited investors, or by entering into a joint venture, merger, or by developing an acceptable, creative form of a business combination.

The Company’s directors and officers, with the aid of investment bankers and finders, are aggressively seeking a compatible financial or business arrangement.  The verbal and written proposals or arrangements received up to this time were not acceptable by the Company primarily due to the terms and conditions.

The Joint Venture plans to begin its open-pit, heap-leaching process on the SSGM site when adequate funding becomes available under fair and reasonable terms and conditions, and providing that the price of gold maintains at the current price level.  It also plans to continue its SSGM site preparation, the expansion of its exploration and exploitation targets, and the identification and development of gold ore reserves.  Furthermore, it plans to explore the potential of other gold and silver mine exploration prospects in El Salvador.  Concurrently, it is in the process of obtaining necessary funding for each of these separate programs while its Joint Venture is performing minor retrofit and rehabilitation work at the SCMP.  It commenced an exploration program in the New SSGM and in the Nueva Esparta.  Its funding of additional precious metals encourages it to expand the exploration activities.

(b)

Basis of presentation:

Management estimates and assumptions:

Certain amounts included in or affecting the Company’s consolidated financial statements and related disclosures must be estimated, requiring that certain assumptions be made with respect to values or conditions which cannot be made with certainty at the time the financial statements are prepared.  Therefore, the reported amounts of the Company’s assets and liabilities, revenues and expenses, and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates.  The Company evaluates these estimates on an ongoing basis, utilizing historical experience, consultation with experts, and other methods considered reasonable in the particular circumstances.  Nevertheless, actual results may differ significantly from the Company’s estimates.

The more significant areas requiring the use of management estimates and assumptions relate to mineralized material that are the basis for future cash flow estimates and units-of-production amortization determination; updating feasibility studies, recoverability and timing of gold production from the heap-leaching process; environmental, reclamation and closure obligations; asset impairments (including estimates of future cash flows); useful lives and residual values of intangible assets; fair value of stock based compensation; fair value of financial instruments and non-monetary transactions; valuation allowances for deferred tax assets; and contingencies and litigation.  The Company’s estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

(2)  Significant Accounting Policies

Consolidated Statements

The Joint Venture and the following subsidiaries are all majority-owned by the Company and are included in the consolidated financial statements of the Company.  All significant intercompany balances and transactions have been eliminated.  Not included in the consolidated statements is Mineral San Sebastian, S.A. de C.V. (Misanse) as the Company does not have corporate control of Misanse because the majority of Misanse’s elected directors must be El Salvadoran shareholders.

		Charter/Joint Venture
Included in the Consolidated Statements	% Ownership	Place	Date
Homespan Realty Co., Inc. (“Homespan”)	100.0	Wisconsin	02/12/1959
Ecomm Group Inc. (“Ecomm”)	100.0	Wisconsin	06/24/1974
San Luis Estates, Inc. (“SLE”)	100.0	Colorado	11/09/1970
San Sebastian Gold Mines, Inc. (“Sanseb”)	82.5	Nevada	09/04/1968
Universal Developers, Inc.  (“UDI”)	100.0	Wisconsin	09/28/1964
Commerce/Sanseb Joint Venture (“Joint Venture”)	90.0	Wisconsin & El Salvador	09/22/1987
Not included in the Consolidated Statements
Mineral San Sebastian, S.A. de C.V.  (“Misanse”)	52.0	El Salvador	05/08/1960

Minority Interest

During the twelve-months ended March 31, 2008 and 2007, there were no expenses in the entities wherein minority interests existed.  Minority interest as a whole is immaterial in these financial statements and therefore has not been presented.

Other Current Assets

1.

Other current assets consist primarily of assets held in an employee benefit account stated at cost of $101,529 as of March 31, 2008.  The funds are to be used primarily to pay the El Salvadoran employee medical benefits and pension benefits as required by the El Salvadoran Government and for other employee purposes.

The El Salvadoran vacation and Christmas bonus payments are due when earned while the severance pay is due and payable at such time when the employee has been discharged, retired, permanently laid off, death or when incapable of working due to permanent health/work related conditions.  The Company has sole control and jurisdiction over this account and to the best of the Company’s knowledge, there is absolutely no condition, right, or requirement by the El Salvadoran authorities to have such funds in any form of a reserve.

Also included in other current assets are certain precious stones and jewelry stated at cost of $132,448 as of March 31, 2008.  The Directors approved the sale of these assets to the Rollover Individual Retirement Account of the late President of the Company at the Company’s cost.

2.

The accounts receivable - related balance consists of advances to Mineral San Sebastian S.A. (Misanse), which is 52% owned by the Company.  These advances are an offset for the past and future Misanse rental charges that are included in the accounts payable.  An accounting is as follows:

	Misanse	Others	Total
Accounts receivable	$584,925	$           0	$584,925
Accounts payable	$246,439	$133,754	$380,192

On January 14, 2003, at a Misanse shareholders’ meeting held at the Company’s City of San Miguel, El Salvador office, the Misanse shareholders and the Misanse Directors approved, confirmed and ratified the amount that Misanse owed the Company for advances and other obligations the Company incurred on behalf of Misanse.  The amount due to Misanse at that time was also approved, ratified and confirmed.

The Company is of the opinion that it is appropriate to record the fact that Misanse owes the Company $584,925 and that the Company owes Misanse $242,350 as Misanse is not consolidated with the Company’s financial records.  When gold production commences, the 5% royalty payable to Misanse for rent of the San Sebastian Gold Mine property based on the gross proceeds from the sale of gold and the accounts payable offset will reduce this receivable until it is paid in full.

3.

Mining supplies consist of consumable items used in processing mineralized material, which are stated at the average cost.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

The accounts receivable consist of advances to Misanse, a 52%-owned subsidiary, which will be offset for the Misanse rental charges included in the Joint Venture’s accounts payable.

Intercompany Balances

All intercompany balances and transactions have been eliminated in the consolidated financial statements.

Mining Supplies

Mining supplies consist of consumable supplies used in connection with processing mineralized material, and are stated at the average cost, which is lower than the market value.

33

Deferred Mining Cost

The Company, in order to avoid expense and revenue unbalance, capitalizes all costs directly associated with acquisition, exploration and development of specific properties, until these properties are put into operation, sold or are abandoned (excluding the interest expense.).  Gains or losses resulting from the sale or abandonment of mining properties will be included in operations.  The Joint Venture capitalizes its costs and expenses (excluding the interest expense) and will write off these cumulative costs on a units of production method at such time as it begins producing gold derived from the gold ore on a full production basis.  If the prospect of gold production, due to different conditions and circumstances becomes unlikely, all of these costs may be written off in the year that this occurs.

The Company regularly evaluates its carrying value of exploration properties in light of their potential for economic mineralization and the likelihood of continued work by either the Company or a joint venture partner.  The Company may, from time to time, reduce its carrying value to an amount that approximates fair market value based upon an assessment of such criteria.

Revenue Recognition

Revenue from the sale of gold will be recognized when delivery has occurred, title and risk of loss passes to the buyer, and collectability is reasonably assured.  Gold sales will be made in accordance with sales contracts where the price is fixed or determinable.  No revenue has been recognized for the years presented.

Property, Plant and Equipment

Property, plant, and equipment are stated at the lower of cost or estimated net realizable value.  Mining properties, development costs and plant and equipment will be depreciated when full production takes place using the units of production method based upon proven and probable reserves.  Until the Company suspended its mining operations, the assets were depreciated using the straight-line method over estimated useful lives ranging from three to ten years.  Depreciation and amortization expenses include the amortization of assets acquired, if any, under capital leases.  Replacements and major improvements are capitalized.  When in operation, maintenance and repairs will be charged to expense based on average estimated equipment usage.  Certain interest costs incurred in the construction or acquisition of property, plant, and equipment are capitalized and amortized over the useful lives of the related assets.  Since the Company suspended its gold processing operations effective March 31, 2000, it also ceased to depreciate its fixed assets.

Mineral Exploration and Development Costs

Significant property acquisition payments for active exploration properties are capitalized.  If no minable ore body is discovered, previously capitalized costs are expensed in the period the property is abandoned.  Expenditures for the development of new mines, to define further mineralization at and adjacent to existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on the units of production basis over proven and probable reserves.

Impairments of Long-Lived Assets

The Company evaluates the carrying value of its mine development, mineral interest and mining properties when events or changes in circumstances indicate that the properties may be impaired.  For these assets, an impairment loss is recognized when the estimated future cash flows (undiscounted and without interest) expected to result from the use of the asset are less than the carrying amount of the asset. Measurement of the impairment loss is based on discounted cash flows.

Intangible assets subject to impairment are assessed for impairment at least annually or more frequently when changes in market conditions or other events occur.  Impairments are measured based on estimated fair value.  Fair value with respect to such mineral interests, pursuant to a Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets effective January 1, 2002, would generally be assessed with reference to comparable property sales transactions in the market place.  No impairment has been recorded as of the periods presented.

Asset Retirement Obligations

Accounting for Asset Retirement Obligations is based on the guidance of SFAS No. 143 which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  Fair value is determined by estimating the retirement obligations in the period an asset is first placed in service and then adjusting the amount for estimated inflation and market risk contingencies to the projected settlement date of the liability.  The result is then discounted to a present value from the projected settlement date to the date the asset was first placed in service or to the change in estimate/timing.  The present value of the asset retirement obligation is recorded as an additional property cost and as an asset retirement liability.  The amortization of the additional property cost (using the units of production meth od) is included in depreciation, depletion and amortization expense and the accretion of the discounted liability is recorded as a separate operating expense in the Company’s statement of operations.  No impairment has been recorded as of the periods presented.

Recently Issued Financial Accounting Standards

The FASB has issued FSP EITF 00-19-2.  This FSP states that the contingent obligation to make future payments or other transfers of consideration under a registration payment arrangement, issued as a separate agreement or included as a part of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies.  Also, a financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable GAAP without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement.  This FSP will be applied for when the occasion occurs.

In March 2005, the FASB issued FASB Interpretation No. 47 Accounting for Conditional Asset Retirement Obligations -- an interpretation of FASB Statement No. 143 (FIN 47).  FIN 47 clarifies the term conditional asset retirement obligation as used in SFAS No. 143, “Accounting for Asset Retirement Obligations,” and requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated.  Any uncertainty about the amount and/or timing of future settlement of a conditional asset retirement obligation should be factored into the measurement of the liability where sufficient information exists.  FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for fiscal years ending after December 15, 2005.  Th e adoption of these standards will have no material impact on the Company’s financial reporting and disclosures at this time.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections.  This statement replaces APB Opinion No. 20 Accounting Changes and FASB Statement No. 3 Reporting Accounting Changes in Interim Financial Statements.  SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so.  SFAS No. 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.”  This statement is effective for accounting changes and correction of errors made in fiscal year s beginning after December 15, 2005.  Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005.  At this time, the adoption of SFAS No. 154 will have no material impact on the Company’s financial reporting and disclosures.

In February 2006, the FASB issued SFAS No. 155, ACCOUNTING FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS, AN AMENDMENT OF FASB STATEMENTS NO. 133 AND 140.  This Statement amends FASB Statements No. 133, accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.  This statement resolves issues addressed in Statement 133 Implementation Issued No. D1, "Application of Statement 133 to Beneficial Interests in Securitized Financial Assets."  The adoption of SFAS No. 155 did not have an impact on the Company's consolidated financial statements.

In March 2006, the FASB issued SFAS No. 156, ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS, AN AMENDMENT OF FASB STATEMENT No. 140.  This Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities.  The adoption of SFAS No. 156 did not have an impact on the Company's consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.  This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The requirement is that recognition of the impact of a tax position is made in the financial statements, if the position is more likely than not of being sustained upon examination based on the technical merits of the position.  This interpretation also includes guidance on derecognition, classification, interest and penalties, accounting interim periods, disclosure, and transition.  The cumulative effect should be reported as an adjustment to the opening balance of retained earnings for the fiscal year.  Adoption must take place for fiscal years beginning after December 15, 2006, although ear ly adoption is allowed.  The Company is currently determining the effect of this interpretation on its financial reporting.

In August 2006, the SEC published amendments to the disclosure requirements for executive and director compensation, related party transactions, director independence and other corporate governance matters, and security ownership of officers and directors.  The rules affect disclosure in proxy statements, annual reports and registration statements.  These amendments are effective for filings for fiscal years ending on or after December 15, 2006.  The Company is currently determining the effect these amendments will have on its financial reporting.

In September 2006, the FASB issued FASB No. 157, Fair Value Measurements.  This standard provides guidance for using fair value to measure assets and liabilities.  SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances.  The standard clarifies that for items that are not actively traded, fair value should reflect the price in a transaction with a market participant, including an adjustment for risk.  Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market which the reporting entity transacts.  The Company is currently determining the effect of this Statement on its financial reporting.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R" ("SFAS 158").  SFAS 158 requires employers that sponsor defined benefit pension and post retirement plans to recognize previously unrecognized actuarial losses and prior service costs in the statement of financial position and to recognize future changes in these amounts in the year in which changes occur through comprehensive income.  As a result, the statement of financial position will reflect funded status of those plans as an asset or liability. Additionally, employers are required to measure the funded status of a plan as of the date of their year-end statements of financial position and provide additional disclosures.  SFAS 158 is effective for financial statements issued for fiscal years ending after December 15, 2006 for companies whose securities are publicly traded.  The Company does not expect the adoption of SFAS 158 to have a significant effect on its financial position or results of operation.

In October 2006, the Financial Accounting Standards Board (“FASB”) issued FAS 123(R)-5, Amendment of FASB Staff Position (“FSP”) FAS 123(R)-1, which addresses whether a modification of an instrument in connection with an equity restructuring should be considered a modification for purposes of applying FSP FAS 123(R)-1, Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R).  This FSP is effective for the first reporting period beginning after October 10, 2006.  This FSP should have no effect on the financial reporting.

In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (“SFAS 159”).  SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value, and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.  SFAS 159 is effective for the Company on January 1, 2008, and is not expected to have a material effect on its consolidated financial statements.

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(R), “Business Combinations” (“SFAS 141R”).  SFAS 141R establishes the principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and the goodwill acquired.  SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.  SFAS 141R is effective for the Company on January 1, 2009, and is not expected to have a material effect on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”).  SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. This new consolidation method will significantly change the accounting for transactions with minority interest holders.  SFAS 160 is effective for the Company on January 1, 2009, and is not expected to have a material effect on its consolidated financial statements.

During March 2008 the FASB issued Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“FAS No. 161”).  FAS No. 161 enhances the disclosure requirements under FAS No. 133 pertaining to how and why an entity uses derivative instruments, how derivative instruments and related hedge items are accounted for under FAS No. 133, and how derivative instruments and related hedge items affect an entity’s financial position, financial performance, and cash flows. FAS No. 161 is effective for fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008 (fiscal year 2009 for the Company). This disclosure is not expected to have a material effect on the Company’s consolidated financial statements.

Management’s assumptions

Management’s estimates of gold and other metal prices, recoverable gold, operating, capital, and reclamation costs are subject to certain risks and uncertainties which may affect the recoverability of the Company’s investment in property, plant, and equipment.  Although management has made its best estimate of these factors based on current conditions, it is reasonably possible that changes could occur in the near-term which could adversely affect management’s estimate of the net cash flows expected to be generated from its mining properties.

Estimates of future cash flows are subject to risks and uncertainties.  It is possible that changes could occur which may affect the recoverability of property, plant and equipment.

Interest Capitalization

Certain interest costs were capitalized as part of the historical cost of facilities and equipment, if material.

Income Taxes

The Company files a consolidated federal income tax return with its subsidiaries (See note 9).  The Joint Venture files a U.S. partnership return.

Loss Per Common Share

The Company has in the past years reported its “Earnings per Share” (EPS) which presently complies with the provisions of Statement of Financial Accounting Standards No. 128 (SFAS No. 128).  As required by this standard, the Company, if applicable, could report two earnings per share amounts, basic net loss and diluted net loss per share.  Basic net loss per share is computed by dividing loss reportable to common shareholders (the numerator) by the weighted average number of common shares outstanding (the denominator).  The computation of diluted net loss per share is similar to the computation of basic net loss per share except that the denominator is increased to include the dilutive effect of the additional common shares that would have been outstanding if all convertible securities, stock options, rights, share loans etc. had been converted to common shares, however, there were no such dilutive i tems as of March 31, 2006, 2007 and 2008.

The computation of diluted EPS shall not assume conversion, exercise, or contingent issuance of securities that would have an antidilutive effect on earnings per share.  Shares issued on actual conversion, exercise, or satisfaction of certain conditions for which the underlying potential common shares were antidilutive shall be included in the computation as outstanding common shares from the date of conversion, exercise, or satisfaction of those conditions, respectively.  Therefore, there is no difference in the loss or the number of basic or diluted shares.

The computation of loss per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.

   Net Loss

      Shares

Per-Share

(Numerator)

(Denominator)

  Amount

For the year ended March 31, 2008:

  Basic EPS

    Net loss to common Shareholders

$(3,052,198)

  28,401,086

$

(0.11)

For the year ended March 31, 2007:

  Basic EPS

    Net loss to common Shareholders

$(2,616,821)

  25,457,052

$

(0.10)

For the year ended March 31, 2006:

  Basic EPS

    Net loss to common Shareholders

$(2,209,424)

  23,834,988

 $

(0.09)

Foreign Currency

The Company conducts the majority of its operations in the Republic of El Salvador, Central America. Currently, El Salvador is on the U.S. dollar system and therefore all transactions since January 1, 2001 are reported in U.S. dollars.

Stock Options

Prior to January 1, 2006, the Company accounted for stock compensation plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations (“APB 25”), as permitted by FASB Statement No. 123, “Accounting for Stock-Based  Compensation” (“SFAS 123”).  No stock-based employee compensation cost was recognized for stock option awards in the consolidated statements of operations for the periods prior to January 1, 2006, as all options granted under those plans had an exercise price equal to the market value of the Common Stock on the date of the grant in accordance with APB 25.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), “Share-Based Payment” (“SFAS 123R”), using the modified-prospective-transition method.  Under this transition method, total compensation cost includes compensation costs for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and compensation costs for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R.  The Company estimated the fair value of its option awards granted prior to January 1, 2006 using the Black-Scholes option-pricing formula, and the Company continues to use this model.  The Company records compensation expense for stock options ratably over the options vesting period.  Results for prior periods have not been restated.

Fair Value of Financial Instruments

Unless otherwise indicated, the fair values of all reported assets and liabilities which represent financial instruments (none of which are held for trading purposes) approximate the carrying values of such amounts.

34

(3) Investment in Property, Plant, Equipment  and Mining Resources

The following is a summary of the investment in property, plant, equipment, mining resources and development costs:

	March 31, 2008 ------------------------------------------------------			March 31, 2007 ------------------------------------------------------
	Cost	Accumulated Depreciation	Net	Cost	Accumulated Depreciation	Net
Mineral Properties and Deferred Development	$20,763,318	$                  0	$20,763,318	$20,258,587	$                 0	$20,258,587
Property, Plant and Equipment	7,098,400	(2,252,143)	4,846,257	6,946,076	(2,252,143)	4,693,933
	$27,861,718	$(2,252,143)	$25,609,575	$27,204,663	$(2,252,143)	$24,952,520
Breakdown of Property, Plant and Equipment:
SCMP Plant No. 1	$2,061,585	$(1,360,932)	$    700,653	$2,061,585	$(1,360,932)	$    700,653
SCMP Plant No. 2	2,952,755	(429,525)	$ 2,523,230	2,865,018	(429,525)	$ 2,435,492
SCMP Mach and Tools	94,531	(94,531)	0	94,531	(94,531)	0
SCMP Crushing Plant	1,542,559	0	1,542,559	1,477,972	0	1,477,972
SCMP Vehicles	202,675	(202,675)	0	202,675	(202,675)	0
SSGM Lab-Bldg.	29,789	(26,296)	3,493	29,789	(26,296)	3,493
SSGM Lab-Equip.	110,702	(110,702)	0	110,702	(110,702)	0
SSGM Metal Shed	553	(553)	0	553	(553)	0
SMO Office	26,929	(26,929)	0	26,929	(26,929)	0
SSGM Land	2,441	0	2,441	2,441	0	2,441
Modesto Land	73,881	0	73,881	73,881	0	73,881
		$(2,252,143)			$(2,252,143)

Vehicles, office, mining and laboratory equipment, buildings, etc. are stated at cost and are depreciated using the straight-line method over estimated useful lives of three to ten years.  Maintenance and repairs are charged to expense as incurred.  Gains or losses on dispositions are included in operations.  Since the Joint Venture suspended operations effective on March 31, 2000 in view of the weak price of gold and the need to expand the SCMP facilities, no depreciation has been recorded during the following fiscal years.  The Company is maintaining the property and equipment and will begin to depreciate them once operations commence again.  Reference is made to Property, Plant and Equipment in note (2)  Significant Accounting Policies.

(4)  Commerce/Sanseb Joint Venture (“Joint Venture”)

The Company is in a joint venture with and owns 82 1/2% of the total common stock (2,002,037 shares) of Sanseb, a U.S. State of Nevada chartered (1968) corporation.  Approximately 180 non-related shareholders, including the late President of the Company who owns 2,073 common shares, hold the balance of Sanseb’s stock.  Sanseb was formed in 1968 to explore, exploit, research, and develop adequate gold reserves and to produce gold.  Sanseb produced gold from the SSGM from 1972 through February 1978.

On September 22, 1987, the Company and Sanseb entered into a joint venture agreement to formalize their relationship with respect to the mining venture and to account for the Company’s substantial investment in Sanseb.  Under the terms of the agreement, the Company is authorized to supervise and control all of the business affairs of the Joint Venture and has the authority to do all that is necessary to resume mining operations at the SSGM on behalf of the Joint Venture.  The net pre-tax profits of the Joint Venture will be distributed as follows:  Company 90%; and Sanseb 10%.  Since the Company owns 82 1/2% of the authorized and issued common shares of Sanseb, the Company in effect has over a 98% interest in the Joint Venture activities.

The joint venture agreement further provides that the Company has the right to be compensated for its general and administrative expenses in connection with managing the Joint Venture.

Under the joint venture agreement, agreements signed by the Company for the benefit of the Joint Venture create obligations binding upon the Joint Venture.

The Joint Venture is registered to do business in the State of Wisconsin and in the Republic of El Salvador, Central America.

Investment in El Salvador Mining Projects

During the fiscal year, the Company has advanced funds, performed services, and allocated its general and administrative costs to the Joint Venture.

As of March 31, 2008 and 2007, the Company, Sanseb and three of the Company’s subsidiaries have invested (including carrying costs) the following in its Joint Venture:

	2008	2007
The Company’s advances (net of gold sale proceeds) since 09/22/87	$71,399,367	$62,975,723
The Company’s initial investment in the Joint Venture	3,508,180	3,508,180
Sanseb’s investment in the Joint Venture	3,508,180	3,508,180
Sanseb’s investment in the mining projects and amount due to the Company	51,526,354	46,802,101
Total:	1	116,794,184
Advances by the Company’s three subsidiaries	590,265	590,265
Combined total investment	$130,532,346	$117,384,449

Exploration Activity

The Company had no significant activity at the SSGM site from February 1978 through January 1987 due to the civil unrest in El Salvador.  The present status is that, the Company, since January 1987, and thereafter, the Joint Venture, since September 1987, have completed certain of the required mining pre-production preliminary stages in the effort to locate and evaluate minable and proven gold ore reserve area, and the Company is active in attempting to obtain adequate financing at acceptable terms and conditions for the proposed open-pit, heap-leaching operations at the SSGM and to commence the production of gold and silver at its SCMP.  The Joint Venture plans to resume its exploration and expansion program to identify and develop gold ore reserves in the area surrounding the SSGM.  Presently, it is completing the erection of its cone crushing system, performing minor rehabilitation repairs to its San Cristo bal Mill and Plant, and performing exploration in targeted areas.  On February 24, 2003, the Ministry of Economy’s Director of El Salvador Department of Hydrocarbons and Mines (DHM) granted an exploration license referred to as the “New San Sebastian Exploration License” which area includes and encompasses the existing SSGM.  Also the Company is currently in the process of exploring two of the formerly operated gold mines in this exploration area.  On May 25, 2004, the Government of El Salvador (GOES) granted another exploration license which is referred to as the “Nueva Esparta” and includes eight formerly operated gold/silver mines.  Exploration has commenced on the Montemayor Mine, the La Joya Mine, the Tabanco Mine, the La Lola Mine, and other formerly operated mines included in this license.

Mineral San Sebastian S.A. de C.V. (“Misanse”)

(a)  Misanse Corporate Structure

The SSGM real estate is owned by and leased to the Joint Venture by Misanse, a Salvadoran-chartered corporation.  The Company owns 52% of the total of Misanse’s issued and outstanding common shares.  Approximately 100 El Salvador, Central American, and United States’ citizens own the balance.

(b)  SSGM Mining Lease

On January 14, 2003, the Company entered into an amended and renewed 30-year lease agreement with Mineral San Sebastian Sociedad Anomina de Capital Variable (Misanse) pursuant to the approval of the Misanse shareholders and Misanse directors at a meeting held on January 12, 2003.  The renewed lease is for a period of thirty (30) years commencing on the date that the Company received its Renewed San Sebastian Gold Mine Exploitation Concession, hereinafter identified as the “Renewed SSGM,” from the DHM.  The lease is automatically extendible for one or more equal periods.  The Company will pay to Misanse for the rental of this real estate the sum of five percent of the sales of the gold and silver produced from this real estate, however, the payment will not be less than $343.00 per month.  The Company has the right to assign this lease without prior notice or permission from Misanse.  This l ease is pledged as collateral for loans made by related parties (Notes 6 and 7).

(c)  One Exploitation and Two Exploration Mineral Concessions/Licenses issued by the Government of El Salvador

Renewed San Sebastian Gold Mine Exploitation Concession under El Salvador Agreement Number 591 dated May 20, 2004 and delivered on June 4, 2004 (Renewed SSGM) - approximately 1.2306 square kilometers (304 acres) located in the Department of La Union, El Salvador, Central America

On September 6, 2002, at a meeting held with the El Salvadoran Minister of Economy and the DHM, it was agreed to submit an application for the Renewed SSGM for a 30-year term and to simultaneously cancel the concession obtained on July 23, 1987.  On September 26, 2002, the Company filed this application.  On February 28, 2003 (received March 3, 2003) the DHM admitted to the receipt of the application and the Company proceeded to file public notices as required by Article 40 of the El Salvadoran Mining Law and its Reform (MLIR).  On April 16, 2003, the Company’s El Salvadoran legal counsel filed with the DHM notice that it believed that it complied with the requirements of Article 40, and that there were no objections; and requested that the DHM make its inspection as required by MLIR Article 42.  An inspection by the DHM was made.  The Company then provided a bond which was subsequently renewed for a period of three years beginning on February 17, 2006; it was required by the DHM to protect third parties against any damage caused from the mining operations; it simultaneously paid the annual surface tax.  On August 29, 2003 the Office of the Ministry of Economy formally presented the Company with a twenty-year Renewed SSGM which was dated August 18, 2003.  On May 20, 2004 (delivered June 4, 2004) the Government of El Salvador under this Agreement Number 591 extended the exploitation concession for a period of thirty (30) years.  This Renewed SSGM replaces the collateral that the same lenders held with the previous concession.  On or about September 13, 2006, the El Salvador Ministry of the Environment delivered to Commerce’s El Salvadoran legal counsel its revocation of the environmental permits issued for the SSGM exploitation concession and the SCMP.  This Company’s legal counsel on December 6, 2006, filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice two complaints relating to this matter.  (See the Company’s discussion in the section entitled “Environmental Matters.”) These legal proceedings are pending.

New SSGM Exploration License under El Salvador Resolution Number 27 (New SSGM) - approximately 40.7694 square kilometers (10,070 acres) located in the Departments of La Union and Morazan, El Salvador, Central America

On October 20, 2002, the Company applied to the Government of El Salvador through the DHM for the New San Sebastian Exploration License, which covers an area of 41 square kilometers and includes approximately 1.2306 square kilometers of the Renewed SSGM Exploitation Concession.  The New San Sebastian Exploration License is in the jurisdiction of the City of Santa Rosa de Lima in the Department of La Union and in the Nueva Esparta in the Department of Morazan, Republic of El Salvador, Central America.  On February 24, 2003, the DHM issued the New SSGM for a period of four years starting from the date following the notification of this resolution which was received on March 3, 2003.  The New SSGM may be extended for two two-year periods, or for a total of eight years.  It is presently in the process of receiving an extension of time from the GOES.  Besides the San Sebastian Gold Mine, the follow ing three other formerly operative gold and silver mines included in the New SSGM are being explored:  the La Lola Mine, the Santa Lucia Mine, and the Tabanco Mine.

Nueva Esparta Exploration License (Nueva Esparta) under El Salvador Resolution No. 271 - approximately 45 square kilometers (11,115 acres) located in the Departments of La Union and Morazan, El Salvador, Central America

On or about October 20, 2002, the Company filed an application with the Government of El Salvador through the DHM for the Nueva Esparta, which consists of 45 square kilometers north and adjacent to the New SSGM.  This rectangular area is in the Departments of La Union (east) and Morazan (west) and in the jurisdiction of the City of Santa Rosa de Lima, El Salvador, Central America.  On May 25, 2004 (received June 4, 2004) the Government of El Salvador under Resolution Number 271 issued the exploration license for a period of four years with a right to request an additional four year extension.  An important observation is that these mines form a belt of mineralization following a fault line from the SSGM to the Montemayor Mine for a distance of approximately five miles.  Included in the Nueva Esparta are eight other formerly operated gold and silver mines known as:  the Grande Mine, the Las Piñas Mine, the Oro Mine, the Montemayor Mine, the Bañadero Mine, the Carrizal Mine, the La Joya Mine and the Copetillo Mine.

El Salvador Mineral Production Fees

As of July 2001, a series of revisions to the El Salvador Mining Law offer to make exploitation more attractive.  The principal change is that the fee payable to the GOES has been reduced to two percent of the gross gold and silver receipts.

35

SCMP Land and Building Lease

On November 12, 1993, the Joint Venture entered into an agreement with Corporacion Salvadorena de Inversiones (“Corsain”), an El Salvadoran governmental agency, to lease for a period of ten years, approximately 166 acres of land and certain buildings on which its gold processing mill, plant and related equipment (the SCMP) are located, and which is approximately 15 miles west of the SSGM site.  The basic annual lease payment was U.S. $11,500, payable annually in advance, unless otherwise amended, and subject to an annual increase based on the annual United States’ inflation rate.  As agreed, a security deposit of U.S. $11,500 was paid on the same date and this deposit was subject to increases based on any United States’ inflationary rate adjustments.

On April 26, 2004, a three-year lease, which includes an automatic additional three-year extension subject to Corsain’s review, was executed by and between Corsain and the Company.  This lease is retroactive to November 12, 2003 and the monthly lease payments are $1,418.51 plus the El Salvadoran added value tax.  The lease is subject to an annual increase based on the U.S. annual inflationary rate adjustments, and is in the process of being renewed.  The SCMP is strategically located to process ore from other nearby mining projects.

On March 25, 2008 a nineteen-month lease retroactive to November 12, 2006 was executed by and between Corsain and the Company.  The total lease payment for this nineteen-month period is $18,608.21.  Reference is made to Exhibit 10.16 for a copy of this lease.  The lease was renewed on June 12, 2008 for a six-month period to expire on December 11, 2008.

Modesto Mine

Real Estate

The Company, through its Chairman, owns 63 acres of land which are a key part of the Modesto Mine that is located near the city of El Paisnal, El Salvador.  This real estate is subject to a mortgage and promissory note and is pledged as collateral to certain parties described in Notes 6 and 7.

Montemayor Mine

The Joint Venture has obtained permission from a number of property owners to enter their property for the purpose of exploring, exploiting and developing the property and then if feasible to mine and extract minerals from this property.  This property is located 14 miles northwest of the SCMP, six miles northwest of the SSGM, and about two miles east of the city of San Francisco Gotera in the Department of Morazan, El Salvador.

(5)  Synopsis of Real Estate Ownership and Leases

The Company’s 52%-owned subsidiary, Misanse, owns the 1,470 acre SSGM site located near the city of Santa Rosa de Lima in the Department of La Union, El Salvador.  Other real estate ownership or leases in El Salvador are as follows:  the Company, through its Chairman, owns approximately 63 acres at the Modesto Mine; and the Joint Venture leases the SCMP land and buildings on which its mill, plant and equipment are located.  In addition, the Joint Venture from time to time has entered into term agreements with others to have access to other properties.  Payment for these agreements is based on the production of gold payable in the form of royalties.  The Company also leases on a month-to-month basis approximately 4,032 square feet of office space in Milwaukee, Wisconsin.

(6)  Notes Payable and Accrued Interest

	03/31/08	03/31/07
Related Parties Mortgage and promissory notes to related parties, interest ranging from one percent to four percent over prime rate, but not less than 16%, payable monthly, due on demand, using the Misanse lease, real estate and all other assets owned by the Company,  its subsidiaries and the Joint Venture as collateral. (Note 7)	$19,433,730	$16,410,397
Other Short-term notes and accrued interest (March 31, 2008, $199,038 and March 31, 2007, $177,379) issued to other non related parties, interest rates of varying amounts, in lieu of actual cash payments and includes a mortgage on a certain parcel of land pledged as collateral located in El Salvador.	334,038	312,379
Total:	$19,767,768	$16,722,776

(7)  Related Party Transactions

The Company, in an attempt to preserve cash, had prevailed on its late President to accrue his salary for the past 26.58 years, including vacation pay, for a total of $3,455,786 and $3,351,515 at March 31, 2008 and 2007, respectively.

In addition, with the consent and approval of the Directors, the late President of the Company, as an individual and not as a Director or Officer of the Company, entered into the following financial transactions with the Company, the status of which is reflected as of March 31, 2008 and 2007:

The amount of cash funds which the Company has borrowed from its late President from time to time, together with accrued interest, amounts to $13,354,281 and $11,372,962 at March 31, 2008 and 2007, respectively; the 2008 interest was $1,992,171 and the 2007 interest was $1,695,286.  To evidence this debt, the Company has issued to its late President a series of open-ended, secured, on-demand promissory notes, with interest payable monthly at the prime rate plus two percent, but not less than 16% per annum.

The Company had borrowed an aggregate of $1,429,871 and $1,216,540 at March 31, 2008 and 2007, respectively, including accrued interest, from the Company’s late President’s Rollover Individual Retirement Account (ELM RIRA).  The 2008 interest was $213,331 and the 2007 interest was $192,210.  These loans are evidenced by the Company’s open-ended, secured, on-demand promissory note, with interest payable monthly at the prime rate plus four percent per annum, but not less than 16% per annum.

In order to satisfy the Company’s cash requirements from time to time, the Company’s late President has sold or pledged as collateral for loans, shares of the Company’s common stock owned by him.  In order to compensate its late President for selling or pledging his shares on behalf of the Company, the Company has made a practice of issuing him the number of restricted shares of common stock equivalent to the number of shares sold or pledged, plus an additional number of shares equivalent to the amount of accrued interest calculated at the prime rate plus three percent per annum and payable monthly.  The Company receives all of the net cash proceeds from the sale or from the pledge of these shares.  The Company did not borrow any common shares during this fiscal year.  The share loans, if any, are all in accordance with the terms and conditions of Director-approved, open-ended loan agreemen ts dated June 20, 1988, October 14, 1988, May 17, 1989, and April 1, 1990.

On February 16, 1987, the Company granted its late President, by unanimous consent of the Board of Directors, compensation in the form of a bonus in the amount of two percent of the pre-tax profits realized by the Company from its gold mining operations in El Salvador, payable annually over a period of twenty years commencing on the first day of the month following the month in which gold production commences.

The late President, as an individual, and not as a Director or Officer of the Company, presently owns a total of 467 Misanse common shares.  There are a total of 2,600 Misanse common shares issued and outstanding.

Also with the consent and approval of the Directors, a company in which the late President has a 55% ownership, General Lumber & Supply Co., Inc. (GLSCO), entered into the following agreements, and the status is reflected as of March 31, 2008:

The Company leased approximately 4,032 square feet on a month-to-month basis for its corporate headquarters’ office; the monthly rental charge was $2,789.  The same related company provides administrative services, use of its vehicles, and other property, as required by the Company.

In lieu of cash payments for the office space rental and for the consulting, administrative services, etc., these amounts due are added each month to this related company’s open-ended, secured, on-demand promissory note issued by the Company.

In addition, this related company does from time to time use its credit facilities to purchase items needed for the Company or for the Joint Venture’s mining needs.

This related company has been issued an open-ended, secured, on-demand promissory note, which amounts to $3,242,264 and $2,673,457 at March 31, 2008 and 2007, respectively; the 2008 interest was $478,493 and the 2007 interest was $370,996.  The annual interest rate is four percent plus the prime rate, but not less than 16%, and it is payable monthly.

The Company’s Directors have consented and approved the following transactions of which the status of each are reflected as of March 31, 2008 and 2007:

The late President’s wife’s Rollover Individual Retirement Account (SM RIRA) has the Company’s open-ended, secured, on-demand promissory note in the sum of $994,866 and $846,436 at March 31, 2008 and 2007, respectively; the 2008 interest was $148,430 and the 2007 interest was $124,939.  The annual interest rate is three percent plus the prime rate, but not less than 16%, and it is payable monthly.

The Directors also have acknowledged that the wife of the late President is to be compensated for her consulting fees due to her from October 1, 1994 through September 30, 2000 or 72 months at $2,800 a month, and thereafter at $3,000 per month.  The Company owes her as an individual and as a consultant, the sum of $471,600 and $435,600 at March 31, 2008 and 2007, respectively, for services rendered from October 1994.

36

The second oldest son of the late President and his son’s wife have the Company’s open-ended, on-demand promissory note in the sum of $293,308 and $249,548 at March 31, 2008 and 2007, respectively; the 2008 interest was $43,760 and the 2007 interest was $37,138.  The annual interest rate is three percent plus the prime rate, but not less than 16%, and it is payable monthly.

The Law Firm which represents the Company in which the second oldest son of the late President is a principal is owed the sum of $454,443.75 for 2,019.75 hours of legal services rendered from July 1980 through February 29, 2008.  By agreement on the date of payment, these fees are to be adjusted to commensurate with the current hourly fees charged by the Law Firm.

The current President, who has controlling ownership of a company called Circular Marketing, Inc., has the Company’s open-ended, secured, on-demand promissory note in the sum of $51,454 and $102,181 at March 31, 2008 and 2007, respectively; the 2008 interest was $10,728 and the 2007 interest was $1,454.  The annual interest rate is four percent plus the prime rate, but not less than 16%, and it is payable monthly.

The late President's half brother has a promissory note in the sum of $16,958 as of March 31, 2008, which bears interest at an annual rate of 16% payable monthly.  The 2008 interest was $1,958.

The Directors, by their agreement, have deferred cash payment of their Director fees beginning on January 1, 1981, until such time as the Company’s operations are profitable.  Effective from October 1, 1996, the Director fees are $1,200 for each quarterly meeting and $400 for attendance at any other Directors’ meeting.  The Executive Committee Director fees are $400 for each meeting.  The Directors and Officers have an option to receive cash at such time as the Company has profits and an adequate cash flow, or to at any time exchange the amount due to them for the Company’s common shares.  The Chairman/President does not receive any Director fees.  All of the accrued amount due for Director fees during this fiscal year were exchanged for common stock in March of 2008.  The other salary accruals as of March 31, 2008 are $52,616 compared to $126,053 for March 31, 2007.

(8)  Commitments

Reference is made to Notes 2, 4, 5, 6, 7, 10, 11, 12, 13 and 16.

(9)  Income Taxes

At March 31, 2008, the Company and its subsidiaries, excluding the Joint Venture, have estimated net operating losses remaining in a sum of approximately $13,123,892, which may be carried forward to offset future taxable income; the net operating losses expire at various times up until the year 2022.

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes.  Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss, tax credit carry-forwards, and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

37

	March 31
Deferred Tax Assets:	2008	Rate	2007	Rate
Net Operating Loss Carry-forwards	$  4,462,123	34%	$ 3,619,772	34%
Valuation Allowance for Deferred Tax Assets	(4,462,123)	(34%)	(3,619,772)	(34%)
Net Deferred Tax Assets:	$              0	0	$              0	0

The components of current income tax expense as of March 31, 2008, 2007 and 2006 respectively are as follows:

	As of March 31
	2008	2007	2006
Current federal tax expense	$               0	$               0	$               0
Current state tax expense	$               0	$               0	$               0
Change in NOL benefits	$   (842,351)	$     (58,887)	$   (646,200)*
Change in valuation allowance	$    842,351	$      58,887	$    646,200
Income tax expense	$               0	$               0	$               0

*The March 31, 2006 net operating tax loss includes $591,200 restatement from prior years.

(10)  Description of Securities

a.  Common Stock

The Company’s Wisconsin Certificate of Incorporation effective as of April 1, 1999 authorizes the issuance of 50,000,000 shares of common stock, $0.10 par value per share of which 30,715,869 and 27,778,596 shares were issued and outstanding as of March 31, 2008 and 2007.  Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the shareholders.  Holders of common stock have no cumulative voting rights.  Holders of shares of common stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the Board of Directors in its discretion, from funds legally available therefore.  In the event of a liquidation, dissolution or winding up of the Company, the holders of shares of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities.  Holders of common stock have no pr eemptive rights to purchase the Company’s common stock.  There are no conversion rights or redemption or sinking fund provisions with respect to the common stock.  All of the issued and outstanding shares of common stock are validly issued, fully paid and non-assessable.

b.  Preferred Stock

There were no preferred shares issued and outstanding for the periods ending March 31, 2008 or 2007.

The Company’s Wisconsin Certificate of Incorporation authorizes the issuance of 250,000 shares of preferred stock, $0.10 par value.

The preferred shares are issuable in one or more series.  If issued, the Board of Directors is authorized to fix or alter the dividend rate, conversion rights (if any), voting rights, rights and terms of redemption (including any sinking fund provisions), redemption price or prices, liquidation preferences and number of shares constituting any wholly unissued series of preferred shares.

38

c.  Stock option activity:

	03/31/08 ----------------------------		03/31/07 ----------------------------		03/31/06 -----------------------------
	Option Shares	Weighted Average Price	Option Shares	Weighted Average Price	Option Shares	Weighted Average Price
Outstanding, beg. yr.	0	N/A	0	N/A	0	N/A
Granted	0	N/A	0	N/A	0	N/A
Exercised	0	N/A	0	N/A	0	N/A
Forfeited	0	N/A	0	N/A	0	N/A
Expired	0	N/A	0	N/A	0	N/A
Outstanding, end of yr.	0	N/A	0	N/A	0	N/A

There were no stock options issued or outstanding as of March 31, 2008 or 2007.

d.  Stock Rights - To The Late President

Reference is made to note 7, Related Party Transactions, of the Company’s financial statements which disclose the terms and conditions of the share loans to the Company by the late President and the interest which is payable to him by the Company’s issuance of its restricted common shares.

Any share interest payable to the late President is for shares loaned to the Company and/or for such shares loaned or pledged for collateral purposes, or for unpaid interest, from time to time, all in accordance with the terms and conditions of Director-approved, open-ended loan agreements dated June 20, 1988, October 14, 1988, May 17, 1989 and April 1, 1990.

e.  Share Loans - Others

A series of borrowings of the Company’s common shares were made from time to time under the provision that the owners would sell said shares as the Company’s designee, with the proceeds payable to the Company.  In exchange, the Company agreed to pay these shares loaned within 31 days or less by issuing its restricted common shares, together with interest payable in restricted common shares payable at a negotiated rate of interest normally payable in advance for a period of one year.  As of March 31, 2008, there were no shares due to other parties for shares borrowed or for interest payment on the borrowed shares.

f.  S.E.C. Form S-8 Registration

On June 7, 2006, the Company declared effective its sixth Securities and Exchange Commission Form S-8 Registration Statement No. 333-134805 under the Securities Act of 1933, as amended, and registered 3,000,000 of the Company’s $0.10 par value common shares for the purpose of distributing shares pursuant to the plan contained in such registration.  A total of 1,107,580 of these shares were issued during the fiscal year ending March 31, 2007 and 932,273 shares were issued during this fiscal year, leaving a balance of 960,147 unissued Form S-8 common shares.

39

g.  Commerce Group Corp. Employee Benefit Account (CGCEBA)

This account was established for the purpose of compensating the Company’s employees for benefits such as retirement, severance pay, and all other related compensation that is mandatory under El Salvadoran labor regulations, and/or as determined by the Officers of the Corporation.  The Directors provide the Officers of the Company with the authority to issue its common shares to the CGCEBA on an as needed basis.  Under this plan, payment can be made to any employee of the Company or the Company’s subsidiaries.  The CGCEBA has sold some of the shares issued to the CGCEBA from time to time during this fiscal year to meet its obligations primarily to its El Salvadoran employees.  As of April 1, 2007, 986,655 common shares remained in the account.  During this fiscal period no shares were added and 186,655 shares were sold, leaving a balance of 800,000 common shares as of March 31, 2008.

(11)  Litigation

There is no pending litigation in the United States.  However, in the Republic of El Salvador, Central America, the Company’s El Salvadoran legal counsel on December 6, 2006, filed a complaint with the El Salvadoran Supreme Court Administrative Division claiming that the El Salvadoran Office of the Ministry of Environment and Natural Resources (MARN) has revoked two of its El Salvadoran environmental permits for mining exploitation, without any prior notice, without a right to a hearing and the right of due process, based on misguided assertions, and contrary to El Salvadoran law.  In addition, the Company’s legal counsel stated that there is a lack of legal foundation for the sanctions and excess authority exercised by MARN.  Reference is made to Exhibit 10.20 of the Company’s Form 10-K/A for its fiscal year ended March 31, 2007, for an English translation of that complaint.  There has bee n no amount accrued for litigation as of March 31, 2008 or March 31, 2007.

(12)  Certain Concentrations and Concentrations of Credit Risk

The Company is subject to concentrations of credit risk in connection with maintaining its cash primarily in two financial institutions for the amounts in excess of levels.  One is insured by the U.S. Federal Deposit Insurance Corporation.  The other is an El Salvadoran banking institution which the Company uses to pay its El Salvadoran obligations.  The Company considers the U.S. institution to be financially strong and does not consider the underlying risk at this time with its El Salvadoran bank to be significant.  To date, these concentrations of credit risk have not had a significant effect on the Company’s financial position or results of operations.

The Company is not subject to credit risk in connection with any hedging activities as it has never hedged any of its gold production.  If the Company changes its policies, then it will only use highly-rated credit worthy counterparties, therefore it should not anticipate non-performance.

When in production the Company sold its gold and silver to one customer.  Given the marketability and liquidity of the precious metals being sold and because of the large pool of qualified buyers for gold and silver the Company believes that the loss of its customer could be quickly replaced without any adverse affect.

40

(13)  Commitments and Contingencies

Environmental Compliance

Based upon current knowledge, the Company believes that it is in compliance with the U.S. and El Salvadoran environmental laws and regulations as currently promulgated.  However, the exact nature of environmental control problems, if any, which the Company may encounter in the future cannot be predicted, primarily because of the increasing number, complexity and changing character of environmental requirements that may be enacted or of the standards being promulgated by governmental authorities.  The Company has filed a lawsuit with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice.  Reference is made to Exhibit 10.20 of the Company’s Form 10-K/A for its fiscal year ended March 31, 2007, for a copy of such filing.

Environmental Guarantees

In connection with the issuance of environmental permits, the Company has provided the Government of El Salvador with the following guarantees on March 15, 2006:  three-year guarantees expiring on March 15, 2009 were issued by Seguros del Pacifico, S.A., an El Salvadoran insurance company, on behalf of the Company to the Ministry of Environment and Natural Resources for the Renewed SSGM Exploitation Concession.

In connection with the Renewed SSGM Exploitation Concession, on February 17, 2006, a three-year, third-party liability guarantee (bond) expiring on February 17, 2009 in the sum of $42,857.14 was issued by Seguros del Pacifico, S.A. on behalf of the Company as required to the Ministry of Economy’s Office of the Department of Hydrocarbons and Mines.

The El Salvadoran Environmental Law, Decree No. 233, 1998 and the General Regulation of the Environmental Law specify the following:

·

An environmental permit from the Ministry of Environment and Natural Resources (MARN) based on the approval of an Environmental Impact Assessment, is required for exploitation and industrial processing of minerals and fossil fuels;

·

The environmental permit requires the Company to implement prevention, minimization or compensation measures established in the environmental management program, which is a component of the Environmental Impact Assessment;

·

A financial security (bond) is required that covers the total cost of the facilities or investment required to comply with the environmental management plans included in the Environmental Impact Assessment.

Numeric standards for ambient air quality; emissions from fixed sources; maximum environmental noise levels; water quality and effluent limits are specified in various norms and regulation, including the Special Regulation of Technical Norms for Environmental Quality Decree No. 40, and the Special Regulations of Wastewater Decree No. 39.

The El Salvadoran Department of Hydrocarbons and Mines (DHM) requires environmental permits to be issued in connection with the application of the Renewed SSGM.  The issuance of these permits is under the jurisdiction of the El Salvador Ministry of Environment and Natural Resources Office (MARN).  On October 15, 2002, MARN issued an environmental permit under Resolution 474-2002 for the SCMP.  On October 20, 2002, MARN issued an environmental permit under Resolution 493-2002 for the Renewed SSGM Exploitation area, which on March 15, 2006, was renewed for a three-year period expiring March 15, 2009.

On or about September 18, 2006, without any prior notice, the El Salvador Minister of Environment’s office delivered to Commerce’s El Salvadoran legal counsel, its revocation of its San Sebastian Gold Mine Exploitation environmental permit which was the only permit of its kind issued in the Republic of El Salvador.  The Company’s El Salvadoran legal counsel after reviewing the two letters (one for the SSGM and the other for the SCMP) concluded that the revocation of these permits was arbitrary, illegal and unconstitutional and he so stated in his September 20, 2006 letter to the Minister of Environment’s office; a second letter was submitted by our legal counsel as the Minister of Environment’s office requested a response to the first letter.  As of October 28, 2006, no responses were received.  The Company has filed a lawsuit with the El Salvadoran Court of Administrative Litigation o f the Supreme Court of Justice stating that the Ministry of Environment has not provided any prior notice, has not provided a right to a hearing and the right of due process, based its opinion on misguided assertions, and contrary to El Salvadoran law.  In addition, the Company’s legal counsel stated that there is a lack of legal foundation for the sanctions and excess authority exercised by MARN.  Reference is made to Exhibit 10.20 of the Company’s Form 10-K/A for its fiscal year ended March 31, 2007, for a copy of such filing.

Lease Commitments

The month-to-month lease of its offices is described in note (7) Related Party Transactions of the Notes to the Consolidated Financial Statements.  The lease of the SCMP and other mining leases are described in note (4) Commerce/Sanseb Joint Venture (“Joint Venture”) and in note (5) Synopsis of Real Estate Ownership and Leases of the Notes to the Consolidated Financial Statements.

Confirmation Agreements with Related Parties

The Company, with Directors’ approval, as of the end of each fiscal year, enters into confirmation agreements with Edward L. Machulak, as an individual, and not as a Director or Officer of the Company, the Edward L. Machulak Rollover Individual Retirement Account, (Edward L. Machulak’s Widow Sylvia Machulak will now act on his behalf), General Lumber & Supply Co., Inc., and Sylvia Machulak as an individual and for the Sylvia Machulak Rollover Individual Retirement Account, John E. and Susan R. Machulak, Edward A. Machulak and Circular Marketing, Inc. to acknowledge the amount due, the collateral pledged, and other pertinent facts and understandings between the parties as of the fiscal year end.  These agreements are filed annually as exhibits to the SEC Form 10-K.

Intercompany Transactions and Other Transactions

In addition to the transactions between the Company and General Lumber, and certain individuals who also are Directors and Officers of the Company and between the Company and its Officers, Directors and affiliates, the Company has and continues to have transactions with its subsidiaries, San Luis Estates, Inc., Universal Developers, Inc., Homespan Realty Co., Inc., Ecomm Group Inc., San Sebastian Gold Mines, Inc., Mineral San Sebastian S.A. de C.V., and substantial transactions with the Commerce/Sanseb Joint Venture.

The Company advances funds, allocates expenses, and charges for disbursements made to the Joint Venture.  The Joint Venture in turn capitalizes all of these advances, allocations, expenses, and disbursements (excluding interest expense).

The Company has adopted a policy to maintain a separate accounting of the amount due to it from Sanseb and the Joint Venture.  This independent accounting will be maintained by the Company to reflect its investment and the amount due to it.  This record will become the official document for future Joint Venture cash distributions.  All of the advances and interest earned will be paid to the Company before the distribution to others of any of the Joint Venture’s profits or cash flow.

The Company maintains a separate accounting for the funds or credits advanced to the Joint Venture and for the interest charged which is at the prime rate quoted on the first business day of each month plus four percent and said interest is payable monthly.  These advances, together with interest, are to be paid to the Company prior to the distribution of any of the Joint Venture profits, and are reflected as follows:

Company Net Advances to the Joint Venture during the fiscal year ended March 31, 2008

	Total Advances	Interest Charges
Beginning balance	$62,975,723	$43,853,373
Advances during fiscal year ended March 31, 2008	8,423,644	7,780,057
Total Company’s net advances	71,399,367	51,633,430
Advances by three of the Company’s subsidiaries	590,265	0
Total net advances as of March 31, 2008	$71,989,632	$51,633,430

(14)  Business Segments

The Statement of Financial Accounting Standards No. 131 (SFAS 131), Disclosures about Segments of an Enterprise and Related Information became effective for fiscal years beginning after December 15, 1997.  SFAS 131 establishes standards for the way that public business enterprises determine operating segments and report information about those segments in annual financial statements.  SFAS 131 also requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders.  SFAS 131 further establishes standards for related disclosure about products and services, geographic areas, and major customers.

41

The Company presently has two reportable segments:  mining and other.  The mining segment was engaged in the exploitation and exploration of precious metals.  The production processing is temporarily suspended while the exploration continues.  The other segments are those activities that are combined for reporting purposes.

	Mining *1 El Salvador, Central America	Corporate Headquarters
Year ended March 31, 2008
Sales and revenues	$                0	$              0
Depreciation & amortization	0	0
Operating income (loss)	0	(3,052,198)
Total assets	26,247,593	237,409
Capital expenditures	534,817	0
Year ended March 31, 2007
Sales and revenues	$                0	$              0
Depreciation & amortization	0	0
Operating income (loss)	0	(2,616,821)
Total assets	25,610,222	278,843
Capital expenditures	645,830	0
Year ended March 31, 2006
Sales and revenues	$                0	$              0
Depreciation & amortization	0	0
Operating income (loss)	0	(2,209,424)
Total assets	24,969,022	267,784
Capital expenditures	688,060	0

^*1  

Its major customer for the refining and purchase of gold is a refinery located in the United States.  The price of gold is dependent on the world market price over which the Company, the refinery or any other single competitor do not have control.

42

(15) Quarterly Financial Data

The following is a tabulation of the quarterly operating results for the years ended March 31, 2008 and 2007:

Fiscal year ended 3/31/08	Operating Revenues	Net (Loss)	Per Share Basic/Diluted Net Income/(Loss)
First quarter 06/30/07	$0	$  (725,670)	$0
Second quarter 09/30/07	$0	$  (790,564)	$0
Third quarter 12/31/07	$0	$  (766,188)	$0
Fourth quarter 03/31/08	$0	$  (769,776)	$0
	$0	$(3,052,198)	$0
Fiscal year ended 3/31/07	Operating Revenues	Net (Loss)	Per Share Basic/Diluted Net Income/(Loss)
First quarter 06/30/06	$0	$   (609,362)	$0
Second quarter 09/30/06	$0	$   (644,562)	$0
Third quarter 12/31/06	$0	$   (671,954)	$0
Fourth quarter 03/31/07	$0	$   (690,943)	$0
	$0	$(2,616,821)	$0

(16)  Uncertainties

The Company has experienced recurring losses since the gold mining operations have been placed on a hold status.  The Company has had no revenues during this phase and is therefore dependent upon raising capital to continue operations.  During the past five years, the Company and its shareholders and officers have been able to provide the capital necessary to continue the operations of the Company, the maintenance of the mine and related equipment, and perform limited exploration on its exploration license areas.  However, there is no guarantee that the Company can continue to provide required capital and to keep the Company’s assets maintained.  If the Company was unable to raise sufficient funds, the Company would be unable to pay the employees maintaining its mining equipment in El Salvador, which could result in loss of assets or impairment thereof.  The financial statements do not include a ny adjustments that might result from the outcome of this uncertainty.

Management believes it has sufficient availability of funds through loans and other business arrangements from its principal officer, its directors, through accredited investors, and other sources to continue its operations for the coming year.  Management is also entertaining joint venture opportunities, and other financing in order to generate sufficient capital to begin the open-pit, heap-leaching operation at the San Sebastian Gold Mine and to resume its production facilities at its San Cristobal Mill and Plant.  The substantial increase in the price of gold--the highest in 25 years--has expanded investors’ interest.

43

(17)  Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has recurring net losses, negative working capital and negative cash flow from operations, and is dependent upon raising capital to continue operations.  The Company’s ability to continue as a going concern is subject to its ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of its securities, increasing sales or obtaining loans and grants from various financial institutions where possible.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9(a).  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company is not an accelerated filer and therefore is not required to provide a report of management on its internal controls over financial reporting.  However, the Company maintains a system of disclosure controls and procedures.  The term “disclosure controls and procedures,” as defined by regulations of the Securities and Exchange Commission (“SEC”), means controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits to the SEC under the Securities Exchange Act of 1934, as amended (the “Act”), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports th at it files or submits to the SEC under the Act is accumulated and communicated to the Company’s management, including its principal executive officer and its principal financial officer, as appropriate to allow timely decisions to be made regarding required disclosure.  The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K and have concluded that the Company’s disclosure controls and procedures are effective as of the date of such evaluation.

Changes in Internal Control Over Financial Reporting

Effective for the reporting year ended March 31, 2008, the Company is not an accelerated filer and it is not required to provide a report of management on our internal control over financial reporting.

There have been no changes in our internal control over financial reporting for the period ended March 31, 2008 that have materially effected, or are reasonable likely to materially affect the internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies and procedures may deteriorate.

Item 9(b).  Other Information

None.

PART III

Item 10.  Directors and Executive Officers of the Registrant

The information required by this item appears under the captions “Officers and Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” and will be included in the Company’s definitive proxy statement for the 2008 Annual Meeting of the Shareholders to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year and is incorporated by reference in this Annual Report on Form 10-K.

Item 11.  Executive Compensation

The information called for by Item 11 is incorporated by reference from information under the caption “Executive Compensation” in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A no later than 120 days after the close of its fiscal year and is incorporated by reference in the Annual Report on Form 10-K.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The information called for by Item 12 is incorporated by reference from information under the captions “Security Ownership of Directors and Management” and “Principal Shareholders” in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A no later than 120 days after the close of its fiscal year.

Item 13.  Certain Relationships and Related Transactions

The information called for by Item 13 is incorporated by reference from information under the caption “Certain Relationships and Related Transactions” in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A no later than 120 days after the close of its fiscal year and is incorporated by reference in the Annual Report on Form 10-K.

Item 14.  Principal Accounting Fees and Services

The information called for by Item 14 is incorporated by reference from the information under the caption “Relationship with Independent Accountants and Audit Fees” and is to be included in the Company’s definitive proxy statement for the 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A no later than 120 days after the close of its fiscal year and is incorporated by reference in the Annual Report on Form 10-K.

44

PART IV

Item 15.  Exhibits and Financial Statement Schedules

(a)

The following is a list of documents filed as part of this Report and are included herewith (*) or have been filed previously:

(1)

Financial Statements (included in Item 8 of this Report)

·

Report of Independent Registered Public Accounting Firm

·

Consolidated Balance Sheets - March 31, 2008 and 2007

·

Consolidated Statements of Operations - Years Ended March 31, 2008, 2007 and 2006

·

Consolidated Statements of Changes in Stockholders’ Equity - Years Ended March 31, 2008, 2007 and 2006

·

Consolidated Statements of Cash Flows - Years Ended March 31, 2008, 2007 and 2006

·

Notes to Consolidated Financial Statements

(1)

Financial Statement Schedules:  All Schedules are omitted because the information called for is not applicable, is not required, or because the financial information is set forth in the financial statements or notes thereto.

(2)

Schedule IV (1) Indebtedness of Related Parties

(3)

Schedule IV (2) Indebtedness to Related Parties

(4)

Reports on Form 8-K:

a.

On March 7, 2008, the Company filed a Securities and Exchange Commission Form 8-K disclosing that a news release was issued on the same date announcing that the Company entered into an agreement with Manti Holdings LLC to fund the San Sebastian Gold Mines.

b.

On March 11, 2008 the Company filed a Securities and Exchange Commission Form 8-K disclosing the general terms and conditions of the thirty-day option agreement by and between the Company and Manti Holdings LLC dated March 7, 2008.

c.

On April 10, 2008 the Company filed a Securities and Exchange Commission Form 8-K/A reporting the status of Manti Holdings LLC and stating that the March 7, 2008 agreement may be amended to reflect any new terms and conditions.

45

(1)

Exhibits:

The exhibit numbers noted by an asterisk (*) indicate exhibits actually filed with this Annual Report on Form 10-K.  All other exhibits are incorporated by reference into this Annual Report on Form 10-K.

Exhibit Number	Description of Exhibit
3.1	Articles of Incorporation of the Company.   (Incorporated by reference to Exhibit 3.(i) of the Company’s S.E.C. Form 8-K filed on April 13, 1999.)
3.2	Amended By-laws of the Wisconsin Chartered Company dated May 10, 2004.  (Incorporated by reference to Exhibit 3.2 of the Company’s S.E.C. Form 10-K for the year ended March 31, 2006.)
3.3	The Articles of Amendment of the Wisconsin corporation increasing the authorized shares to 50,000,000 common shares.  (Incorporated by reference to Exhibit 3.(iii) of the Company’s S.E.C. Form 8-K filed on April 13, 1999.)
3.4	The Articles of Merger from a Delaware corporation to a Wisconsin corporation effective April 1, 1999 at 12:01 a.m. (Central Time).  (Incorporated by reference to Exhibit 2.(i) of the Company’s S.E.C. Form 8-K filed on April 13, 1999.)
3.5	A Certificate of Merger filed with the Office of the Secretary of State of Delaware merging into a Wisconsin corporation.  (Incorporated by reference to Exhibit 2.(ii) of the Company’s S.E.C. Form 8-K filed on April 13, 1999.)
4	Instruments defining the rights of security holders, including indentures.
9	Voting Trust Agreement--not applicable.
10	Material contracts.
10.1	Bonus compensation, Edward L. Machulak, February 16, 1987.  (Incorporated by reference to Exhibit 7 of the Company’s Form 10-K for the year ended March 31, 1987.)
10.2	Loan Agreement and Promissory Note, Edward L. Machulak, June 20, 1988. (Incorporated by reference to Exhibit 10.2 of the Company’s Form 10-K for the year ended March 31, 1993.)
Exhibit Number	Description of Exhibit
10.3	Loan Agreement and Promissory Note, Edward L. Machulak, October 14, 1988. (Incorporated by reference to Exhibit 10.3 of the Company’s Form 10-K for the year ended March 31, 1993.)
10.4	Loan Agreement and Promissory Note, Edward L. Machulak, May 17, 1989. (Incorporated by reference to Exhibit 10.4 of the Company’s Form 10-K for the year ended March 31, 1993.)
10.5	Loan Agreement and Promissory Note, Edward L. Machulak, April 1, 1990. (Incorporated by reference to Exhibit 10.5 of the Company’s Form 10-K for the year ended March 31, 1993.)
10.6	Letter Agreement, Edward L. Machulak, October 10, 1989.   (Incorporated by reference to Exhibit 10.6 of the Company’s Form 10-K for the year ended March 31, 1993.)
10.7	Loan Agreement and Promissory Note dated January 19, 1994.  (Incorporated by reference to Exhibit 10.10 of the Company’s Form 10-K for the year ended March 31, 1995.)
10.8	John E. Machulak and Susan R. Robertson, Loan Agreement and Promissory Note dated June 3, 1994.  (Incorporated by reference to Exhibit 10.14 of the Company’s Form 10-K for the year ended March 31, 1995.)
10.9	Lillian M. Skeen, Loan Agreement and Open Ended On Demand Promissory Note dated June 26, 1997. (Incorporated by reference to Exhibit 10.9 of the Company’s Form 10-K for the year ended March 31, 1998.)
10.10	Robert C. Skeen, Loan Agreement and Open Ended On Demand Promissory Note dated June 26, 1997. (Incorporated by reference to Exhibit 10.10 of the Company’s Form 10-K for the year ended March 31, 1998.)
10.11	Robert C. Skeen, Loan Agreement and Open Ended On Demand Promissory Note dated January 20, 1998. (Incorporated by reference to Exhibit 10.11 of the Company’s Form 10-K for the year ended March 31, 1998.)
Exhibit Number	Description of Exhibit
10.12	John E. Machulak and Susan R. Robertson, Loan Agreement and Open Ended On Demand Promissory Note dated March 6, 1998. (Incorporated by reference to Exhibit 10.12 of the Company’s Form 10-K for the year ended March 31, 1998.)
10.13	Lillian M. Skeen, Loan Agreement and Open Ended On Demand Promissory Note dated May 21, 1998. (Incorporated by reference to Exhibit 10.13 of the Company’s Form 10-K for the year ended March 31, 1998.)
10.14	Edward A. Machulak, Loan Agreement and Open Ended On Demand Promissory Note dated March 6, 1998. (Incorporated by reference to Exhibit 10.14 of the Company’s Form 10-K for the year ended March 31, 1999.)
10.15	Three-year lease agreement by and between the Company and Corporacion Salvadorena de Inversiones (“Corsain”), an El Salvadoran governmental agency, covering the real estate known as the San Cristobal Mill and Plant (SCMP) executed on April 26, 2004, retroactive to November 13, 2003. (Incorporated by reference to Exhibit 10.15 of the Company’s Form 10-K for the year ended March 31, 2004.)
10.16*	Nineteen-month lease agreement by and between the Company and Corporacion Salvadorena de Inversiones (“Corsain”), an El Salvadoran governmental agency, covering the real estate known as the San Cristobal Mill and Plant (SCMP) executed on March 25, 2008, retroactive to November 12, 2006.   Lease renewed on June 12, 2008 for a six-month period to expire on December 11, 2008.
10.17	Renewed January 14, 2003 thirty (30) year lease agreement by and between the Company and Mineral San Sebastian S.A. de C.V. (Misanse) covering the 1,470-acre San Sebastian Gold Mine real estate.  (Incorporated by reference to Exhibit 3 of Exhibit B of Exhibit 99.3 of the Company’s Form 10-K for the year ended March 31, 2003.)
Exhibit Number	Description of Exhibit
10.18	Exploitation concession/license issued by the Government of El Salvador to the Company for a period of 30 years under Agreement Number 591 dated May 20, 2004.  This concession/license permits the Company to develop, extract and sell precious metals from a 304-acre site and is identified as the Renewed San Sebastian Gold Mine (Renewed SSGM).  (Incorporated by reference to Exhibit 10.17 of the Company’s Form 10-K for the year ended March 31, 2006.)
10.19	Exploration concession/license issued by the Government of El Salvador to the Company for a period of four years with a four-year renewable extension under Resolution Number 27 dated February 24, 2003.  This concession/license permits the Company to explore an area of 10,070 acres for precious metals and is identified as the New San Sebastian Gold Mine Exploration Concession/License (New SSGM).  (Incorporated by reference to Exhibit 10.16 of the Company’s Form 10-Q for the period ended September 30, 2003.
10.20	Exploration concession/license issued by the Government of El Salvador to the Company for a period of four years with a four-year renewable extension under Resolution Number 271 dated May 25, 2004.  This concession/license permits the Company to explore an area of 11,115 acres for precious metals and is identified as the Nueva Esparta Exploration Concession/License (Nueva Esparta).  (Incorporated by reference to Exhibit 10.19 of the Company’s Form 10-K for the year ended March 31, 2006.)
10.21	Lawsuit Company filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice.  (Incorporated by reference to Exhibit 10.20 of the Company’s Form 10-K for the year ended March 31, 2007.)
Exhibit Number	Description of Exhibit
11*	Schedule of Computation of Net Income Per Share
21*	Subsidiaries and Joint Venture of the Company
31.1*	Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.0	Additional Exhibits
99.1*	Confirmation agreement, General Lumber & Supply Co., Inc., May 30, 2008, incorporated herein by reference.
99.2*	Confirmation Agreement, Sylvia Machulak, Widow, on behalf of Edward L. Machulak, deceased, May 30, 2008, incorporated herein by reference.
99.3*	Confirmation Agreement, Sylvia Machulak, Widow, on behalf of Edward L. Machulak, deceased, for the Edward L. Machulak Rollover Individual Retirement Account, May 30, 2008, incorporated herein by reference.
99.4*	Confirmation Agreement, Sylvia Machulak as an individual and for her Rollover Individual Retirement Account, May 30, 2008, incorporated herein by reference.
99.5*	Confirmation Agreement, Edward A. Machulak as an individual and as President of Circular Marketing, Inc., May 30, 2008, incorporated herein by reference.
99.6*	Confirmation Agreement, John E. Machulak and Susan R. Robertson as individuals, May 30, 2008, incorporated herein by reference.
Exhibit Number	Description of Exhibit
99.7*	Confirmation Agreement, the Law Firm of Machulak, Robertson & Sodos, S.C., May 30, 2008, incorporated herein by reference.
99.8	Concession Agreement Assignment to the Company by Misanse (Incorporated by reference to Exhibit 1 of the Company’s Form 10-K for the year ended March 31, 1988.)
99.9	Individual financial statements of majority-owned companies have been omitted because most of these companies are inactive and do not constitute a significant or material contribution to the Company.
99.10	S.E.C. Form S-8 Registration Statement No. 333-134805 filed under the Securities Act of 1933, as amended and declared effective June 7, 2006, registering three million of its common shares, ten cents par value.  (Incorporated by reference as this S.E.C. Form S-8 Registration Statement had been filed on June 7, 2006.)
99.11	Consent of Independent Registered Public Accounting Firm to incorporate by reference in the S.E.C. Form S-8 Registration Statement No. 333-134805 filed under the Securities Act of 1933 as amended and declared effective June 7, 2006, the Independent Registered Public Accounting Firm’s report dated May 24, 2006 relating to the financial statements of the Company for the years ended March 31, 2006 and 2005.  (Incorporated by reference to Exhibit 99.7(a) of the Company’s Form 10-K for the year ended March 31, 2006.)

46

COMMERCE GROUP CORP.

FORM 10-K - MARCH 31, 2008

PART IV

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on July 14, 2008.

COMMERCE GROUP CORP.

(Company)

By:

/s/ Edward A. Machulak

Edward A. Machulak

Chairman of the Board of Directors,

Member of Executive Committee,

Member of Audit Committee

Director-Emeritus, President and

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons, on behalf  of the Company and in the capacities and on the dates indicated:

Name	Office	Date
/s/ Edward A. Machulak Edward A. Machulak	Chairman of the Board of Directors, Member of Executive Committee, Member of Audit Committee, Director-Emeritus, President and Chief Executive Officer	July 14, 2008
/s/ Sidney Sodos Sidney Sodos	Director, Vice President and Treasurer	July 14, 2008
/s/ John H. Curry John H. Curry	Director and Member of Audit Committee, Executive Vice President	July 14, 2008

47

EX-11

                              EXHIBIT 11

EX-21

                                 EXHIBIT 21

              SUBSIDIARIES AND JOINT VENTURE OF THE COMPANY

As of March 31, 2008, the Company discloses its position of ownership of

the following entities:

                                           Charter/Joint Venture

Included in the                            ---------------------

Consolidated Statements    % Ownership       Place         Date

-------------------------  -----------       -----         ----

Homespan Realty Co., Inc.

 ("Homespan")                  100.0       Wisconsin     02/12/1959

Ecomm Group Inc.

 ("Ecomm")                     100.0       Wisconsin     06/24/1974

San Luis Estates, Inc.

 ("SLE")                       100.0       Colorado      11/09/1970

San Sebastian Gold Mines,

 Inc. ("Sanseb")                82.5       Nevada        09/04/1968

Universal Developers, Inc.

 ("UDI")                       100.0       Wisconsin     09/28/1964

Commerce/Sanseb Joint

 Venture ("Joint Venture")      90.0       Wisconsin &   09/22/1987

                                           El Salvador

Not included in the

Consolidated Statements

--------------------------

Mineral San Sebastian,

 S.A. de C.V.  ("Misanse")      52.0       El Salvador   05/08/1960

EX-31

                                  EXHIBIT 31.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

                    ----------------------------------------

PURSUANT TO RULE 13(a)-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

------------------------------------------------------------------------------

     AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

     --------------------------------------------------------------------

I, Edward A. Machulak, certify that:

1.   I have reviewed this annual report on Form 10-K of Commerce Group

     Corp.;

2.   Based on my knowledge, this report does not contain any untrue statement

     of a material fact or omit to state a material fact necessary to make the

     statements made, in light of the circumstances under which such

     statements were made, not misleading with respect to the period covered

     by this annual report;

3.   Based on my knowledge, the financial statements, and other financial

     information included in this report, fairly present in all material

     respects the financial condition, results of operations and cash flows of

     the registrant as of, and for, the periods presented in this

     annual report;

4.   The registrant's other certifying officer(s) and I are responsible for

     establishing and maintaining disclosure controls and procedures (as

     defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal

     control over financial reporting (as defined in Exchange Act Rules

     13a-15(f) and 15d-15(f)) for the registrant and have:

     a)  designed such disclosure controls and procedures, or caused such

         disclosure controls and procedures to be designed under our

         supervision, to ensure that material information relating to the

         registrant, including its consolidated subsidiaries, is made known to

         us by others within those entities, particularly during the period in

         which this report is being prepared;

     b)  designed such internal controls over financial reporting, or caused

         such internal control over financial reporting to be designed under

         our supervision, to provide reasonable assurance regarding the

         reliability of financial reporting and the preparation of financial

         statements for external purposes in accordance with generally

         accepted accounting principles;

     c)  evaluated the effectiveness of the registrant's disclosure controls

         and procedures and presented in this report our conclusions about the

         effectiveness of the disclosure controls and procedures, as of the

         end of the period covered by this annual report based on such

         evaluation; and

     d)  disclosed in this report any change in the registrant's internal

         control over financial reporting that occurred during the

         registrant's most recent fiscal quarter that has materially affected,

         or is reasonably likely to materially affect, the registrant's

         internal control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based

     on our most recent evaluation of internal control over financial

     reporting, to the registrant's auditors and the audit committee of the

     registrant's board of directors (or persons performing the equivalent

     functions):

     a)  all significant deficiencies and material weaknesses in the design or

         operation of internal controls over financial reporting which are

         reasonably likely to adversely affect the registrant's ability to

         record, process, summarize and report financial information; and

     b)  any fraud, whether or not material, that involves management or other

         employees who have a significant role in the registrant's internal

         control over financial reporting.

Date:  July 14, 2008          /s/ Edward A. Machulak

                              -----------------------------------------------

                              Edward A. Machulak

                              Chairman, President and Chief Executive Officer

EX-31

                                   EXHIBIT 31.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

                    -----------------------------------------

PURSUANT TO RULE 13(a)-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

------------------------------------------------------------------------------

      AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

      --------------------------------------------------------------------

I, Sidney Sodos, certify that:

1.   I have reviewed this annual report on Form 10-K of Commerce Group

     Corp.;

2.   Based on my knowledge, this report does not contain any untrue statement

     of a material fact or omit to state a material fact necessary to make the

     statements made, in light of the circumstances under which such

     statements were made, not misleading with respect to the period covered

     by this annual report;

3.   Based on my knowledge, the financial statements, and other financial

     information included in this report, fairly present in all material

     respects the financial condition, results of operations and cash flows of

     the registrant as of, and for, the periods presented in this

     annual report;

4.   The registrant's other certifying officer(s) and I are responsible for

     establishing and maintaining disclosure controls and procedures (as

     defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal

     control over financial reporting (as defined in Exchange Act Rules

     13a-15(f) and 15d-15(f)) for the registrant and have:

     a)  designed such disclosure controls and procedures, or caused such

         disclosure controls and procedures to be designed under our

         supervision, to ensure that material information relating to the

         registrant, including its consolidated subsidiaries, is made known to

         us by others within those entities, particularly during the period in

         which this report is being prepared;

     b)  designed such internal controls over financial reporting, or caused

         such internal control over financial reporting to be designed under

         our supervision, to provide reasonable assurance regarding the

         reliability of financial reporting and the preparation of financial

         statements for external purposes in accordance with generally

         accepted accounting principles;

     c)  evaluated the effectiveness of the registrant's disclosure controls

         and procedures and presented in this report our conclusions about the

         effectiveness of the disclosure controls and procedures, as of the

         end of the period covered by this annual report based on such

         evaluation; and

     d)  disclosed in this report any change in the registrant's internal

         control over financial reporting that occurred during the

         registrant's most recent fiscal quarter that has materially affected,

         or is reasonably likely to materially affect, the registrant's

         internal control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based

     on our most recent evaluation of internal controls over financial

     reporting, to the registrant's auditors and the audit committee of the

     registrant's board of directors (or persons performing the equivalent

     functions):

     a)  all significant deficiencies and material weaknesses in the design or

         operation of internal controls over financial reporting which are

         reasonably likely to adversely affect the registrant's ability to

         record, process, summarize and report financial information; and

     b)  any fraud, whether or not material, that involves management or other

         employees who have a significant role in the registrant's internal

         control over financial reporting.

Date:  July 14, 2008                  /s/ Sidney Sodos

                                      --------------------------------------

                                      Sidney Sodos

                                      Vice President, Treasurer

                                      and Chief Financial Officer

EX-32

                                EXHIBIT 32.1

                  CERTIFICATION OF CHIEF EXECUTIVE OFFICER

     PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

                      OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the

Annual Report of Commerce Group Corp. (the "Company") on Form 10-K for the

fiscal year ended March 31, 2008 (the "Report") for the

purpose of complying with Rule 13a-14(b) of the Securities Exchange Act of

1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the

United States Code.

I, Edward A. Machulak, Chairman, President and Chief Executive Officer

of Commerce Group Corp., (the "Company"), hereby certify, pursuant to

18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002, that:

1.   the Form 10-K of the Company for the fiscal year ended

     March 31, 2008, (the "Form 10-K"), fully complies with the

     requirements of Section 13(a) or 15(d) of the Securities Exchange Act of

     1934; and

2.   the information contained in the Form 10-K fairly presents, in all

     material respects, the financial condition and results of operations of

     the Company.

Date:  July 14, 2008            /s/ Edward A. Machulak

                               -----------------------------------------------

                               Edward A. Machulak

                               Chairman, President and Chief Executive Officer

EX-32

                                EXHIBIT 32.2

                 CERTIFICATION OF CHIEF FINANCIAL OFFICER

     PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

                   OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the

Annual Report of Commerce Group Corp. (the "Company") on Form 10-K for the

fiscal year ended March 31, 2008 (the "Report") for the

purpose of complying with Rule 13a-14(b) of the Securities Exchange Act of

1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the

United States Code.

I, Sidney Sodos, Vice President, Treasurer and Chief Financial

Officer of Commerce Group Corp., (the "Company"), hereby certify,

pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of

the Sarbanes-Oxley Act of 2002, that:

1.   the Form 10-K of the Company for the fiscal year ended

     March 31, 2008, (the "Form 10-K"), fully complies with the

     requirements of Section 13(a) or 15(d) of the Securities Exchange Act of

     1934; and

2.   the information contained in the Form 10-K fairly presents, in all

     material respects, the financial condition and results of operations of

     the Company.

Date:  July 14, 2008                      /s/ Sidney Sodos

                                          -----------------------------------

                                          Sidney Sodos

                                          Vice President, Treasurer

                                          and Chief Financial Officer

EX-99.1 CHARTER

                                 EXHIBIT 99.1

                            COMMERCE GROUP CORP.

                           6001 NORTH 91ST STREET

                         MILWAUKEE, WISCONSIN  53225

                              (414) 462-5310

                           FAX (414) 462-5312

                     E-MAIL info@commercegroupcorp.com

                     WEBSITE www.commercegroupcorp.com

                      AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)

                      AND/OR HOMESPAN REALTY CO., INC. (Homespan)

                      AND/OR ECOMM GROUP INC. (Ecomm)

                      AND/OR SAN LUIS ESTATES, INC. (SLE)

                      AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)

                      AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)

                      ALL LOCATED AT THE SAME ADDRESS

May 30, 2008

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

6001 North 91st Street

Milwaukee, Wisconsin  53225

Dear Mrs. Machulak:

At today's Commerce Group Corp. (Commerce) Directors' meeting, the

Directors were informed about the annual confirmation, disclosure and

status letter that you requested from Commerce, its subsidiaries, its

affiliates, and the Joint Venture and to establish and confirm the amount

due and the collateral pledged along with any other Commerce obligations

or agreements made to General Lumber & Supply Co., Inc. (GLSCO and/or

Lender)  as of Commerce's fiscal year ended March 31, 2008.  Today,

Commerce's Directors, by unanimous consent, approved, ratified and

confirmed the contents of this letter and authorized me to submit its

understanding of your status with Commerce, which is as follows:

1.   Promissory Notes and Other Obligations

     a.  An open-ended, secured, on-demand promissory note no. 3 which

         was originally issued to GLSCO on December 31, 1981 in the sum

         of $16,836.37 and has been open-ended since that date and is to

         include all future advances, services, charges and interest on a

         monthly basis.  Pursuant to Commerce's Directors' approval on

         October 1, 1990, the interest rate on this note was increased to

         a rate of 4% over the prime rate base established by the First

         National Bank of Chicago, Chicago, Illinois.  Beginning with

         April 1, 1994, the interest rate is 4% over the prime rate base

         established by the First National Bank of Chicago, Chicago,

         Illinois, (then Bank One; now the prime rate published in the

         Wall Street Journal), but not less than 16% per annum.  The

         interest is payable monthly and the total amount due to GLSCO on

         this promissory note as of March 31, 2008 is $3,242,263.69.  

         Commerce has

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 2 of 14 Pages

         renewed this promissory note as of March 31, 2008 and a copy is

         attached (Exhibit A).  A schedule including all of the

         transactions pertaining to the activities relating to this note

         during the fiscal year ended March 31, 2008 is also attached

         (Exhibit A-1).

         Commerce is no longer issuing monthly Notes for the payment of

         interest, etc., but pursuant to our understanding, Commerce is

         augmenting all additions and advances made by GLSCO, and it will

         deduct any payments or credits made by Commerce to the current

         open-ended, secured, on-demand, outstanding Notes issued or

         obligations owed to GLSCO and Commerce will provide an annual

         accounting and confirmation letter.

         On May 9, 2005, Commerce's Directors authorized its Officers to

         issue renewed annual note(s) (Exhibit B of the May 9, 2005

         confirmation letter) so that the Lender will have a current

         substituted dated debt instrument.  The Directors acknowledged

         that the issuance of note(s) for each transaction are too

         cumbersome and are not practicable to manage.  Also, the length

         of time involved and the number of transactions make it

         impractical to devote the time and effort to issue a note for

         each transaction. However, beginning with the Company's fiscal year

         ended March 31, 2007, the Directors are including the following

         as Lender(s):  John E. Machulak and Susan R. Robertson, husband

         and wife (M&R), the Machulak, Robertson & Sodos, S.C. Law Firm

         (Law Firm), Circular Marketing, Inc. (CMI) and Edward A.  

         Machulak as an individual (EAM).  Therefore, the Directors have

         unanimously agreed to continue to embrace this resolution, which

         was adopted on May 9, 2005:

              WHEREAS, in the past 20 years or more the following

         parties: General Lumber & Supply Co., Inc. (GLSCO); Edward L.

         Machulak  as an individual and not as a Director or Officer of

         Commerce (ELM); the Edward L. Machulak Rollover Individual

         Retirement Account (ELM RIRA), the Sylvia Machulak Rollover

         Individual Retirement Account (SM RIRA), and Sylvia Machulak, as

         a consultant and as an individual (SM), hereafter collectively

         and individually identified as the Lender(s), have accounted for

         advancing cash funds, earning accrued interest, and for

         appropriate credit which was reconciled to the open-ended,

         secured, on-demand notes(s); and

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 3 of 14 Pages

              WHEREAS, the Directors desire to minimize the record

         keeping in these transactions without jeopardizing, diminishing,

         altering, changing or losing any rights that the Lenders have by

         changing the procedures in handling the recording of any

         notes(s) issued or to be issued; and

              WHEREAS, in order to provide an easier accounting facility

         by renewing the notes(s) on an annual basis to coincide with the

         Company's fiscal year (which presently ends on March 31) and to

         incorporate said renewed note(s) with the annual confirmation

         agreement(s); and

              WHEREAS, prior to the change to issue substituted renewed

         note(s), the initial promissory note(s) were considered to be

         open-ended, secured, on-demand and the additions and deductions

         were recognized by separate accounting records; therefore, be it

                   RESOLVED, That the Directors authorize and empower the

              Officers to substitute and issue renewed consolidated

              promissory note(s) at the end of each fiscal year beginning

              with the Company's fiscal year ended March 31, 2005 to the

              following: General Lumber & Supply Co., Inc.  (GLSCO);

              Edward L. Machulak as an individual and not as a Director

              or Officer of Commerce (ELM); the Edward L. Machulak

              Rollover Individual Retirement Account (ELM RIRA), the

              Sylvia Machulak Rollover Individual Retirement Account (SM

              RIRA), and Sylvia Machulak, as a consultant and as an

              individual (SM), hereafter collectively and individually

              identified as the Lender(s); and

                   BE IT FURTHER RESOLVED, That the Officers of the

              Company are authorized and empowered to assure the

              Lender(s) that by substituting and consolidating the

              existing note(s) and issuing the renewed note(s) on the

              last day of the Company's fiscal year beginning with March

              31, 2005 with the understanding that the intention is that

              the Lender(s) will not jeopardize, lose, diminish, risk,

              alter or change any rights, including the pledge of

              collateral, that are inherent with the initial note(s) by

              the issuance of annual renewed open-ended, secured,

              on-demand promissory note(s); and

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 4 of 14 Pages

                   BE IT FURTHER RESOLVED, That the Directors acknowledge

              that the only purpose of the change and substitution to

              issue annual renewed notes(s) is for the convenience,

              reduced accounting and reducing the paperwork involved; and

                   BE IT FURTHER RESOVED, That the Officers are

              authorized and empowered to perform any act that they deem

              necessary to accommodate the purpose of issuing annual

              renewed note(s).

     As of March 31, 2008, the following parties are collectively and

     individually identified as the Lender(s): General Lumber & Supply

     Co., Inc.  (GLSCO); Edward L. Machulak  as an individual and not as

     a Director or Officer of Commerce (ELM); the Edward L. Machulak

     Rollover Individual Retirement Account (ELM RIRA), the Sylvia

     Machulak Rollover Individual Retirement Account (SM RIRA), Sylvia

     Machulak, as a consultant and as an individual (SM), John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc. (CMI) and Edward A. Machulak as an individual (EAM).

     b.  Commerce leased approximately 3,100 square feet on a

         month-to-month basis for its corporate headquarter's office; the

         monthly rental charge was $2,145 since October 1, 1992.  As of

         December 1, 1995, Commerce increased the space it rents to 4,032

         square feet, and the monthly rental charge was increased to

         $2,789.  All other terms and conditions of the Amended October

         1, 1992 Lease Agreement remain the same.  (Reference is made to

         Exhibit B, December 1, 1995 Amended Lease Agreement, included in

         April 5, 1996 confirmation letter.) (Reference is made to

         Exhibit B, Lease Agreement, included in April 12, 1993

         confirmation letter.)

     c.  Commerce also acknowledges that it purchases on an open account

         from GLSCO from time to time materials, supplies etc. that it

         needs for itself or for the Joint Venture.  Some of the

         purchases are made through GLSCO because Commerce does not have

         the credit availability from the various sellers of goods,

         merchandise, etc. that is required by it or the Joint Venture.

         The amount due from time to time varies.  As of March 31, 2008,

         there is nothing due on this open account.

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 5 of 14 Pages

     d.  GLSCO from time to time has canceled part of its debt by the

         purchase of restricted Commerce common shares based on a price

         determined by the Directors or at a price sold to third party

         purchasers at an arms-length transaction.  There were no  

         transactions consummated during this fiscal year.

     e.  In order to provide continuity and to make an orderly transition

         of the Standing Rock Campground (SRC) operations, the parties

         agreed that Commerce would operate the SRC until such time that

         GLSCO would terminate this agreement.

         Commerce retained the profits earned from the SRC operations and

         the following describes the transactions that took place:

Fiscal year end                       Revenues      Expenses        Profit

                                      --------      --------        ------

March 31, 2002                     $ 73,364.97    $40,202.17    $33,162.80

March 31, 2003                       68,304.07     41,009.24     27,294.83

                                   -----------    ----------    ----------

  Balances                         $141,669.04    $81,211.41    $60,457.63

Interest July 1, 2001

 through March 31, 2003                                          11,918.31

April 1, 2003 Total Addition                                    ----------

 to GLSCO Note (GJ4-P2; Entry 4-2)                              $72,375.94

                                                                ==========

March 31, 2004                     $58,548.87     $37,956.32    $20,592.55

April 1, 2004 Entry GJ4-P1;                                     ==========

 Addition to GLSCO Note                                         $20,592.55

                                                                ==========

March 31, 2005                     $58,182.12     $37,093.47    $21,088.65

April 1, 2005 Entry GJ4-P1;                                     ==========

 Addition to GLSCO Note                                         $21,088.65

                                                                ==========

March 31, 2007                     $41,911.50     $38,972.05    $ 2,939.45

March 31, 2007;                                                 ==========

 Addition to GLSCO Note                                         $ 2,939.45

 (Adjustment will be made on April 1, 2008)                     ==========

March 31, 2008                     $40,453.86     $30,450.80    $10,003.06

March 31, 2008;                                                 ==========

 Addition to GLSCO Note                                         $10,003.06

 (Adjustment will be made on April 1, 2008)                     ==========

     f.  On April 1, 2008, the amounts due of $2,939.45 and $10,003.06 by

         Commerce to GLSCO will be transferred to the notes payable due

         to GLSCO.

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 6 of 14 Pages

2.   Collateral Pledged

     The collateral specifically pledged to GLSCO or as otherwise noted

     is as follows:

     a.  San Luis Estates, Inc. (SLE) Certificate No. 24 which is dated

         December 31, 1981, consisting of 48,645 common shares, $0.50 par

         value, being 50% of the total issued and outstanding shares.

         SLE and Commerce agree that no additional shares of any kind

         whatsoever of SLE will be issued as long as any monies are due

         to GLSCO.  Reference is made to Exhibit 3 included in the April

         9, 1990 confirmation letter.

     b.  Commerce/Sanseb Joint Venture (Joint Venture)

         Commerce and Sanseb agree that ELM (the other Lenders were

         included later) has as collateral, the assignment and pledge of

         all of their rights, titles, claims, remedies, and interest

         whatsoever in the Joint Venture which was formed on September

         22, 1987.  In the event of default, whatever interest Commerce

         and Sanseb have in the Joint Venture will be transferred to ELM

         and it will include whatever assets are owned by the Joint

         Venture, including, but not limited to the precious metal ore

         reserves.  Reference is made to Exhibit 5 included in the April

         9, 1990 confirmation letter.

     c.  Uniform Commercial Code Filing - all other specific assets

         An interest with ELM in filing financing statements under the

         Uniform Commercial Code by an assignment and pledge of all

         corporate assets, such as but not limited to the property of

         Commerce, Joint Venture, SLE, and Homespan, wherever located,

         now owned or hereafter acquired is as follows:  all accounts,

         all land contract receivables, contract rights, instruments and

         chattel paper; all inventory, all jewelry and precious stones,

         and all documents relating to inventory, including all goods

         held for sale, lease or demonstration, to be furnished under

         contracts of service, and raw materials, work in process and

         materials and supplies used or consumed in the business of

         Commerce, the Joint Venture, SLE, and Homespan; all office

         furniture, fixtures and all other equipment; all general

         intangibles, all stock and securities of any kind, and all

         rights, titles and interest in the Commerce Group Corp./San

         Sebastian Gold Mines, Inc. Joint Venture, and all additions and

         accessions to, all spare and repair parts, special tools,

         equipment and replacements for all returned or

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 7 of 14 Pages

         repossessed goods

         the sale or lease of which gave rise to, and all proceeds and

         products of the foregoing.  Reference is made to the Wisconsin

         Department of Financial Institutions Uniform Commercial Code

         filing, Exhibit 6, included in the April 9, 1990 confirmation

         letter, the renewed UCC-1 filing on December 23, 1996, Exhibit

         B, included in the April 14, 1997 confirmation letter, and the

         UCC-4 continuation filing on June 27, 2001 at 8:55 a.m., Filing

         #02078155 (Exhibit B of the May 13, 2002 confirmation letter).

         A UCC Financing Statement was electronically filed with the

         Wisconsin Department of Financial Institutions on January 5,

         2007 (Filing #070000277016).

     d.  Acknowledgement of previously recorded collateral provided to

         the Lenders

         Historical information - San Sebastian Gold Mine Concession

         GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM collectively and

         individually identified as the Lender(s), have been assigned on

         October 19, 1987, all of the rights, titles, claims, remedies

         and interest in the Joint Venture, and to the mine concession

         granted by the Government of El Salvador to Mineral San

         Sebastian, S.A. de C.V (Misanse) on July 23, 1987, and

         thereafter from time to time amended, and which Misanse then

         assigned to the Joint Venture on September 22, 1987.  This

         collateral specifically includes, but is not limited to, all of

         the San Sebastian Gold Mine (SSGM) precious metal ore reserves.  

         Commerce and the Joint Venture have the right to assign this and

         any subsequent concession agreement.  Reference is made to

         Exhibit 5 included in the April 9, 1990 confirmation letter.

         The following collateral has been previously assigned to the

         Lenders pursuant to resolutions adopted by the Directors:

         (1) Commerce/Sanseb Joint Venture (Joint Venture)

             Both Commerce and San Sebastian Gold Mines, Inc. have

             assigned all of the rights, title, claims, remedies and

             interest that each has in the Joint Venture to the Lenders.  

             Reference is made to Historical information - San Sebastian

             Gold Mine Concession.

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 8 of 14 Pages

         (2) New SSGM Exploration Concession/License (New SSGM) -

             approximately 40.7694 square kilometers (10,070 acres)

             Government of El Salvador Resolution No. 27.

             On October 20, 2002, the Company applied for the New SSGM,

             which covers an area of 42 square kilometers and includes

             approximately 1.2306 square kilometers of the Renewed SSGM.  

             The New SSGM is in the jurisdiction of the City of Santa

             Rosa de Lima in the Department of La Union and in the Nueva

             Esparta in the Department of Morazan, Republic of El

             Salvador, Central America.  On February 24, 2003, the El

             Salvador Department of Hydrocarbons and Mines (DHM) issued

             the New SSGM for a period of four years starting from the

             date following the notification of this resolution which was

             received on March 3, 2003.  The New SSGM may be extended for

             two two-year periods, or for a total of eight years.

             Besides the San Sebastian Gold Mine,  three other formerly

             operative gold and silver mines known as the La Lola Mine,

             the Santa Lucia Mine, and the Tabanco Mine are included in

             the New SSGM and are being explored.  The Company has

             complied as required by filing its annual activity report

             and it paid the annual surface tax.  This concession had

             been assigned collectively to all of the Lenders named

             herein on May 12, 2003 and the assignment was included in

             the May 12, 2003 confirmation agreement as Exhibit B.

         (3) Lease agreement by and between Mineral San Sebastian

             Sociedad Anomina de Capital Variable (Misanse) and Commerce

             dated January 14, 2003

             The term of this lease agreement coincides with the term of

             the Renewed San Sebastian Gold Mine Exploitation Concession

             and consists of 1,470 acres owned by Misanse.  This lease

             agreement has been assigned to all of the Lenders named

             herein on May 12, 2003 and the assignment was included in

             the May 12, 2003 confirmation agreement as Exhibit B.

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 9 of 14 Pages

         (4) Renewed San Sebastian Gold Mine Exploitation

             Concession/License (Renewed SSGM) - approximately 1.2306

             square kilometers (304 acres), Department of La Union, El

             Salvador, Central America (pledged and assigned as

             collateral on May 10, 2004) Government of El Salvador

             Agreement No. 591.

             On September 6, 2002, at a meeting held with the El

             Salvadoran Minister of Economy and the DHM, it was agreed to

             submit an application for the Renewed SSGM for a 30-year

             term and to simultaneously cancel the concession obtained on

             July 23, 1987.  On September 26, 2002, the Company filed

             this application.  On February 28, 2003 (received March 3,

             2003) the DHM admitted to the receipt of the application and

             the Company proceeded to file public notices as required by

             Article 40 of the El Salvadoran Mining Law and its Reform

             (MLIR).  On April 16, 2003, the Company's El Salvadoran

             legal counsel filed with the DHM notice that it believed

             that it complied with the requirements of Article 40, and

             that there were no objections; and requested that the DHM

             make its inspection as required by MLIR Article 42.  The

             Company then provided a bond which was required by the DHM

             to protect third parties against any damage caused from the

             mining operations, and it simultaneously paid the annual

             surface tax.  On August 29, 2003 the Office of the Ministry

             of Economy formally presented the Company with the

             twenty-year Renewed SSGM

             which was dated August 18, 2003.  This Renewed SSGM replaces

             the collateral that the same parties held with the previous

             concession.  On May 20, 2004 (delivered June 4, 2004) the

             Government of El Salvador, under their Agreement Number 591,

             extended the exploitation concession for a period of 30

             years.  A copy of the assignment dated May 10, 2004, is

             attached to the May 10, 2004 confirmation letter as Exhibit

             B and the Renewed SSGM agreement is attached to Exhibit B

             and referred to as Exhibit 1.

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 10 of 14 Pages

         (5) San Cristobal Mill and Plant (SCMP) three-year lease by and

             between Commerce and Corporacion Salvadorena de Inversiones

             (Corsain), an El Salvadoran governmental agency, executed on

             Monday, April 26, 2004, retroactive to November 13, 2003.

             Pledged and assigned as collateral on May 10, 2004.

             The renewed three-year SCMP lease for the property located

             near the City of El Divisadero was finalized and executed on

             Monday, April 26, 2004, and is retroactive to November 13,

             2003.  This May 10, 2004 assignment is included in the May

             10, 2004 confirmation letter as Exhibit B and the lease

             agreement is attached to Exhibit B and referred to as

             Exhibit 2.

             On March 25, 2008 a nineteen-month lease retroactive to

             November 12, 2006 was executed by and between Corsain and

             Commerce.  The lease was renewed on June 12, 2008 for a

             six-month period to expire on December 11, 2008.  Reference

             is made to Exhibit 10.16 of Commerce's Form 10-K for its

             fiscal year ended March 31, 2008 for a copy of this lease.

         (6) Nueva Esparta Exploration Concession/License (Nueva Esparta)

             - 45 square kilometers (11,115 acres) Resolution No. 271 -

             pledged and assigned as collateral on May 9, 2005.

             On or about October 20, 2002, the Company filed an

             application with the DHM for the Nueva Esparta Exploration

             Concession/License which consists of 45 square kilometers

             and is located north and adjacent to the New SSGM.  On May

             25, 2004 the Government of El Salvador, under their

             Resolution No. 271, issued the Nueva Esparta Exploration

             Concession/License for a period of four years starting from

             the date following the notification of this resolution which

             was received on June 4, 2004.  This concession/license may

             be extended for two two-year periods or for a total of eight

             years.  This rectangular area is in the Departments of La

             Union (east) and Morazan (west) and in the jurisdiction of

             the City of Santa Rosa de Lima, El Salvador, Central

             America.  Included in the Nueva Esparta are eight other

             formerly operated gold and silver mines known as:  the

             Banadero Mine, the

             Carrizal Mine, the Copetillo Mine, the Grande Mine, the La

             Joya Mine, the Las Pinas Mine, the Montemayor Mine, and the

             Oro Mine.  A copy of the assignment dated May 9, 2005 was

             attached to the May 9, 2005.

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 11 of 14 Pages

             confirmation letter as Exhibit C

             and the Nueva Esparta Exploration Concession was attached to

             Exhibit C and referred to as Exhibit 1.

         (7) Acknowledgment of collateral provided through March 31, 2008

             Commerce's Directors have on May 30, 2008 authorized and

             directed Commerce's Officers to assign all of the rights,

             titles, claims, remedies and interest in all of its assets

             that it has including any assets owned by the Joint Venture,

             to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from March

             31, 2007 to include M&R, the Law Firm, CMI and EAM,

             collectively and individually referred to as Lenders, as

             additional collateral for all of the outstanding loans and

             obligations as of March 31, 2008, including all future

             advances of any kind.

3.   Cross Pledge Collateral Agreement

     GLSCO, ELM, the ELM RIRA, the SM RIRA and SM individually are

     entitled to specific collateral that has been pledged to them by

     Commerce, its subsidiaries, affiliates and the Joint Venture.  Upon

     default by Commerce, or its subsidiaries or affiliates or the Joint

     Venture, then GLSCO, ELM, the ELM RIRA, the SM RIRA and SM have the

     first right to the proceeds from the specific collateral pledged to

     each of them.  Commerce, its subsidiaries, affiliates, and the Joint

     Venture also have cross-pledged the collateral without diminishing

     the rights of the specific collateral pledged to each of the

     following:  GLSCO, ELM, the ELM RIRA, the SM RIRA and SM.  The

     purpose and the intent of the cross pledge of collateral is to

     assure GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM, that each of

     them would be paid in full; thus, any excess collateral that would

     be available is for the purpose of satisfying any debts and

     obligations due to each of the named parties including M&R, the Law

     Firm, CMI and EAM.  The formula to be used (after deducting the

     payments made from the specific collateral) is to total all of the

     debts due to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from

     March 31, 2007 to include M&R, the Law Firm, CMI and EAM, and then

     to divide this total debt into each individual debt to establish

     each individual's percentage of the outstanding debt due.  This

     percentage then will be multiplied by the total of the excess

     collateral to determine the amount of proceeds each party should

     receive from the excess collateral.  Then the amount due to each of

     them would be distributed accordingly.

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 12 of 14 Pages

4.   Cancellation of Inter-Company Debts Upon Default

     Since certain of the collateral specifically or collectively pledged

     to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM and from March 31, 2007

     to include M&R, the Law Firm, CMI and EAM, consists of the common

     stock of Homespan, Ecomm, Sanseb, SLE, Misanse, UDI and the interest

     in the ownership of the Joint Venture, Commerce agreed, upon default

     of the payment of principal or interest to any of the individual

     Lender(s) mentioned herein, that it will automatically cancel any

     inter-company debts owed to Commerce by any of its wholly-owned

     subsidiaries or affiliates or the Joint Venture at such time as any

     of the stock or Joint Venture ownership is transferred to the

     collateral holders as a result of default of any promissory note.

5.   Guarantors

     This agreement further confirms that Commerce and all of the

     following are guarantors to the obligations due to GLSCO and to the

     loans made by GLSCO to Commerce:  Joint Venture, Homespan, Ecomm,

     SLE, Sanseb and UDI.  They jointly and severally guarantee payment

     of the note(s) that they caused to be issued and also agree that

     these note(s) may be accelerated in accordance with the provisions

     contained in the agreement and/or any collateral or mortgages

     securing these notes.  Also, Commerce, all of its subsidiaries and

     the Joint Venture agree to the cross pledge of collateral for the

     benefit of GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from March

     31, 2007 to include M&R, the Law Firm, CMI and EAM.  Reference is

     made to Exhibit 7 included in the April 9, 1990 confirmation letter.

6.   Re-Execution Agreement(s)

     In the event GLSCO deems that it is necessary or advisable for GLSCO

     to have Commerce re-execute any document(s) entered into, including,

     but not limited to the promissory note(s) or collateral

     agreement(s), Commerce will re-execute such document(s) reasonably

     required by GLSCO.  Commerce also acknowledges that Commerce may be

     liable to pay certain costs related to any of the transactions

     entered into with GLSCO.  If at a later date GLSCO determines that

     an error has been made in the payment of such costs to it then it

     may demand payment and Commerce does hereby agree to make such

     payment forthwith.  All requests for corrections of any errors

     and/or payment of costs shall be complied with by Commerce within

     seven (7) days of GLSCO's written request.   The failure of Commerce

     to comply with Commerce's obligation(s) hereunder shall constitute a

     default and shall entitle GLSCO

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 13 of 14 Pages

     to the remedies available for default under any provisions of the

     agreements including, but not limited to the promissory note(s)

     and/or the collateral pledge agreement(s) and/or any other Commerce

     obligation(s).

7.   Omissions

     Commerce believes that it has included all of its obligations,

     monies due and has listed all of the collateral due to GLSCO,

     however, since these transactions have taken place over  a long

     period of time in which changes could have taken place, it is

     possible that inadvertently some item(s), particularly collateral,

     could have been omitted.  If that should prove to be a fact, then

     Commerce, the Joint Venture, Homespan, Ecomm, SLE, Sanseb, and UDI

     agree that those omissions of collateral, if any, are meant to be

     included as collateral under this confirmation agreement.

If you are in agreement with the contents of this letter, please sign

below and return one copy to Commerce.

Very truly yours,

COMMERCE GROUP CORP.

/s/ Christine M. Wolski

Christine M. Wolski

Secretary

<PAGE>

Mrs. Sylvia Machulak

President

General Lumber & Supply Co., Inc.

May 30, 2008

Page 14 of 14 Pages

The contents of this letter are agreed by the following:

COMMERCE/SANSEB JOINT VENTURE            HOMESPAN REALTY COMPANY, INC.

as Guarantor (Joint Venture)             as Guarantor (Homespan)

/s/ Edward A. Machulak                   /s/ Edward A. Machulak

---------------------------------------  --------------------------------------

By:  Edward A. Machulak, Auth. Designee  By:  Edward A. Machulak, President

ECOMM GROUP INC.                         SAN LUIS ESTATES, INC.

as Guarantor (Ecomm)                     as Guarantor (SLE)

/s/ Edward A. Machulak                   /s/ Edward A. Machulak

---------------------------------------  --------------------------------------

By:  Edward A. Machulak, President       By:  Edward A. Machulak, President

SAN SEBASTIAN GOLD MINES, INC.           UNIVERSAL DEVELOPERS, INC.

as Guarantor (Sanseb)                    as Guarantor (UDI)

/s/ Edward A. Machulak                   /s/ Edward A. Machulak

---------------------------------------  --------------------------------------

By:  Edward A. Machulak, President       By:  Edward A. Machulak, President

Accepted by:

GENERAL LUMBER & SUPPLY CO., INC.

/s/ Sylvia Machulak

---------------------------------------

By:  Sylvia Machulak, President

Date:  May 30, 2008

<PAGE>

                         EXHIBIT A TO EXHIBIT 99.1

                          RENEWED PROMISSORY NOTE

Borrower: Commerce Group Corp.       Lender: General Lumber & Supply Co., Inc.

          6001 North 91st Street             6001 North 91st Street.

          Milwaukee, WI  53225               Milwaukee, WI  53225

Principal Amount:        $3,242,263.69

Initial Rate:            4.000% + prime rate, but not less than 16.000%

Date of Renewed Note:    March 31, 2008

PROMISE TO PAY.  COMMERCE GROUP CORP. ("Borrower") promises to pay to

GENERAL LUMBER & SUPPLY CO., INC. ("Lender"), or order, in lawful money

of the United States of America, the principal amount of Three Million Two

Hundred Forty Two Thousand Two Hundred Sixty Three and 69/100

Dollars  ($3,242,263.69), together with interest, paid monthly, on the

unpaid principal balance from March 31, 2008, until paid in full.

PAYMENT.  This is an open-ended, secured, on-demand payment, renewed

promissory note.  Interest is to be paid monthly.  The Lender, at its

discretion, can add the monthly interest due to the principal balance.

Unless otherwise agreed or required by applicable law, payments will be

applied first to any accrued unpaid interest; and then to principal.  The

annual interest rate for this Note is computed on a 365/360 basis; that

is, by applying the ratio of the annual interest rate over a year of 360

days, multiplied by the outstanding principal balance, multiplied by the

actual number of days the principal balance is outstanding and the

interest is payable monthly.  Borrower will pay Lender at Lender's

address shown above or at such other place as Lender may designate in

writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to

change from time to time based on changes in the prime rate as quoted in

the Wall Street Journal plus four percent, but not less than sixteen

percent per annum.  Borrower understands that Lender may make loans to

the Borrower based on other rates as well. The prime rate as of this date

is 5.250% per annum.  The interest rate to be applied to the unpaid

principal balance of this Note will be at a rate of 4.000 percentage

points over the prime rate, but not less than 16.000% per annum.  NOTICE:  

Under no circumstances will the interest rate on this Note be less than

16.000% per annum or more than the maximum rate allowed by applicable

law.

PREPAYMENT.  Borrower may pay without penalty all or a portion of the

amount owed earlier than it is due.  Early payments will not, unless

agreed to by Lender in writing, relieve Borrower of Borrower's obligation

to pay on demand, the entire amount due.  Rather, any payment will reduce

the principal balance due.  Borrower agrees not to send Lender payments

marked "paid in full," "without recourse," or similar language.  If

Borrower sends such a payment, Lender may accept it without losing any of

Lender's rights under this Note, and Borrower will remain obligated to

pay any further amount owed to Lender.

INTEREST AFTER DEFAULT.  Upon default, including failure to pay on

demand, Lender, at its option, may, if permitted under applicable law,

increase the variable interest rate on this Note to 6.000 percentage

points over the prime rate or over the 16.000% rate, whichever is higher.  

The interest rate will not exceed the maximum rate permitted by

applicable law.

DEFAULT.  Each of the following shall constitute an event of default

("Event of Default") under this Note:

     Payment Default.  Borrower fails to make any payment when demand is

     made under this Note.

     Other Defaults.  Borrower fails to comply with or to perform any

     other term, obligation, covenant or condition contained in this Note

     or in any of the related documents or to comply with or to perform

     any term, obligation, covenant or condition contained in any other

     agreement between Lender and Borrower.

<PAGE>

     Default in Favor of Third Parties.  Borrower or any Grantor defaults

     under any loan, extension of credit, security agreement, purchase or

     sales agreement, or any other agreement, in favor of any other

     creditor or person that may materially affect any of Borrower's

     property or Borrower's ability to repay this Note or perform

     Borrower's obligations under this Note or any of the related

     documents.

     False Statements.  Any warranty, representation or statement made or

     furnished to Lender by Borrower or on Borrower's behalf under this

     Note or the related documents is false or misleading in any material

     respect, either now or at the time made or furnished or becomes

     false or misleading at any time thereafter.

     Insolvency.  The dissolution or termination of Borrower's existence

     as a going business, the insolvency of Borrower, the appointment of

     a receiver for any part of Borrower's property, any assignment for

     the benefit of creditors, any type of creditor workout, or the

     commencement of any proceeding under any bankruptcy or insolvency

     laws by or against Borrower.

     Creditor or Forfeiture Proceedings.  Commencement of foreclosure or

     forfeiture proceedings, whether by judicial proceeding, self-help,

     repossession or any other method, by any creditor of Borrower or by

     any governmental agency against any collateral securing the loan.  

     However, this Event of Default shall not apply if there is a good

     faith dispute by Borrower as to the validity or reasonableness of

     the claim which is the basis of the creditor or forfeiture

     proceeding and if Borrower gives Lender written notice of the

     creditor or forfeiture proceeding and deposits with Lender monies or

     a surety bond for the creditor or forfeiture proceeding, in an

     amount determined by Lender, in its sole discretion, as being an

     adequate reserve or bond for the dispute.

     Events Affecting Guarantor.  Any of the preceding events occurs with

     respect to any Guarantor of any of the indebtedness or any Guarantor

     disputes the validity of, or liability under, any guaranty of the

     indebtedness evidenced by this Note.

     Adverse Change.  A material adverse change occurs in Borrower's

     financial condition, or Lender believes the prospect of payment or

     performance of this Note is impaired.

     Insecurity.  Lender in good faith believes itself insecure.

LENDER'S RIGHTS.  Upon default or upon demand, the Lender may declare the

entire unpaid principal balance on this Note and all accrued unpaid

interest immediately due, and then Borrower will pay that amount.

COLLATERAL.  Borrower acknowledges this Note is secured by all security

agreements, guarantees, mortgages, and other security instruments

previously granted, contemporaneously granted, and granted in the future,

and it has the collateral and other rights all as contained in a certain

confirmation agreement dated May 10, 2004 between all parties contained

therein, and as subsequently amended and updated from time to time.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help

collect this Note if Borrower does not pay.  Borrower will pay Lender

that amount.  This includes, subject to any limits under applicable law,

Lender's attorneys' fees and Lender's legal expenses, whether or not

there is a lawsuit, including attorneys' fees, expenses for bankruptcy

proceedings (including efforts to modify or vacate any automatic stay or

injunction), and appeals.  If not prohibited by applicable law, Borrower

also will pay any court costs, in addition to all other sums provided by

law.

GOVERNING LAW.  This Note will be governed by, construed and enforced in

accordance with the laws of the State of Wisconsin.  This Note has been

accepted by Lender in the State of Wisconsin.

<PAGE>

OTHER LOAN AGREEMENTS.  If Borrower and Lender have either previously or

contemporaneously entered into a Loan or Confirmation Agreements, it is

agreed that this Note is subject to the terms and conditions of such Loan

or Confirmation Agreements.  For purpose of this provision, Loan or

Confirmation Agreements shall include, but not be limited to, a Business

Loan Agreement or any other Loan or Confirmation Agreements.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon

Borrower, and upon Borrower's successors and assigns, and shall inure to

the benefit of Lender and Lender's heirs, executors, administrators,

successors and assigns.

GENERAL PROVISIONS.  This Note benefits Lender and its successors and

assigns, and binds Borrower and Borrower's successors, assigns, and

representatives.  Lender may delay or forgo enforcing any of its rights

or remedies under this Note without losing them.  Borrower and any other

person or corporation who signs, guarantees or endorses this Note, to the

extent allowed by law, waive presentment, demand for payment, and notice

of dishonor.  Upon any change in the terms of this Note, and unless

otherwise expressly stated in writing, no party who signs this Note,

whether as maker, guarantor, accommodation maker or endorser, shall be

released from liability.  All such parties agree that Lender may renew or

extend (repeatedly and for any length of time) this loan or release any

party or guarantor or collateral; or impair, fail to realize upon or

perfect Lender's security interest in the collateral; and take any other

action deemed necessary by Lender without the consent of or notice to

anyone.  All such parties also agree that Lender may modify this loan

without the consent of or notice to anyone other than the party with whom

the modification is made.  The obligations under this Note are joint and

several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE

PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS.

BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

COMMERCE GROUP CORP.

/s/ Edward A. Machulak

----------------------------------

By:  Edward A. Machulak, President

/s/ Christine M. Wolski

-------------------------------------

By:  Christine M. Wolski, Secretary

<PAGE>

                         EXHIBIT A-1 TO EXHIBIT 99.1

                 (Schedule of all transactions pertaining to

                   the activities relating to Exhibit A to

           Exhibit 99.1 for the fiscal year ending March 31, 2008

               has been purposely omitted as it only reflects

            the calculations of the principal and interest.)

EX-99.2 BYLAWS

                               EXHIBIT 99.2

                            COMMERCE GROUP CORP.

                            6001 NORTH 91ST ST.

                         MILWAUKEE, WI 53225-1795

                                414-462-5310

                           FAX  414-462-5312

                     E-MAIL  info@commercgroupcorp.com

                     WEBSITE www.commercegroupcorp.com

                      AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)

                      AND/OR HOMESPAN REALTY CO., INC. (Homespan)

                      AND/OR ECOMM GROUP INC. (Ecomm)

                      AND/OR SAN LUIS ESTATES, INC. (SLE)

                      AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)

                      AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)

                      ALL LOCATED AT THE SAME ADDRESS

May 30, 2008

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

903 West Green Tree Road

River Hills, Wisconsin  53217

Dear Mrs. Machulak:

At today's Commerce Group Corp. (Commerce) Directors' meeting, the

Directors were informed about the annual confirmation, disclosure and

status letter that you requested from Commerce, its subsidiaries, its

affiliates, and the Joint Venture, and to establish and confirm the

amount due and the collateral pledged along with any other Commerce

obligations or agreements made to Edward L. Machulak (ELM and/or Lender)

as an individual and not as a Director or Officer of Commerce or its

subsidiaries or as the authorized designee of the Joint Venture as of

Commerce's fiscal year ended March 31, 2008.  Today, Commerce's

Directors, by unanimous consent, approved, ratified and confirmed the

contents of this letter and authorized me to submit its understanding of

your status with Commerce, which is as follows:

1.   Promissory Notes and Other Obligations

     a.  An open-ended, secured, on-demand promissory note (Note) dated

         October 1, 1989 in which all of the prior promissory notes were

         consolidated into this single Note amounted to $490,217.19 as of

         that date.  All future advances and interest, not paid, are

         added to this Note, and payments to ELM reduce the amount owed.

         This Note, together with cash and other advances and interest as

         of March 31, 2008, amounts to $13,354,280.95.  Commerce has

         renewed this promissory note as of March 31, 2008 and a copy is

         attached (Exhibit A).  A schedule including all of the

         transactions pertaining to the activities relating to this Note

         during the fiscal year ended March 31, 2008 is also attached

         (Exhibit A-1).  This Note bears interest, payable monthly, at

         the rate of 2% over the prime rate established from time to time

         by the First National Bank of Chicago, Chicago, Illinois, (then

         Bank One; now the prime rate published in the Wall Street

         Journal), but not less than 16% per annum.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 2 of 16 Pages

     Commerce is no longer issuing monthly notes for the payment of

     interest, etc., but pursuant to our understanding, Commerce is

     augmenting all additions and advances made by ELM, and it will

     deduct any payments or credits made by Commerce to the current

     open-ended, secured, on-demand, outstanding promissory note(s)

     issued or obligations owed to ELM and Commerce will provide an

     annual accounting and confirmation letter.

         On May 9, 2005, Commerce's Directors authorized its Officers to

         issue renewed annual note(s) (Exhibit B of the May 9, 2005

         confirmation letter) so that the Lender will have a current

         substituted dated debt instrument.  The Directors acknowledged

         that the issuance of note(s) for each transaction are too

         cumbersome and are not practicable to manage.  Also, the length

         of time involved and the number of transactions make it

         impractical to devote the time and effort to issue a note for

         each transaction.  However, beginning with this fiscal year

         which ended March 31, 2007, the Directors are including the

         following as Lender(s):  John E. Machulak and Susan R.

         Robertson, husband and wife (M&R), the Machulak, Robertson &

         Sodos, S.C. Law Firm (Law Firm), Circular Marketing, Inc. (CMI)

         and Edward A. Machulak as an individual (EAM).  Therefore, the

         Directors have unanimously agreed to continue to embrace this

         resolution, which was adopted on May 9, 2005:

              WHEREAS, in the past 20 years or more the following

         parties: General Lumber & Supply Co., Inc. (GLSCO); Edward L.

         Machulak  as an individual and not as a Director or Officer of

         Commerce (ELM); the Edward L. Machulak Rollover Individual

         Retirement Account (ELM RIRA), the Sylvia Machulak Rollover

         Individual Retirement Account (SM RIRA), and Sylvia Machulak, as

         a consultant and as an individual (SM), hereafter collectively

         and individually identified as the Lender(s), have accounted for

         advancing cash funds, earning accrued interest, and for

         appropriate credit which was reconciled to the open-ended,

         secured, on-demand notes(s); and

              WHEREAS, the Directors desire to minimize the record

         keeping in these transactions without jeopardizing, diminishing,

         altering, changing or losing any rights that the Lenders have by

         changing the procedures in handling the recording of any

         notes(s) issued or to be issued; and

              WHEREAS, in order to provide an easier accounting facility

         by renewing the notes(s) on an annual basis to coincide with the

         Company's fiscal year (which presently ends on March 31) and to

         incorporate said renewed note(s) with the annual confirmation

         agreement(s); and

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 3 of 16 Pages

              WHEREAS, prior to the change to issue substituted renewed

         note(s), the initial promissory note(s) were considered to be

         open-ended, secured, on-demand and the additions and deductions

         were recognized by separate accounting records; therefore, be it

                   RESOLVED, That the Directors authorize and empower the

              Officers to substitute and issue renewed consolidated

              promissory note(s) at the end of each fiscal year beginning

              with the Company's fiscal year ended March 31, 2005 to the

              following: General Lumber & Supply Co., Inc. (GLSCO);

              Edward L. Machulak  as an individual and not as a Director

              or Officer of Commerce (ELM); the Edward L.  Machulak

              Rollover Individual Retirement Account (ELM RIRA), the

              Sylvia Machulak Rollover Individual Retirement Account (SM

              RIRA), and Sylvia Machulak, as a consultant and as an

              individual (SM), hereafter collectively and individually

              identified as the Lender(s); and

                   BE IT FURTHER RESOLVED, That the Officers of the

              Company are authorized and empowered to assure the

              Lender(s) that by substituting and consolidating the

              existing note(s) and issuing the renewed note(s) on the

              last day of the Company's fiscal year beginning with March

              31, 2005 with the understanding that the intention is that

              the Lender(s) will not jeopardize, lose, diminish, risk,

              alter or change any rights, including the pledge of

              collateral, that are inherent with the initial note(s) by

              the issuance of annual renewed open-ended, secured,

              on-demand promissory note(s); and

                   BE IT FURTHER RESOLVED, That the Directors acknowledge

              that the only purpose of the change and substitution to

              issue annual renewed notes(s) is for the convenience,

              reduced accounting and reducing the paperwork involved; and

                   BE IT FURTHER RESOVED, That the Officers are

              authorized and empowered to perform any act that they deem

              necessary to accommodate the purpose of issuing annual

              renewed note(s).

     As of March 31, 2008, the following parties are collectively and

     individually identified as the Lender(s): General Lumber & Supply

     Co., Inc. (GLSCO); Edward L. Machulak  as an individual and not as a

     Director or Officer of Commerce (ELM); the Edward L. Machulak

     Rollover Individual Retirement Account (ELM RIRA), the Sylvia

     Machulak Rollover Individual Retirement Account (SM RIRA), Sylvia

     Machulak, as a consultant and as an individual (SM), John E.

     Machulak and Susan R. Robertson, husband and

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 4 of 16 Pages

     wife (M&R), the Machulak, Robertson & Sodos, S.C. Law Firm (Law

     Firm), Circular Marketing, Inc. (CMI) and Edward A. Machulak as an

     individual (EAM).

     b.   Salaries, vacation pay

          In addition to the promissory note, Commerce owes ELM the

          following for accrued salaries and vacation:

                    Period               Years  Annual Salary    Total

                    ------               -----  -------------    -----

        April 1, 1981 - March 31, 1992   11.00      67,740    $  745,140

        April 1, 1992 - Sept. 30, 1996    4.50    $114,750       516,375

        Oct. 1, 1996 - October 31, 2007  11.08    $165,000     1,828,750

                                         -----                ----------

          Balance                        26.58                $3,090,265

              Vacation Pay              Months     Payment

              ------------              ------     -------

        April 1981 - October 31, 2007    26.58    $ 13,750       365,521

                                                              ----------

          Total Due                                           $3,455,786

          At Commerce's Annual Board of Directors' Meeting held on

          October 19, 2001, the Directors adopted a resolution to

          compensate ELM for vacation pay based on one month for each

          year of service beginning on April 1, 1981, and also the

          following resolution, which in part states:

               "BE IT FURTHER RESOLVED, That the Directors agreed that on

          the day the compensation will be paid to Edward L. Machulak, an

          adjustment will be made to compensate him for the loss of the

          dollar purchasing value caused by inflation and other economic

          factors;"

     c.   ELM Bonus agreement

          On February 16, 1987, by a Consent Resolution of all of the

          Directors, ELM was awarded as a bonus compensation, the

          following:  for a period of 20 years, commencing the first day

          of the month following the month in which Commerce begins to

          produce gold from its El Salvadoran gold mining operations,

          Commerce will pay annually to ELM, 2% of the pre-tax profits

          earned from these operations.  Reference is made to Exhibit 11

          included in the April 9, 1990 confirmation letter.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 5 of 16 Pages

     d.   Share loans

          To infuse funds into Commerce, Commerce from time to time

          borrowed ELM's free trading common shares of Commerce and ELM

          sold these shares as designee for Commerce's benefit with

          Commerce receiving all of the proceeds.  For these share loans,

          Commerce has agreed to pay ELM interest at the rate of prime

          plus 3%, payable monthly with payment by issuing Commerce's

          restricted common shares based on these borrowed shares.

          Interest is also due and payable monthly with Commerce's

          restricted common shares for the shares pledged by ELM as

          collateral to others, all for the Company's best interest and

          benefit.  All share loans and interest are to be paid annually

          on or before March 31 of each of Commerce's fiscal years.  An

          accounting of the Commerce common shares due and/or paid to ELM

          as of March 31, 2008, pursuant to a series of

          Director-approved, open-ended, on-demand loan and promissory

          note agreements by and between Commerce and ELM dated April 1,

          1990, May 17, 1989, October 14, 1988 and June 20, 1988, and for

          certain continuous loans and/or pledges of ELM's securities

          that have taken place and continued to occur during the fiscal

          year ended March 31, 2008 is as follows:

          1.  Share loans                                           None

          2.  Interest shares due on shares pledged

              to banks for an open line of credit                   None

          3.  Interest shares due on shares sold for

              the benefit of Commerce                               None

              Total Commerce restricted common shares

              paid and issued for the fiscal period

              ended March 31, 2008 to ELM                           None

     e.   Open ended loan agreements

          Reference is made to four Director-approved, open-ended loan

          agreements dated June 20, 1988, October 14, 1988, May 17, 1989

          (Exhibits B, C and D of the April 12, 1993, confirmation

          letter) and April 1, 1990 (Exhibit 2 of the April 9, 1990

          confirmation letter).

     f.   Misanse share ownership disclosure

          On October 23, 1993, in order to comply with the El Salvador

          Government's minimum capital requirements, the shareholders of

          Mineral San Sebastian S.A. de C.V. (Misanse) voted to increase

          Misanse's capitalization from 119,500 colones to 260,000

          colones.  This was accomplished via a shareholders' rights

          offering on the basis of purchasing one share for each share

          owned with the

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 6 of 16

          rights expiring on December 10, 1993.  According to Misanse's

          by-laws, the rights not exercised would be offered

          proportionately to the shareholders who did exercise their

          rights.  In addition to the rights offering, the Misanse

          shareholders authorized the sale of 210 additional common

          shares to the following:  ten shares to each of the four

          officers/directors (40 shares), five shares to each of the

          remaining six directors (30 shares), three shares to each of

          the ten supplemental directors (30 shares), (the President and

          the Secretary of the Company, who are directors of Misanse, had

          the right and they purchased ten and three shares

          respectively), and 110 shares were sold  to the Company over

          and above the amount of shares it was entitled to by the rights

          offering so that it would retain its 52% ownership after the

          issuance of the shares under the rights offering.  When the

          Company obtained the concession in 1987, it agreed with the El

          Salvador Ministry of Economy's office not to increase its 52%

          ownership of Misanse.  Therefore, after the rights offering,

          the Company owned approximately 52%.

          On the closing date of December 10, 1993 of this rights

          offering, there were 264 shares that were not subscribed and

          purchased.  The Company would have been entitled to purchase

          137 shares (264 x 52%).  However, the Company had been

          prohibited to purchase these shares as it would have exceeded

          its 52% ownership of Misanse shares.  The 137 shares were

          acquired by ELM with prior approval of Commerce's directors.  

          He acquired an additional four shares by virtue of his

          proportionate ownership in the remaining unsold shares.  A

          Misanse Director-approved drawing was held to sell the

          unsubscribed shares.  In order to close the sales, 52 shares

          were purchased by ELM which he agreed in writing to hold these

          shares in escrow for a period of one year for the purpose of

          providing certain named El Salvador Misanse shareholders time

          to obtain funds to purchase these shares at his cost.  None

          were purchased by the Misanse shareholders.

          During June 1995, ELM personally purchased an additional 264

          Misanse common shares from a Misanse shareholder in an

          arms-length transaction.  Therefore ELM presently owns a total

          of 467 Misanse common shares or approximately 17.96% of the

          total 2,600 Misanse common shares issued and outstanding.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 7 of 16 Pages

2.   Collateral Pledged

     The collateral specifically pledged to ELM or as otherwise noted is

     as follows:

     a.   A Collateral Pledge Agreement dated October 14, 1981 granted to

          ELM by Commerce pledging the following collateral:  2,002,037

          shares of Sanseb common stock, par value $0.10 per share and

          1,346 shares of Mineral San Sebastian, S.A. de C.V. common

          stock, par value one hundred colones ($11.43) per share.  The

          shares pledged are as follows:  the 618 shares originally owned

          by Commerce, and the 618 shares plus 110 shares purchased from

          the October 23, 1993 Misanse rights offering.  Reference is

          made to Exhibit 4 included in the April 9, 1990 confirmation

          letter.

     b.   A Collateral Pledge Agreement dated February 24, 1983, by

          Commerce, SLE and UDI collectively and individually, pledging

          the following collateral:

          300 shares of no par value common shares of Homespan (formerly

          known as Trade Realty Co., Inc.), Certificate No. 7 dated

          January 21, 1974, being 100% of its issued and outstanding

          shares.  Homespan and Commerce agree that no additional shares

          of Homespan will be issued as long as there are any obligations

          due to ELM; 1,800 shares of no par value (UDI) capital stock

          Certificate No. 17 dated September 15, 1972, representing 100%

          of the shares issued and outstanding.  UDI and Commerce agree

          that no additional shares of UDI will be issued as long as

          there are any outstanding obligations due to ELM.  Reference is

          made to Exhibit 5 included in the April 9, 1990 confirmation

          letter.

     c.   Collateral Pledge Agreement dated July 13, 1983 granted to

          General Lumber & Supply Co., Inc. (GLSCO) and ELM by Commerce,

          SLE, and Ecomm, individually and collectively, pledging the

          following collateral:

          One voting membership certificate of San Luis Valley Irrigation

          Well Owners, Inc., Membership Certificate No. 871, dated

          November 27, 1979; Certificate No. 312, Membership No. 871,

          consisting of .001447 units of Augmentation Plan Number One of

          San Luis Valley Irrigation Well Owners, Inc. dated February 8,

          1980;

          100 common shares of $0.10 par value, Piccadilly (now Ecomm),

          Certificate No. 1, dated July 23, 1974.  Ecomm and Commerce

          agree that no additional shares of Ecomm will be issued as long

          as there are any outstanding obligations

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 8 of 16 Pages

          due to ELM. Reference is made to Exhibit 6 included in the

          April 9, 1990 confirmation letter.

     d.   A Deed of Trust dated November 3, 1983 by and between Homespan,

          as party of the first part, and Ronald K. Carpenter, Esq.

          (Trustee), as party of the second part, for the benefit of ELM

          and GLSCO, as party of the third part.  The Deed of Trust is in

          favor of ELM and GLSCO and is open-ended to secure the

          promissory note(s) due to ELM and GLSCO and to further secure

          any future obligations that Commerce or Homespan may incur from

          them.  This Deed of Trust is issued to Ronald K. Carpenter,

          Esq., Trustee for the benefit of ELM and GLSCO and is a first

          lien on the 331-acre Standing Rock  Campground located in

          Camdenton, Missouri.  The Deed of Trust was recorded on

          November 5, 1984 in Camden County, Missouri at 1:24 p.m. in

          Book 122, Page 200.  Reference is made to Exhibit 7 included in

          the April 9, 1990 confirmation letter.  On August 14, 2000,

          with the Directors' approval, this property, via an agreement,

          was conveyed to GLSCO in consideration of the cancellation of

          $1,249,050 of debt owed to GLSCO and for other consideration

          contained in the said agreement.

     e.   Commerce/Sanseb Joint Venture (Joint Venture)

          Commerce and Sanseb agree that ELM (the other Lenders were

          included later) has as collateral, the assignment and pledge of

          all of their rights, titles, claims, remedies, and interest

          whatsoever in the Joint Venture which was formed on September

          22, 1987.  In the event of default, whatever interest Commerce

          and Sanseb have in the Joint Venture will be transferred to ELM

          and it will include whatever assets are owned by the Joint

          Venture, including, but not limited to the precious metal ore

          reserves.  Reference is made to Exhibit C included in the April

          8, 1991 confirmation letter.

     f.   Uniform Commercial Code Filing - all other specific assets

          ELM's interest with GLSCO in filing financing statements under

          the Uniform Commercial Code by an assignment and pledge of all

          corporate assets, such as but not limited to the property of

          Commerce, Joint Venture, SLE, and Homespan, wherever located,

          now owned or hereafter acquired is as follows:  all accounts,

          all land contract receivables, contract rights, instruments and

          chattel paper; all inventory, all jewelry and precious stones,

          and all documents relating to inventory, including all goods

          held for sale, lease or demonstration, to be furnished under

          contracts of service, and raw materials, work in process and

          materials and supplies used or consumed in the business of

          Commerce, the

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 9 of 16 Pages

          Joint Venture, SLE, and Homespan; all office furniture,

          fixtures and all other equipment; all general intangibles, all

          stock and securities of any kind, and all rights, titles and

          interest in the Commerce Group Corp./San Sebastian Gold Mines,

          Inc. Joint Venture, and all additions and accessions to, all

          spare and repair parts, special tools, equipment and

          replacements for all returned or repossessed goods the sale or

          lease of which gave rise to, and all proceeds and products of

          the foregoing.  Reference is made to the Wisconsin Department

          of Financial Institutions Uniform Commercial Code filing,

          Exhibit 10, included in the April 9, 1990 confirmation letter,

          the renewed UCC-1 filing on December 23, 1996, Exhibit B,

          included in the April 14, 1997 confirmation letter, and the

          UCC-4 continuation filing on June 27, 2001 at 8:55 a.m., Filing

          #02078155 (Exhibit B of the May 13, 2002 confirmation letter).

          A UCC Financing Statement was electronically filed with the

          Wisconsin Department of Financial Institutions on January 5,

          2007 (Filing #070000277016).

     g.   Acknowledgement of previously recorded collateral provided to

          the Lenders

          Historical information - San Sebastian Gold Mine Concession

          GLSCO, ELM, ELM RIRA, SM RIRA, and SM collectively and

          individually identified as the Lender(s), have been assigned on

          October 19, 1987, all of the rights, titles, claims, remedies

          and interest in the Joint Venture, and to the mine concession

          granted by the Government of El Salvador to Mineral San

          Sebastian, S.A. de C.V (Misanse) on July 23, 1987, and

          thereafter from time to time amended, and which Misanse then

          assigned to the Joint Venture on September 22, 1987.  This

          collateral specifically includes, but is not limited to, all of

          the San Sebastian Gold Mine (SSGM) precious metal ore reserves.  

          Commerce and the Joint Venture have the right to assign this

          and any subsequent concession agreement.  Reference is made to

          Exhibit 9 included in the April 9, 1990 confirmation letter.

          The following collateral has been previously assigned to the

          Lenders pursuant to resolutions adopted by the Directors:

          (1) Commerce/Sanseb Joint Venture (Joint Venture)

              Both Commerce and San Sebastian Gold Mines, Inc. have

              assigned all of the rights, title, claims, remedies and

              interest that each has in the Joint Venture to the Lenders.

              Reference is made to Historical information - San Sebastian

              Gold Mine Concession.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 10 of 16 Pages

          (2) New SSGM Exploration Concession/License (New SSGM) -

              approximately 40.7694 square kilometers (10,070 acres)

              Government of El Salvador Resolution No. 27.

              On October 20, 2002, the Company applied for the New SSGM,

              which covers an area of 42 square kilometers and includes

              approximately 1.2306 square kilometers of the Renewed SSGM.

              The New SSGM is in the jurisdiction of the City of Santa

              Rosa de Lima in the Department of La Union and in the Nueva

              Esparta in the Department of Morazan, Republic of El

              Salvador, Central America.  On February 24, 2003, the El

              Salvador Department of Hydrocarbons and Mines (DHM) issued

              the New SSGM for a period of four years starting from the

              date following the notification of this resolution which

              was received on March 3, 2003.  The New SSGM may be

              extended for two two-year periods, or for a total of eight

              years.  Besides the San Sebastian Gold Mine,  three other

              formerly operative gold and silver mines known as the La

              Lola Mine, the Santa Lucia Mine, and the Tabanco Mine are

              included in the New SSGM and are being explored.  The

              Company has complied as required by filing its annual

              activity report and it paid the annual surface tax.  This

              concession had been assigned collectively to all of the

              Lenders named herein on May 12, 2003 and the assignment was

              included in the May 12, 2003 confirmation agreement as

              Exhibit B.

          (3) Lease agreement by and between Mineral San Sebastian

              Sociedad Anomina de Capital Variable (Misanse) and Commerce

              dated January 14, 2003

              The term of this lease agreement coincides with the term of

              the Renewed San Sebastian Gold Mine Exploitation Concession

              and consists of 1,470 acres owned by Misanse.  This lease

              agreement has been assigned to all of the Lenders named

              herein on May 12, 2003 and the assignment was included in

              the May 12, 2003 confirmation agreement as Exhibit B.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 11 of 16 Pages

          (4) Renewed San Sebastian Gold Mine Exploitation

              Concession/License (Renewed SSGM) - approximately 1.2306

              square kilometers (304 acres), Department of La Union, El

              Salvador, Central America (pledged and assigned as

              collateral on May 10, 2004) Government of El Salvador

              Agreement No. 591.

              On September 6, 2002, at a meeting held with the El

              Salvadoran Minister of Economy and the DHM, it was agreed

              to submit an application for the Renewed SSGM for a 30-year

              term and to simultaneously cancel the concession obtained

              on July 23, 1987.  On September 26, 2002, the Company filed

              this application.  On February 28, 2003 (received March 3,

              2003) the DHM admitted to the receipt of the application

              and the Company proceeded to file public notices as

              required by Article 40 of the El Salvadoran Mining Law and

              its Reform (MLIR).  On April 16, 2003, the Company's El

              Salvadoran legal counsel filed with the DHM notice that it

              believed that it complied with the requirements of Article

              40, and that there were no objections; and requested that

              the DHM make its inspection as required by MLIR Article 42.

              The Company then provided a bond which was required by the

              DHM to protect third parties against any damage caused from

              the mining operations, and it simultaneously paid the

              annual surface tax.  On August 29, 2003 the Office of the

              Ministry of Economy formally presented the Company with the

              twenty-year Renewed SSGM which was dated August 18, 2003.

              This Renewed SSGM replaces the collateral that the same

              parties held with the previous concession.  On May 20, 2004

              (delivered June 4, 2004) the Government of El Salvador,

              under their Agreement Number 591, extended the exploitation

              concession for a period of 30 years.  A copy of the

              assignment dated May 10, 2004, is attached to the May 10,

              2004 confirmation letter as Exhibit B and the Renewed SSGM

              agreement is attached to Exhibit B and referred to as

              Exhibit 1.

          (5) San Cristobal Mill and Plant (SCMP) three-year lease by and

              between Commerce and Corporacion Salvadorena de Inversiones

              (Corsain), an El Salvadoran governmental agency, executed

              on Monday, April 26, 2004, retroactive to November 13,

              2003.  Pledged and assigned as collateral on May 10, 2004.

              The renewed three-year SCMP lease for the property located

              near the City of El Divisadero was finalized and executed

              on Monday, April 26, 2004, and is retroactive to November

              13, 2003.  This May 10, 2004 assignment is included in the

              May 10, 2004 confirmation letter as Exhibit B and the lease

              agreement is attached to Exhibit B and referred to as

              Exhibit 2.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 12 of 16 Pages

              On March 25, 2008 a nineteen-month lease retroactive to

              November 12, 2006 was executed by and between Corsain and

              Commerce.  The lease was renewed on June 12, 2008 for a

              six-month period to expire on December 11, 2008.  Reference

              is made to Exhibit 10.16 of Commerce's Form 10-K for its

              fiscal year ended March 31, 2008 for a copy of this lease.

          (6) Nueva Esparta Exploration Concession/License (Nueva

              Esparta) - 45 square kilometers (11,115 acres) Resolution

              No.  271; Pledged and assigned as collateral on May 9, 2005

              On or about October 20, 2002, the Company filed an

              application with the DHM for the Nueva Esparta Exploration

              Concession/License which consists of 45 square kilometers

              and is located north and adjacent to the New SSGM.  On May

              25, 2004 the Government of El Salvador, under their

              Resolution No. 271, issued the Nueva Esparta Exploration

              Concession/License for a period of four years starting from

              the date

              following the notification of this resolution which was

              received on June 4, 2004.  This concession/license may be

              extended for two two-year periods or for a total of eight

              years.  This rectangular area is in the Departments of La

              Union (east) and Morazan (west) and in the jurisdiction of

              the City of Santa Rosa de Lima, El Salvador, Central

              America.  Included in the Nueva Esparta are eight other

              formerly operated gold and silver mines known as:  the

              Banadero Mine, the Carrizal Mine, the Copetillo Mine, the

              Grande Mine, the La Joya Mine, the Las Pinas Mine, the

              Montemayor Mine, and the Oro Mine.  A copy of the

              assignment dated May 9, 2005 was attached to the May 9,

              2005 confirmation letter as Exhibit C and the Nueva Esparta

              Exploration Concession was attached to Exhibit C and

              referred to as Exhibit 1.

          (7) Acknowledgment of collateral provided through March 31, 2008

              Commerce's Directors have on May 14, 2007 authorized and

              directed Commerce's Officers to assign all of the rights,

              titles, claims, remedies and interest in all of its assets

              that it has including any assets owned by the Joint

              Venture, to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and

              from March 31, 2007 to include M&R, the Law Firm, CMI and

              EAM, collectively and individually referred to as Lenders,

              as additional collateral for all of the outstanding loans

              and obligations as of March 31, 2008, including all future

              advances of any kind.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 13 of 16 Pages

3.   Cross Pledge Collateral Agreement

     GLSCO, ELM, the ELM RIRA, the SM RIRA and SM individually are

     entitled to specific collateral that has been pledged to them by

     Commerce, its subsidiaries, affiliates and the Joint Venture.  Upon

     default by Commerce, or its subsidiaries or affiliates or the Joint

     Venture, then GLSCO, ELM, the ELM RIRA, the SM RIRA and SM have the

     first right to the proceeds from the specific collateral pledged to

     each of them.  Commerce, its subsidiaries, affiliates, and the Joint

     Venture also have cross-pledged the collateral without diminishing

     the rights of the specific collateral pledged to each of the

     following:  GLSCO, ELM, the ELM RIRA, the SM RIRA and SM.  The

     purpose and the intent of the cross pledge of collateral is to

     assure GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM, that each of

     them would be paid in full; thus, any excess collateral that would

     be available is for the purpose of satisfying any debts and

     obligations due to each of the named parties.  The formula to be

     used (after deducting the payments made from the specific

     collateral) is to total all of the debts due to GLSCO, ELM, the ELM

     RIRA, the SM RIRA, SM and from March 31, 2007 to include M&R, the

     Law Firm, CMI and EAM, and then to divide this total debt into each

     individual debt to establish each individual's percentage of the

     outstanding debt

     due.  This percentage then will be multiplied by the total of the

     excess collateral to determine the amount of proceeds each party

     should receive from the excess collateral.  Then the amount due to

     each of them would be distributed accordingly.

4.   Cancellation of Inter-Company Debts Upon Default

     Since certain of the collateral specifically or collectively pledged

     to GLSCO, ELM, the ELM RIRA, the SM RIRA and SM consists of the

     common stock of Homespan, Ecomm, Sanseb, SLE, Misanse, UDI and the

     interest in the ownership of the Joint Venture, Commerce agreed,

     upon default of the payment of principal or interest to any of the

     individual Lender(s) mentioned herein, that it will automatically

     cancel any inter-company debts owed to Commerce by any of its

     wholly-owned subsidiaries or affiliates or the Joint Venture at such

     time as any of the stock or Joint Venture ownership is transferred

     to the collateral holders as a result of default of any promissory

     note.

5.   Guarantors

     This agreement further confirms that Commerce and all of the

     following are guarantors to the obligations due to ELM and to the

     loans made by ELM to Commerce:  Joint Venture, Homespan, Ecomm, SLE,

     Sanseb and UDI.  They jointly and severally guarantee payment of the

     note(s) that they caused to be issued and also agree that these

     note(s) may be accelerated in accordance with the provisions

     contained in the agreement

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 14 of 16 Pages

and/or any collateral or mortgages

     securing these notes.  Also, Commerce, all of its subsidiaries and

     the Joint Venture agree to the cross pledge of collateral for the

     benefit of GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from March

     31, 2007 to include M&R, the Law Firm, CMI and EAM.  Reference is

     made to Exhibit 12 included in the April 9, 1990 confirmation

     letter.

6.   Re-Execution Agreement(s)

     In the event ELM deems that it is necessary or advisable for him to

     have Commerce re-execute any document(s) entered into, including,

     but not limited to the promissory note(s) or collateral

     agreement(s), Commerce will re-execute such document(s) reasonably

     required by ELM.  Commerce also acknowledges that Commerce may be

     liable to pay certain costs related to any of the transactions

     entered into with ELM.  If at a later date ELM determines that an

     error has been made in the payment of such costs to him then he may

     demand payment and Commerce does hereby agree to make such payment

     forthwith.  All requests for corrections of any errors and/or

     payment of costs shall be complied with by Commerce within seven (7)

     days of ELM's written request.   The failure of Commerce to comply

     with Commerce's obligation(s) hereunder shall constitute a default

     and shall entitle ELM to the remedies available for default under

     any provisions of the agreements including, but not limited to the

     promissory note(s) and/or the collateral pledge agreement(s) and/or

     any other Commerce obligation(s).

7.   Omissions

     Commerce believes that it has included all of its obligations,

     monies due and has listed all of the collateral due to ELM, however,

     since these transactions have taken place over  a long period of

     time in which changes could have taken place, it is possible that

     inadvertently some item(s), particularly collateral, could have been

     omitted.  If that should prove to be a fact, then Commerce, the

     Joint Venture, Homespan, Ecomm, SLE, Sanseb, and UDI agree that

     those omissions of collateral, if any, are meant to be included as

     collateral under this confirmation agreement.

8.   Real Estate Ownership Adjacent to San Sebastian Gold Mine, Inc. (SSGM)

     Commerce acknowledges that ELM personally owns the real estate he

     purchased in January of 1988 which is adjacent to and bordering the

     north boundary line of the SSGM located in the Republic of El

     Salvador, Central America, and that Comseb is performing certain

     exploration and exploitation on this property.  These costs are to

     be payable by an offset to the amounts due to ELM.  Commerce also

     agrees to sell, assign and transfer at no cost to ELM, the

     exploration concession rights included in the New

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 15 of 16 Pages

SSGM Exploration

     Concession/License rights granted by the GOES under Resolution No.

     27 dated February 24, 2003 (delivered March 3, 2003) and the

     exploitation rights granted by the GOES under Agreement No. 591

     dated May 20, 2004 (delivered June 4, 2004) pertaining to this

     parcel of land.  (Reference is made to Exhibit B, "Concesion de

     Exploracio El Paraiso" - plat map that identifies the ELM (Macay)

     "92.13 Hectareas," (more or less) in the April 13, 1998 confirmation

     letter).

If you are in agreement with the contents of this letter, please sign

below and return one copy to Commerce.

Very truly yours,

COMMERCE GROUP CORP.

/s/ Christine M. Wolski

Christine M. Wolski

Secretary

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

May 30, 2008

Page 16 of 16 Pages

The contents of this letter are agreed by the following:

COMMERCE/SANSEB JOINT VENTURE             HOMESPAN REALTY COMPANY, INC.

as Guarantor (Joint Venture)              as Guarantor (Homespan)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

---------------------------------------   -----------------------------------

By:  Edward A. Machulak, Auth. Designee   By:  Edward A. Machulak, President

ECOMM GROUP INC.                          SAN LUIS ESTATES, INC.

as Guarantor (Ecomm)                      as Guarantor (SLE)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

--------------------------------------    -----------------------------------

By:  Edward A. Machulak, President        By:  Edward A. Machulak, President

SAN SEBASTIAN GOLD MINES, INC.            UNIVERSAL DEVELOPERS, INC.

as Guarantor (Sanseb)                     as Guarantor (UDI)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

---------------------------------------   -----------------------------------

By:  Edward A. Machulak, President        By:  Edward A. Machulak, President

Accepted by:

/s/ Sylvia Machulak

-------------------------------------------

Sylvia Machulak, Widow,

on behalf of Edward L. Machulak (deceased),

as an Individual and not as a Director or

Officer of any of the

Corporations mentioned in this letter.

Date:  May 30, 2008

<PAGE>

                           EXHIBIT A TO EXHIBIT 99.2

                            RENEWED PROMISSORY NOTE

Borrower: Commerce Group Corp.           Lender:  Edward L. Machulak

          6001 North 91st Street                  903 West Green Tree Rd.

          Milwaukee, WI  53225                    Milwaukee, WI  53217

Principal Amount:          $13,354,280.95

Initial Rate:              2.000% + prime rate, but not less than 16.000%

Date of Renewed Note:     March 31, 2008

PROMISE TO PAY.  COMMERCE GROUP CORP. ("Borrower") promises to pay to

EDWARD L. MACHULAK ("Lender"), or order, in lawful money of the United

States of America, the principal amount of Thirteen Million Three Hundred

Fifty Four Thousand Two Hundred Eighty and 95/100 Dollars

($13,354,280.95), together with interest, paid monthly, on the unpaid

principal balance from March 31, 2008, until paid in full.

PAYMENT.  This is an open-ended, secured, on-demand payment, renewed

promissory note.  Interest is to be paid monthly.  The Lender, at its

discretion, can add the monthly interest due to the principal balance.

Unless otherwise agreed or required by applicable law, payments will be

applied first to any accrued unpaid interest; and then to principal.  The

annual interest rate for this Note is computed on a 365/360 basis; that

is, by applying the ratio of the annual interest rate over a year of 360

days, multiplied by the outstanding principal balance, multiplied by the

actual number of days the principal balance is outstanding and the

interest is payable monthly.  Borrower will pay Lender at Lender's

address shown above or at such other place as Lender may designate in

writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to

change from time to time based on changes in the prime rate as quoted in

the Wall Street Journal plus two percent, but not less than sixteen

percent per annum.  Borrower understands that Lender may make loans to

the Borrower based on other rates as well.  The prime rate as of this

date is 5.250% per annum.  The interest rate to be applied to the unpaid

principal balance of this Note will be at a rate of 2.000 percentage

points over the prime rate, but not less than 16.000% per annum.  NOTICE:  

Under no circumstances will the interest rate on this Note be less than

16.000% per annum or more than the maximum rate allowed by applicable

law.

PREPAYMENT.  Borrower may pay without penalty all or a portion of the

amount owed earlier than it is due.  Early payments will not, unless

agreed to by Lender in writing, relieve Borrower of Borrower's obligation

to pay on demand, the entire amount due.  Rather, any payment will reduce

the principal balance due.  Borrower agrees not to send Lender payments

marked "paid in full," "without recourse," or similar language.  If

Borrower sends such a payment, Lender may accept it without losing any of

Lender's rights under this Note, and Borrower will remain obligated to

pay any further amount owed to Lender.

INTEREST AFTER DEFAULT.  Upon default, including failure to pay on

demand, Lender, at its option, may, if permitted under applicable law,

increase the variable interest rate on this Note to 6.000 percentage

points over the prime rate or over the 16.000% rate, whichever is higher.  

The interest rate will not exceed the maximum rate permitted by

applicable law.

DEFAULT.  Each of the following shall constitute an event of default

("Event of Default") under this Note:

     Payment Default.  Borrower fails to make any payment when demand is

     made under this Note.

     Other Defaults.  Borrower fails to comply with or to perform any

     other term, obligation, covenant or condition contained in this Note

     or in any of the related documents or to comply with or to perform

     any term, obligation, covenant or condition contained in any other

     agreement between Lender and Borrower.

<PAGE>

     Default in Favor of Third Parties.  Borrower or any Grantor defaults

     under any loan, extension of credit, security agreement, purchase or

     sales agreement, or any other agreement, in favor of any other

     creditor or person that may materially affect any of Borrower's

     property or Borrower's ability to repay this Note or perform

     Borrower's obligations under this Note or any of the related

     documents.

     False Statements.  Any warranty, representation or statement made or

     furnished to Lender by Borrower or on Borrower's behalf under this

     Note or the related documents is false or misleading in any material

     respect, either now or at the time made or furnished or becomes

     false or misleading at any time thereafter.

     Insolvency.  The dissolution or termination of Borrower's existence

     as a going business, the insolvency of Borrower, the appointment of

     a receiver for any part of Borrower's property, any assignment for

     the benefit of creditors, any type of creditor workout, or the

     commencement of any proceeding under any bankruptcy or insolvency

     laws by or against Borrower.

     Creditor or Forfeiture Proceedings.  Commencement of foreclosure or

     forfeiture proceedings, whether by judicial proceeding, self-help,

     repossession or any other method, by any creditor of Borrower or by

     any governmental agency against any collateral securing the loan.  

     However, this Event of Default shall not apply if there is a good

     faith dispute by Borrower as to the validity or reasonableness of

     the claim which is the basis of the creditor or forfeiture

     proceeding and if Borrower gives Lender written notice of the

     creditor or forfeiture proceeding and deposits with Lender monies or

     a surety bond for the creditor or forfeiture proceeding, in an

     amount determined by Lender, in its sole discretion, as being an

     adequate reserve or bond for the dispute.

     Events Affecting Guarantor.  Any of the preceding events occurs with

     respect to any Guarantor of any of the indebtedness or any Guarantor

     disputes the validity of, or liability under, any guaranty of the

     indebtedness evidenced by this Note.

     Adverse Change.  A material adverse change occurs in Borrower's

     financial condition, or Lender believes the prospect of payment or

     performance of this Note is impaired.

     Insecurity.  Lender in good faith believes itself insecure.

LENDER'S RIGHTS.  Upon default or upon demand, the Lender may declare the

entire unpaid principal balance on this Note and all accrued unpaid

interest immediately due, and then Borrower will pay that amount.

COLLATERAL.  Borrower acknowledges this Note is secured by all security

agreements, guarantees, mortgages, and other security instruments

previously granted, contemporaneously granted, and granted in the future,

and it has the collateral and other rights all as contained in a certain

confirmation agreement dated May 10, 2004 between all parties contained

therein, and as subsequently amended and updated from time to time.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help

collect this Note if Borrower does not pay.  Borrower will pay Lender

that amount.  This includes, subject to any limits under applicable law,

Lender's attorneys' fees and Lender's legal expenses, whether or not

there is a lawsuit, including attorneys' fees, expenses for bankruptcy

proceedings (including efforts to modify or vacate any automatic stay or

injunction), and appeals.  If not prohibited by applicable law, Borrower

also will pay any court costs, in addition to all other sums provided by

law.

GOVERNING LAW.  This Note will be governed by, construed and enforced in

accordance with the laws of the State of Wisconsin.  This Note has been

accepted by Lender in the State of Wisconsin.

<PAGE>

OTHER LOAN AGREEMENTS.  If Borrower and Lender have either previously or

contemporaneously entered into a Loan or Confirmation Agreements, it is

agreed that this Note is subject to the terms and conditions of such Loan

or Confirmation Agreements.  For purpose of this provision, Loan or

Confirmation Agreements shall include, but not be limited to, a Business

Loan Agreement or any other Loan or Confirmation Agreements.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon

Borrower, and upon Borrower's successors and assigns, and shall inure to

the benefit of Lender and Lender's heirs, executors, administrators,  

successors and assigns.

GENERAL PROVISIONS.  This Note benefits Lender and its successors and

assigns, and binds Borrower and Borrower's successors, assigns, and

representatives.  Lender may delay or forgo enforcing any of its rights

or remedies under this Note without losing them.  Borrower and any other

person or corporation who signs, guarantees or endorses this Note, to the

extent allowed by law, waive presentment, demand for payment, and notice

of dishonor.  Upon any change in the terms of this Note, and unless

otherwise expressly stated in writing, no party who signs this Note,

whether as maker, guarantor, accommodation maker or endorser, shall be

released from liability.  All such parties agree that Lender may renew or

extend (repeatedly and for any length of time) this loan or release any

party or guarantor or collateral; or impair, fail to realize upon or

perfect Lender's security interest in the collateral; and take any other

action deemed necessary by Lender without the consent of or notice to

anyone.  All such parties also agree that Lender may modify this loan

without the consent of or notice to anyone other than the party with whom

the modification is made.  The obligations under this Note are joint and

several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE

PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS.  

BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY

NOTE.

BORROWER:

COMMERCE GROUP CORP.

/s/ Edward A. Machulak

----------------------------------------------

By:  Edward A. Machulak, President

/s/ Christine M. Wolski

-----------------------------------------------------

By:  Christine M. Wolski, Secretary

<PAGE>

                        EXHIBIT A-1 TO EXHIBIT 99.2

             (Schedule of all transactions pertaining to

                 the activities relating to Exhibit A to

          Exhibit 99.2 for the fiscal year ending March 31, 2008

              has been purposely omitted as it only reflects

             the calculations of the principal and interest.)

EX-99.3 VOTING TRUST

                             EXHIBIT 99.3

                          COMMERCE GROUP CORP.

                          6001 NORTH 91ST ST.

                       MILWAUKEE, WI  53225-1795

                              414-462-5310

                          FAX  414-462-5312

                  E-MAIL info@commercegroupcorp.com

                  WEBSITE  www.commercegroupcorp.com

                     AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)

                     AND/OR HOMESPAN REALTY CO., INC. (Homespan)

                     AND/OR ECOMM GROUP INC. (Ecomm)

                     AND/OR SAN LUIS ESTATES, INC. (SLE)

                     AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)

                     AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)

                     ALL LOCATED AT THE SAME ADDRESS

May 30, 2008

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

903 West Green Tree Road

River Hills, Wisconsin  53217

Dear Mrs. Machulak:

At today's Commerce Group Corp. (Commerce) Directors' meeting, the

Directors were informed about the annual confirmation, disclosure and

status letter that you requested from Commerce, its subsidiaries, its

affiliates, and the Joint Venture, and to establish and confirm the

amount due and the collateral pledged along with any other Commerce

obligations or agreements made to the Edward L. Machulak Rollover

Individual Retirement Account (ELM RIRA and/or Lender) as of Commerce's

fiscal year ended March 31, 2008.  Today, Commerce's Directors, by

unanimous consent, approved, ratified and confirmed the contents of this

letter and authorized me to submit its understanding of your status with

Commerce, which is as follows:

1.   Promissory Notes and Other Obligations

     The total amount of all of the open-ended, secured, on-demand

     promissory notes (Notes), together with interest due to the ELM

     RIRA, amounts to $1,429,871.18 as of March 31, 2008.  Commerce has

     renewed this promissory note as of March 31, 2008, and a copy is

     attached (Exhibit A).  A schedule including all of the transactions

     pertaining to the activities relating to this note during the fiscal

     year ended March 31, 2008 is also attached (Exhibit A-1).  These

     Notes, since April 1, 1994, bear interest, payable monthly, at the

     rate of 4% over the prime rate established from time to time by the

     First National Bank of Chicago, Chicago, Illinois, (then Bank One;

     now the prime rate published in the Wall Street Journal), but not

     less than 16% per annum.  Commerce is no longer issuing monthly

     Notes for the payment of interest, etc., but

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 2 of 11 Pages

     pursuant to our understanding, Commerce is augmenting all

     additions and advances

     made by the ELM RIRA, and it will deduct any payments or credits

     made by Commerce to the current open-ended, secured, on-demand,

     outstanding Notes issued or obligations owed to the ELM RIRA and

     Commerce will provide an annual accounting and confirmation letter.

     On May 9, 2005, Commerce's Directors authorized its Officers to

     issue renewed annual note(s) (Exhibit B of the May 9, 2005

     confirmation letter) so that the Lender will have a current

     substituted dated debt instrument.  The Directors acknowledged that

     the issuance of note(s) for each transaction are too cumbersome and

     are not practicable to manage.  Also, the length of time involved

     and the number of transactions make it impractical to devote the

     time and effort to issue a note for each transaction.  However,

     beginning with the fiscal year which ended March 31, 2007, the

     Directors are including the following as Lender(s):  John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc. (CMI) and Edward A. Machulak as an individual (EAM).

     Therefore, the Directors have unanimously agreed to continue to

     embrace this resolution which was adopted on May 9, 2005:

                 WHEREAS, in the past 20 years or more the following

          parties: General Lumber & Supply Co., Inc. (GLSCO); Edward L.

          Machulak  as an individual and not as a Director or Officer of

          Commerce (ELM); the Edward L. Machulak Rollover Individual

          Retirement Account (ELM RIRA), the Sylvia Machulak Rollover

          Individual Retirement Account (SM RIRA), and Sylvia Machulak,

          as a consultant and as an individual (SM), hereafter

          collectively and individually identified as the Lender(s), have

          accounted for advancing cash funds, earning accrued interest,

          and for appropriate credit which was reconciled to the

          open-ended, secured, on-demand notes(s); and

                 WHEREAS, the Directors desire to minimize the record

          keeping in these transactions without jeopardizing,

          diminishing, altering, changing or losing any rights that the

          Lenders have by changing the procedures in handling the

          recording of any notes(s) issued or to be issued; and

                 WHEREAS, in order to provide an easier accounting

          facility by renewing the notes(s) on an annual basis to

          coincide with the Company's fiscal year (which presently ends

          on March 31) and to incorporate said renewed note(s) with the

          annual confirmation agreement(s); and

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 3 of 11 Pages

                 WHEREAS, prior to the change to issue substituted

          renewed note(s), the initial promissory note(s) were considered

          to be open-ended, secured, on-demand and the additions and

          deductions were recognized by separate accounting records;

          therefore, be it

                      RESOLVED, That the Directors authorize and empower

               the Officers to substitute and issue renewed consolidated

               promissory note(s) at the end of each fiscal year

               beginning with the Company's fiscal year ended March 31,

               2005 to the following: General Lumber & Supply Co., Inc.

               (GLSCO); Edward L. Machulak  as an individual and not as a

               Director or Officer of Commerce (ELM); the Edward L.

               Machulak Rollover Individual Retirement Account (ELM

               RIRA), the Sylvia Machulak Rollover Individual Retirement

               Account (SM RIRA), and Sylvia Machulak, as a consultant

               and as an individual (SM), hereafter collectively and

               individually identified as the Lender(s); and

                      BE IT FURTHER RESOLVED, That the Officers of the

               Company are authorized and empowered to assure the

               Lender(s) that by substituting and consolidating the

               existing note(s) and issuing the renewed note(s) on the

               last day of the Company's fiscal year beginning with March

               31, 2005 with the understanding that the intention is that

               the Lender(s) will not jeopardize, lose, diminish, risk,

               alter or change any rights, including the pledge of

               collateral, that are inherent with the initial note(s) by

               the issuance of annual renewed open-ended, secured,

               on-demand promissory note(s); and

                      BE IT FURTHER RESOLVED, That the Directors

               acknowledge that the only purpose of the change and

               substitution to issue annual renewed notes(s) is for the

               convenience, reduced accounting and reducing the paperwork

               involved; and

                      BE IT FURTHER RESOVED, That the Officers are

               authorized and empowered to perform any act that they deem

               necessary to accommodate the purpose of issuing annual

               renewed note(s).

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 4 of 11 Pages

     As of March 31, 2008, the following parties are collectively and

     individually identified as the Lender(s): General Lumber & Supply

     Co., Inc. (GLSCO); Edward L. Machulak  as an individual and not as a

     Director or Officer of Commerce (ELM); the Edward L. Machulak

     Rollover Individual Retirement Account (ELM RIRA), the Sylvia

     Machulak Rollover Individual Retirement Account (SM RIRA), Sylvia

     Machulak, as a consultant and as an individual (SM), John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc. (CMI) and Edward A. Machulak as an individual (EAM).

2.   Other Agreements and Transactions

     a.  On August 14, 2000, Commerce's Directors authorized Commerce's

         Officers to negotiate a sale of its non-income producing assets,

         in this case, precious stones and jewelry, to the ELM RIRA at

         Commerce's book value in exchange for a reduction of debt owed

         by Commerce to the ELM RIRA.   The ELM RIRA agreed to this

         purchase.  The book value of the precious stones and jewelry is

         $132,447.77 as of March 31, 2008.

     b.  On March 28, 2007, the ELM RIRA purchased from Commerce 750,000

         of Commerce's restricted common shares, $.10 par value, at a

         unit price of $.10 a share, for a total of $75,000.  The share

         price was established by using the same formula used by the

         Directors and others who purchased common shares on the same

         date.  The average close bid price for the period beginning

         December 1, 2006 through February 10, 2007 was used.  The

         payment for these shares was made by reducing the outstanding

         promissory note balance due to the ELM RIRA by Commerce.

3.   Acknowledgement of previously recorded collateral provided to the

     Lenders

     a.  Historical information - San Sebastian Gold Mine Concession

         GLSCO, ELM, the ELM RIRA, the SM RIRA and SM collectively and

         individually identified as the Lender(s), have been assigned on

         October 19, 1987, all of the rights, titles, claims, remedies

         and interest in the Joint Venture, and to the mine concession

         granted by the Government of El Salvador to Mineral San

         Sebastian, S.A. de C.V. (Misanse) on July 23, 1987, and

         thereafter from time to time amended, and which Misanse then

         assigned to the Joint Venture on September 22, 1987.  This

         collateral specifically includes, but is not limited to, all of

         the San Sebastian Gold Mine (SSGM) precious metal ore

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 5 of 11 Pages

         reserves.  Commerce and the Joint Venture have the right to

         assign this and any subsequent concession agreement. Reference

         is made to Exhibit 2 included in the April 9, 1990 confirmation

         letter.

         The following collateral has been previously assigned to the

         Lenders pursuant to resolutions adopted by the Directors:

         (1)  Commerce/Sanseb Joint Venture (Joint Venture)

              Both Commerce and San Sebastian Gold Mines, Inc. have

              assigned all of the rights, title, claims, remedies and

              interest that each has in the Joint Venture to the Lenders.

              Reference is made to Historical information - San Sebastian

              Gold Mine Concession.

         (2)  New SSGM Exploration Concession/License (New SSGM) -

              approximately 40.7694 square kilometers (10,070 acres)

              Government of El Salvador, Resolution No. 27

              On October 20, 2002, the Company applied for the New SSGM,

              which covers an area of 42 square kilometers and includes

              approximately 1.2306 square kilometers of the Renewed SSGM.

              The New SSGM is in the jurisdiction of the City of Santa

              Rosa de Lima in the Department of La Union and in the Nueva

              Esparta in the Department of Morazan, Republic of El

              Salvador, Central America.  On February 24, 2003, the El

              Salvador Department of Hydrocarbons and Mines (DHM) issued

              the New SSGM for a period of four years starting from the

              date following the notification of this resolution which

              was received on March 3, 2003.  The New SSGM may be

              extended for two two-year periods, or for a total of eight

              years.  Besides the San Sebastian Gold Mine,  three other

              formerly operative gold and silver mines known as the La

              Lola Mine, the Santa Lucia Mine, and the Tabanco Mine are

              included in the New SSGM and are being explored.  The

              Company has complied as required by filing its annual

              activity report and it paid the annual surface tax.  This

              concession had been assigned collectively to all of the

              Lenders named herein on May 12, 2003 and the assignment was

              included in the May 12, 2003 confirmation agreement as

              Exhibit B.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 6 of 11 Pages

         (3)  Lease agreement by and between Mineral San Sebastian

              Sociedad Anomina de Capital Variable (Misanse) and Commerce

              dated January 14, 2003

              The term of this lease agreement coincides with the term of

              the Renewed San Sebastian Gold Mine Exploitation Concession

              and consists of 1,470 acres owned by Misanse.  This lease

              agreement has been assigned to all of the Lenders named

              herein on May 12, 2003 and the assignment was included in

              the May 12, 2003 confirmation agreement as Exhibit B.

         (4)  Renewed San Sebastian Gold Mine Exploitation

              Concession/License (Renewed SSGM) - approximately 1.2306

              square kilometers (304 acres), Department of La Union, El

              Salvador, Central America (pledged and assigned as

              collateral on May 10, 2004) Government of El Salvador

              Agreement No. 591

              On September 6, 2002, at a meeting held with the El

              Salvadoran Minister of Economy and the DHM, it was agreed

              to submit an application for the Renewed SSGM for a 30-year

              term and to simultaneously cancel the concession obtained

              on July 23, 1987.  On September 26, 2002, the Company filed

              this application.  On February 28, 2003 (received March 3,

              2003) the DHM admitted to the receipt of the application

              and the Company proceeded to file public notices as

              required by Article 40 of the El Salvadoran Mining Law and

              its Reform (MLIR).  On April 16, 2003, the Company's El

              Salvadoran legal counsel filed with the DHM notice that it

              believed that it complied with the requirements of Article

              40, and that there were no objections; and requested that

              the DHM make its inspection as required by MLIR Article 42.  

              The Company then provided a bond which was required by the

              DHM to protect third parties against any damage caused from

              the mining operations, and it simultaneously paid the

              annual surface t ax.  On August 29, 2003 the Office of the

              Ministry of Economy formally presented the Company with the

              twenty-year Renewed SSGM which was dated August 18, 2003.  

              This Renewed SSGM replaces the collateral that the same

              parties held with the previous concession.  On May 20, 2004

              (delivered June 4, 2004) the Government of El Salvador,

              under their Agreement No. 591, extended the exploitation

              concession for a period of 30 years.  A copy of the

              assignment dated May 10, 2004, is attached to the May 10,

              2004 confirmation letter as Exhibit B and the Renewed SSGM

              agreement is attached to Exhibit B and referred to as

              Exhibit 1.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 7 of 11 Pages

         (5)  San Cristobal Mill and Plant (SCMP) three-year lease by and

              between Commerce and Corporacion Salvadorena de Inversiones

              (Corsain), an El Salvadoran governmental agency, executed

              on Monday, April 26, 2004, retroactive to November 13,

              2003.  Pledged and assigned as collateral on May 10, 2004.

              The renewed three-year SCMP lease for the property located

              near the City of El Divisadero was finalized and executed

              on Monday, April 26, 2004, and is retroactive to November

              13, 2003.  This May 10, 2004 assignment is included in the

              May 10, 2004 confirmation letter as Exhibit B and the lease

              agreement is attached to Exhibit B and referred to as

              Exhibit 2.  This lease agreement is in the process of being

              renewed.

              On March 25, 2008 a nineteen-month lease retroactive to

              November 12, 2006 was executed by and between Corsain and

              Commerce.  The lease was renewed on June 12, 2008 for a

              six-month period to expire on December 11, 2008.  Reference

              is made to Exhibit 10.16 of Commerce's Form 10-K for its

              fiscal year ended March 31, 2008 for a copy of this lease.

         (6)  Nueva Esparta Exploration Concession/License (Nueva

              Esparta) - 45 square kilometers (11,115 acres) Resolution

              No.  271

              On or about October 20, 2002, the Company filed an

              application with the DHM for the Nueva Esparta Exploration

              Concession/License which consists of 45 square kilometers

              and is located north and adjacent to the New SSGM.  On May

              25, 2004 the Government of El Salvador, under their

              Resolution No. 271, issued the Nueva Esparta Exploration

              Concession/License for a period of four years starting from

              the date following the notification of this resolution

              which was received on June 4, 2004.  This

              concession/license may be extended for two two-year periods

              or for a total of eight years.  This rectangular area is in

              the Departments of La Union (east) and Morazan (west) and

              in the jurisdiction of the City of Santa Rosa de Lima, El

              Salvador, Central America.  Included in the Nueva Esparta

              are eight other formerly operated gold and silver mines

              known as:  the Banadero Mine, the Carrizal Mine, the

              Copetillo Mine, the Grande Mine, the La Joya Mine, the Las

              Pinas Mine, the Montemayor Mine, and the Oro Mine.  A copy

              of the assignment dated May 9, 2005 was attached to the May

              9, 2005

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 8 of 11 Pages

              confirmation letter as Exhibit C and the Nueva

              Esparta Exploration Concession was attached to Exhibit C

              and referred to as Exhibit 1.

         (7)  Acknowledgment of collateral provided through March 31, 2008

              Commerce's Directors have on May 30, 2008 authorized and

              directed Commerce's Officers to assign all of the rights,

              titles, claims, remedies and interest in all of its assets

              that it has, including any assets owned by the Joint

              Venture, to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and

              from March 31, 2007 to include M&R, the Law Firm, CMI and

              EAM, collectively and individually referred to as Lenders,

              as additional collateral for all of the outstanding loans

              and obligations as of March 31, 2008, including all future

              advances of any kind.

4.   Cross Pledge Collateral Agreement

     GLSCO, ELM, the ELM RIRA, the SM RIRA and SM individually are

     entitled to specific collateral that has been pledged to them by

     Commerce, its subsidiaries, affiliates and the Joint Venture.  Upon

     default by Commerce, or its subsidiaries or affiliates or the Joint

     Venture, then GLSCO, ELM, the ELM RIRA, the SM RIRA and SM have the

     first right to the proceeds from the specific collateral pledged to

     each of them.  Commerce, its subsidiaries, affiliates and the Joint

     Venture, also have cross-pledged the collateral without diminishing

     the rights of the specific collateral pledged to each of the

     following:  GLSCO, ELM, the ELM RIRA, the SM RIRA and SM.  The

     purpose and the intent of the cross pledge of collateral is to

     assure GLSCO, ELM, the ELM RIRA, the SM RIRA and SM, that each of

     them would be paid in full; thus, any excess collateral that would

     be available is for the purpose of satisfying any debts and

     obligations due to each of the named parties, including M&R, the Law

     Firm, CMI and EAM.  The formula to be used (after deducting the

     payments made from the specific collateral) is to total all of the

     debts due to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from

     March 31, 2007 to include M&R, the Law Firm, CMI and EAM, and then

     to divide this total debt into each individual debt to establish

     each individual's percentage of the outstanding debt due.  This

     percentage then will be multiplied by the total of the excess

     collateral to determine the amount of proceeds each party should

     receive from the excess collateral.  Then the amount due to each of

     them would be distributed accordingly.

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 9 of 11 Pages

5.   Cancellation of Inter-Company Debts Upon Default

     Since certain of the collateral specifically or collectively pledged

     to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM and from March 31, 2007

     to include M&R, the Law Firm, CMI and EAM, consists of the common

     stock of Homespan, Ecomm, Sanseb, SLE, Misanse, UDI and the interest

     in the ownership of the Joint Venture, Commerce agreed, upon default

     of the payment of principal or interest to any of the individual

     Lender(s) mentioned herein, that it will automatically cancel any

     inter-company debts owed to Commerce by any of its wholly-owned

     subsidiaries or affiliates or the Joint Venture at such time as any

     of the stock or Joint Venture ownership is transferred to the

     collateral holders as a result of default of any promissory note.

6.   Guarantors

     This agreement further confirms that Commerce and all of the

     following are guarantors to the obligations due to the ELM RIRA and

     to the loans made by the ELM RIRA to Commerce:  Joint Venture,

     Homespan, Ecomm, SLE, Sanseb and UDI.  They jointly and severally

     guarantee payment of the note(s) that they caused to be issued and

     also agree that these note(s) may be accelerated in accordance with

     the provisions contained in the agreement and/or any collateral or

     mortgages securing these notes.  Also, Commerce, all of its

     subsidiaries and the Joint Venture agree to the cross pledge of

     collateral for the benefit of GLSCO, ELM, the ELM RIRA, the SM RIRA,

     SM, and from March 31, 2007 to include M&R, the Law Firm, CMI and

     EAM.  Reference is made to Exhibit 3 included in the April 9, 1990

     confirmation letter.

7.   Re-Execution Agreement(s)

     In the event the ELM RIRA deems that it is necessary or advisable

     for the ELM RIRA to have Commerce re-execute any document(s) entered

     into, including, but not limited to the promissory note(s) or

     collateral agreement(s), Commerce will re-execute such document(s)

     reasonably required by the ELM RIRA.  Commerce also acknowledges

     that Commerce may be liable to pay certain costs related to any of

     the transactions entered into with the ELM RIRA.  If at a later date

     the ELM RIRA determines that an error has been made in the payment

     of such costs to the ELM RIRA, then the ELM RIRA may demand payment

     and Commerce does hereby agree to make such payment forthwith.  All

     requests for corrections of any errors and/or payment of costs shall

     be complied with by Commerce within seven (7) days of the ELM RIRA's

     written request.  The failure of Commerce to comply with Commerce's

     obligation(s) hereunder shall

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 10 of 11 Pages

     constitute a default and shall entitle the ELM RIRA

     to the remedies available for default under any provisions of the

     agreements including, but not limited to the promissory note(s)

     and/or the collateral pledge agreement(s) and/or any other Commerce

     obligation(s).

8.   Omissions

     Commerce believes that it has included all of its obligations,

     monies due and has listed all of the collateral due to the ELM RIRA,

     however, since these transactions have taken place over a long

     period of time in which changes could have taken place, it is

     possible that inadvertently some item(s), particularly collateral,

     could have been omitted.  If that should prove to be a fact, then

     Commerce, the Joint Venture, Homespan, Ecomm, SLE, Sanseb, and UDI

     agree that those omissions of collateral, if any, are meant to be

     included as collateral under this confirmation agreement.

If you are in agreement with the contents of this letter, please sign

below and return one copy to Commerce.

Very truly yours,

COMMERCE GROUP CORP.

/s/ Christine M. Wolski

Christine M. Wolski

Secretary

<PAGE>

Mrs. Sylvia Machulak, Widow,

on behalf of Edward L. Machulak, deceased

for the Edward L. Machulak Rollover

Individual Retirement Account

May 30, 2008

Page 11 of 11 Pages

The contents of this letter are agreed by the following:

COMMERCE/SANSEB JOINT VENTURE              HOMESPAN REALTY COMPANY, INC.

as Guarantor (Joint Venture)               as Guarantor (Homespan)

/s/ Edward A. Machulak                     /s/ Edward A. Machulak

---------------------------------------    -----------------------------------

By:  Edward A. Machulak, Auth. Designee    By:  Edward A. Machulak, President

ECOMM GROUP INC.                           SAN LUIS ESTATES, INC.

as Guarantor (Ecomm)                       as Guarantor (SLE)

/s/ Edward A. Machulak                     /s/ Edward A. Machulak

---------------------------------------    -----------------------------------

By:  Edward A. Machulak, President         By:  Edward A. Machulak, President

SAN SEBASTIAN GOLD MINES, INC.             UNIVERSAL DEVELOPERS, INC.

as Guarantor (Sanseb)                      as Guarantor (UDI)

/s/ Edward A. Machulak                     /s/ Edward A. Machulak

---------------------------------------    -----------------------------------

By:  Edward A. Machulak, President         By:  Edward A. Machulak, President

Accepted by:

/s/ Sylvia Machulak

---------------------------------------

Sylvia Machulak, Widow on behalf of

Edward L.  Machulak, deceased

For the Rollover Individual

Retirement Account

Date:  May 30, 2008

<PAGE>

                        EXHIBIT A TO EXHIBIT 99.3

                          RENEWED PROMISSORY NOTE

Borrower: Commerce Group Corp.          Lender:  Edward L. Machulak RIRA

          6001 North 91st Street                 903 West Green Tree Rd.

          Milwaukee, WI  53225                   Milwaukee, WI  53217

Principal Amount:            $1,429,871.18

Initial Rate:                4.000% + prime rate, but not less than 16.000%

Date of Renewed Note:        March 31, 2008

PROMISE TO PAY.  COMMERCE GROUP CORP. ("Borrower") promises to pay to the

EDWARD L.  MACHULAK ROLLOVER INDIVIDUAL RETIREMENT ACCOUNT ("Lender"), or

order, in lawful money of the United States of America, the principal

amount of One Million Four Hundred Twenty Nine Thousand Eight Hundred

Seventy One and 18/100 Dollars ($1,429,871.18), together with interest,

paid monthly, on the unpaid principal balance from March 31, 2008, until

paid in full.

PAYMENT.  This is an open-ended, secured, on-demand payment, renewed

promissory note.  Interest is to be paid monthly.  The Lender, at its

discretion, can add the monthly interest due to the principal balance.

Unless otherwise agreed or required by applicable law, payments will be

applied first to any accrued unpaid interest; and then to principal.  The

annual interest rate for this Note is computed on a 365/360 basis; that

is, by applying the ratio of the annual interest rate over a year of 360

days, multiplied by the outstanding principal balance, multiplied by the

actual number of days the principal balance is outstanding and the

interest is payable monthly.  Borrower will pay Lender at Lender's

address shown above or at such other place as Lender may designate in

writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to

change from time to time based on changes in the prime rate as quoted in

the Wall Street Journal plus four percent, but not less than sixteen

percent per annum.  Borrower understands that Lender may make loans to

the Borrower based on other rates as well. The prime rate as of this date

is 5.25% per annum.  The interest rate to be applied to the unpaid

principal balance of this Note will be at a rate of 4.000 percentage

points over the prime rate, but not less than 16.000% per annum.  NOTICE:  

Under no circumstances will the interest rate on this Note be less than

16.000% per annum or more than the maximum rate allowed by applicable

law.

PREPAYMENT.  Borrower may pay without penalty all or a portion of the

amount owed earlier than it is due.  Early payments will not, unless

agreed to by Lender in writing, relieve Borrower of Borrower's obligation

to pay on demand, the entire amount due.  Rather, any payment will reduce

the principal balance due.  Borrower agrees not to send Lender payments

marked "paid in full," "without recourse," or similar language.  If

Borrower sends such a payment, Lender may accept it without losing any of

Lender's rights under this Note, and Borrower will remain obligated to

pay any further amount owed to Lender.

INTEREST AFTER DEFAULT.  Upon default, including failure to pay on

demand, Lender, at its option, may, if permitted under applicable law,

increase the variable interest rate on this Note to 6.000 percentage

points over the prime rate or over the 16.000% rate, whichever is higher.  

The interest rate will not exceed the maximum rate permitted by

applicable law.

DEFAULT.  Each of the following shall constitute an event of default

("Event of Default") under this Note:

     Payment Default.  Borrower fails to make any payment when demand is

     made under this Note.

     Other Defaults.  Borrower fails to comply with or to perform any

     other term, obligation, covenant or condition contained in this Note

     or in any of the related documents or to comply with or to perform

     any term, obligation, covenant or condition contained in any other

     agreement between Lender and Borrower.

<PAGE>

     Default in Favor of Third Parties.  Borrower or any Grantor defaults

     under any loan, extension of credit, security agreement, purchase or

     sales agreement, or any other agreement, in favor of any other

     creditor or person that may materially affect any of Borrower's

     property or Borrower's ability to repay this Note or perform

     Borrower's obligations under this Note or any of the related

     documents.

     False Statements.  Any warranty, representation or statement made or

     furnished to Lender by Borrower or on Borrower's behalf under this

     Note or the related documents is false or misleading in any material

     respect, either now or at the time made or furnished or becomes

     false or misleading at any time thereafter.

     Insolvency.  The dissolution or termination of Borrower's existence

     as a going business, the insolvency of Borrower, the appointment of

     a receiver for any part of Borrower's property, any assignment for

     the benefit of creditors, any type of creditor workout, or the

     commencement of any proceeding under any bankruptcy or insolvency

     laws by or against Borrower.

     Creditor or Forfeiture Proceedings.  Commencement of foreclosure or

     forfeiture proceedings, whether by judicial proceeding, self-help,

     repossession or any other method, by any creditor of Borrower or by

     any governmental agency against any collateral securing the loan.  

     However, this Event of Default shall not apply if there is a good

     faith dispute by Borrower as to the validity or reasonableness of

     the claim which is the basis of the creditor or forfeiture

     proceeding and if Borrower gives Lender written notice of the

     creditor or forfeiture proceeding and deposits with Lender monies or

     a surety bond for the creditor or forfeiture proceeding, in an

     amount determined by Lender, in its sole discretion, as being an

     adequate reserve or bond for the dispute.

     Events Affecting Guarantor.  Any of the preceding events occurs with

     respect to any Guarantor of any of the indebtedness or any Guarantor

     disputes the validity of, or liability under, any guaranty of the

     indebtedness evidenced by this Note.

     Adverse Change.  A material adverse change occurs in Borrower's

     financial condition, or Lender believes the prospect of payment or

     performance of this Note is impaired.

     Insecurity.  Lender in good faith believes itself insecure.

LENDER'S RIGHTS.  Upon default or upon demand, the Lender may declare the

entire unpaid principal balance on this Note and all accrued unpaid

interest immediately due, and then Borrower will pay that amount.

COLLATERAL.  Borrower acknowledges this Note is secured by all security

agreements, guarantees, mortgages, and other security instruments

previously granted, contemporaneously granted, and granted in the future,

and it has the collateral and other rights all as contained in a certain

confirmation agreement dated May 10, 2004 between all parties contained

therein, and as subsequently amended and updated from time to time.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help

collect this Note if Borrower does not pay.  Borrower will pay Lender

that amount.  This includes, subject to any limits under applicable law,

Lender's attorneys' fees and Lender's legal expenses, whether or not

there is a lawsuit, including attorneys' fees, expenses for bankruptcy

proceedings (including efforts to modify or vacate any automatic stay or

injunction), and appeals.  If not prohibited by applicable law, Borrower

also will pay any court costs, in addition to all other sums provided by

law.

GOVERNING LAW.  This Note will be governed by, construed and enforced in

accordance with the laws of the State of Wisconsin.  This Note has been

accepted by Lender in the State of Wisconsin.

<PAGE>

OTHER LOAN AGREEMENTS.  If Borrower and Lender have either previously or

contemporaneously entered into a Loan or Confirmation Agreements, it is

agreed that this Note is subject to the terms and conditions of such Loan

or Confirmation Agreements.  For purpose of this provision, Loan or

Confirmation Agreements shall include, but not be limited to, a Business

Loan Agreement or any other Loan or Confirmation Agreements.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon

Borrower, and upon Borrower's successors and assigns, and shall inure to

the benefit of Lender and Lender's heirs, executors, administrators,  

successors and assigns.

GENERAL PROVISIONS.  This Note benefits Lender and its successors and

assigns, and binds Borrower and Borrower's successors, assigns, and

representatives.  Lender may delay or forgo enforcing any of its rights

or remedies under this Note without losing them.  Borrower and any other

person or corporation who signs, guarantees or endorses this Note, to the

extent allowed by law, waive presentment, demand for payment, and notice

of dishonor.  Upon any change in the terms of this Note, and unless

otherwise expressly stated in writing, no party who signs this Note,

whether as maker, guarantor, accommodation maker or endorser, shall be

released from liability.  All such parties agree that Lender may renew or

extend (repeatedly and for any length of time) this loan or release any

party or guarantor or collateral; or impair, fail to realize upon or

perfect Lender's security interest in the collateral; and take any other

action deemed necessary by Lender without the consent of or notice to

anyone.  All such parties also agree that Lender may modify this loan

without the consent of or notice to anyone other than the party with whom

the modification is made.  The obligations under this Note are joint and

several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE

PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS.  

BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

COMMERCE GROUP CORP.

/s/ Edward A. Machulak

----------------------------------------------------

By:  Edward A. Machulak, President

/s/ Christine M. Wolski

-----------------------------------------------------

By:  Christine M. Wolski, Secretary

<PAGE>

                      EXHIBIT A-1 TO EXHIBIT 99.3

            (Schedule of all transactions pertaining to

               the activities relating to Exhibit A to

        Exhibit 99.3 for the fiscal year ending March 31, 2008

            has been purposely omitted as it only reflects

            the calculations of the principal and interest.)

EX-99.4 ACQ AGREEMNT

                              EXHIBIT 99.4

                           COMMERCE GROUP CORP.

                           6001 NORTH 91ST ST.

                        MILWAUKEE, WI  53225-1795

                             (414) 462-5310

                          FAX (414) 462-5312

                    E-MAIL info@commercegroupcorp.com

                   WEBSITE  www.commercegroupcorp.com

                     AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)

                     AND/OR HOMESPAN REALTY CO., INC. (Homespan)

                     AND/OR ECOMM GROUP INC. (Ecomm)

                     AND/OR SAN LUIS ESTATES, INC. (SLE)

                     AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)

                     AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)

                     ALL LOCATED AT THE SAME ADDRESS

May 30, 2008

Mrs. Sylvia Machulak as an

Individual and for her Rollover

Individual Retirement Account

903 West Green Tree Road

River Hills, Wisconsin  53217

Dear Mrs. Machulak:

At today's Commerce Group Corp. (Commerce) Directors' meeting, the

Directors were informed about the annual confirmation, disclosure and

status letter that you requested from Commerce, its subsidiaries, its

affiliates, and the Joint Venture, and to establish and confirm the

amount due and the collateral pledged along with any other Commerce

obligations or agreements made to the Sylvia Machulak Rollover Retirement

Account (SM RIRA) and to Sylvia Machulak as an individual/consultant

(SM), both referred to as Lenders, as of Commerce's fiscal year ended

March 31, 2008.  Today, Commerce's Directors, by unanimous consent,

approved, ratified and confirmed the contents of this letter and

authorized me to submit its understanding of your status with Commerce,

which is as follows:

1.   Promissory Notes

     The total amount of all of the open-ended, secured, on-demand

     promissory notes (Notes) together with interest due to the SM RIRA

     is $994,865.84 as of March 31, 2008.  Commerce has renewed this

     promissory note as of March 31, 2008 and a copy is attached (Exhibit

     A).  A schedule including all of the transactions pertaining to the

     activities relating to this Note during this fiscal year ended March

     31, 2008 is also attached (Exhibit A-1).  These Note(s) bear

     interest, payable monthly, at the rate of 3% over the prime rate

     established from time to time by the First National Bank of Chicago,

     Chicago, Illinois, (then Bank One; now the prime rate published in

     the Wall Street Journal), but not less than 16% per annum.  Commerce

     is no longer issuing monthly Notes for the payment of interest,

     etc., but pursuant to our understanding, Commerce is augmenting all

     additions and advances made by the SM RIRA, and it will deduct any

     payments or credits made by Commerce to the current open-ended,

     secured,

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 2 of 11 Pages

     on-demand, outstanding Notes issued or obligations owed to

     the SM RIRA and Commerce will provide an annual accounting and

     confirmation letter.

     On May 9, 2005, Commerce's Directors authorized its Officers to

     issue renewed annual note(s) (Exhibit B of the May 9, 2005

     confirmation letter) so that the Lender will have a current

     substituted dated debt instrument.  The Directors acknowledged that

     the issuance of note(s) for each transaction are too cumbersome and

     are not practicable to manage.  Also, the length of time involved

     and the number of transactions make it impractical to devote the

     time and effort to issue a note for each transaction.  However,

     beginning with the fiscal year which ended March 31, 2007, the

     Directors are including the following as Lender(s):  John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc.  (CMI) and Edward A. Machulak as an individual

     (EAM).  Therefore, the Directors have unanimously agreed to continue

     to embrace this resolution which was adopted on May 9, 2005:

          WHEREAS, in the past 20 years or more the following parties:

     General Lumber & Supply Co., Inc. (GLSCO); Edward L. Machulak  as an

     individual and not as a Director or Officer of Commerce (ELM); the

     Edward L. Machulak Rollover Individual Retirement Account (ELM

     RIRA), the Sylvia Machulak Rollover Individual Retirement Account

     (SM RIRA), and Sylvia Machulak, as a consultant and as an individual

     (SM), hereafter collectively and individually identified as the

     Lender(s), have accounted for advancing cash funds, earning accrued

     interest, and for appropriate credit which was reconciled to the

     open-ended, secured, on-demand notes(s); and

          WHEREAS, the Directors desire to minimize the record keeping in

     these transactions without jeopardizing, diminishing, altering,

     changing or losing any rights that the Lenders have by changing the

     procedures in handling the recording of any notes(s) issued or to be

     issued; and

          WHEREAS, in order to provide an easier accounting facility by

     renewing the notes(s) on an annual basis to coincide with the

     Company's fiscal year (which presently ends on March 31) and to

     incorporate said renewed note(s) with the annual confirmation

     agreement(s); and

          WHEREAS, prior to the change to issue substituted renewed

     note(s), the initial promissory note(s) were considered to be

     open-ended, secured, on-demand and the additions and deductions were

     recognized by separate accounting records; therefore, be it

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 3 of 11 Pages

          RESOLVED, That the Directors authorize and empower the Officers

     to substitute and issue renewed consolidated promissory note(s) at

     the end of each fiscal year beginning with the Company's fiscal year

     ended March 31, 2005 to the following: General Lumber & Supply Co.,

     Inc. (GLSCO); Edward L. Machulak  as an individual and not as a

     Director or Officer of Commerce (ELM); the Edward L. Machulak

     Rollover Individual Retirement Account (ELM RIRA), the Sylvia

     Machulak Rollover Individual Retirement Account (SM RIRA), and

     Sylvia Machulak, as a consultant and as an individual (SM),

     hereafter collectively and individually identified as the Lender(s);

     and

          BE IT FURTHER RESOLVED, That the Officers of the Company are

     authorized and empowered to assure the Lender(s) that by

     substituting and consolidating the existing note(s) and issuing the

     renewed note(s) on the last day of the Company's fiscal year

     beginning with March 31, 2005 with the understanding that the

     intention is that the Lender(s) will not jeopardize, lose, diminish,

     risk, alter or change any rights, including the pledge of

     collateral, that are inherent with the initial note(s) by the

     issuance of annual renewed open-ended, secured, on-demand promissory

     note(s); and

          BE IT FURTHER RESOLVED, That the Directors acknowledge that the

     only purpose of the change and substitution to issue annual renewed

     notes(s) is for the convenience, reduced accounting and reducing the

     paperwork involved; and

          BE IT FURTHER RESOVED, That the Officers are authorized and

     empowered to perform any act that they deem necessary to accommodate

     the purpose of issuing annual renewed note(s).

As of March 31, 2008, the following parties are collectively and

individually identified as the Lender(s): General Lumber & Supply Co.,

Inc. (GLSCO); Edward L. Machulak  as an individual and not as a Director

or Officer of Commerce (ELM); the Edward L. Machulak Rollover Individual

Retirement Account (ELM RIRA), the Sylvia Machulak Rollover Individual

Retirement Account (SM RIRA), Sylvia Machulak, as a consultant and as an

individual (SM), John E. Machulak and Susan R. Robertson, husband and

wife (M&R), the Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm),

Circular Marketing, Inc. (CMI) and Edward A. Machulak as an individual

(EAM).

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 4 of 11 Pages

2.   Other Obligations - Consulting Fees Due to Sylvia Machulak as an

     Individual (SM)

     As of September 30, 2000, a sum of $201,600 (72 months at $2,800 per

     month) is due to SM for consulting services rendered pursuant to a

     Director resolution adopted on October 20, 2000.  The Directors

     further acknowledge the continuance of SM's services at a sum of

     $3,000 per month beginning on October 1, 2000, and continuing until

     such time as terminated by the Directors or the President.

     Therefore, the amount due to SM as of March 31, 2008 is $471,600 (72

     months at $2,800 and 90 months at $3,000).  Reference is made to

     Exhibit B included in the April 5, 1996 confirmation letter.

3.   Transactions other than Notes Entered into or Confirmed During the

     Fiscal Year with SM or the SM RIRA, Commerce, and its Subsidiaries

     There were no known other non-routine transactions during this

     fiscal year ended March 31, 2008.

4.   Collateral Pledged

     The collateral specifically pledged to the SM RIRA or as otherwise

     noted is as follows:

     a.  A Collateral Pledge Agreement executed by Commerce on December

         31, 1981 granted to the SM RIRA by Commerce pledging 48,645 SLE

         common shares, par value $0.50 a share, Certificate No. 25,

         dated December 31, 1981, together with a letter agreement dated

         December 31, 1981.  Reference is made to Exhibit 4 in the April

         9, 1990 confirmation letter.

     b.  Acknowledgement of previously recorded collateral provided to

         the Lenders

         Historical information - San Sebastian Gold Mine Concession

         GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM collectively and

         individually identified as the Lender(s), have been assigned on

         October 19, 1987, all of the rights, titles, claims, remedies

         and interest in the Joint Venture, and to the mine concession

         granted by the Government of El Salvador to Mineral San

         Sebastian, S.A. de C.V (Misanse) on July 23, 1987, and

         thereafter from time to time amended, and which Misanse then

         assigned to the Joint Venture on September 22, 1987.  This

         collateral specifically includes, but is not limited to, all of

         the San Sebastian Gold Mine (SSGM) precious metal ore

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 5 of 11 Pages

         reserves.  Commerce and the Joint Venture have the right to

         assign this and any subsequent concession agreement.  Reference

         is made to Exhibit 4(a) included in the April 9, 1990

         confirmation letter.

         The following collateral has been previously assigned to the

         Lenders pursuant to resolutions adopted by the Directors:

         (1) Commerce/Sanseb Joint Venture (Joint Venture)

             Both Commerce and San Sebastian Gold Mines, Inc. have

             assigned all of the rights, title, claims, remedies and

             interest that each has in the Joint Venture to the Lenders.

             Reference is made to Historical information - San Sebastian

             Gold Mine Concession.

         (2) New SSGM Exploration Concession/License (New SSGM) -

             approximately 40.7694 square kilometers (10,070 acres)

             Government of El Salvador Resolution No. 27.

             On October 20, 2002, the Company applied for the New SSGM,

             which covers an area of 42 square kilometers and includes

             approximately 1.2306 square kilometers of the Renewed SSGM.

             The New SSGM is in the jurisdiction of the City of Santa

             Rosa de Lima in the Department of La Union and in the Nueva

             Esparta in the Department of Morazan, Republic of El

             Salvador, Central America.  On February 24, 2003, the El

             Salvador Department of Hydrocarbons and Mines (DHM) issued

             the New SSGM for a period of four years starting from the

             date following the notification of this resolution which was

             received on March 3, 2003.  The New SSGM may be extended for

             two two-year periods, or for a total of eight years.

             Besides the San Sebastian Gold Mine,  three other formerly

             operative gold and silver mines known as the La Lola Mine,

             the Santa Lucia Mine, and the Tabanco Mine are included in

             the New SSGM and are being explored.  The Company has

             complied as required by filing its annual activity report

             and it paid the annual surface tax.  This concession had

             been assigned collectively to all of the Lenders named

             herein on May 12, 2003 and the assignment was included in

             the May 12, 2003 confirmation agreement as Exhibit B.

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 6 of 11 Pages

         (3) Lease agreement by and between Mineral San Sebastian

             Sociedad Anomina de Capital Variable (Misanse) and Commerce

             dated January 14, 2003

             The term of this lease agreement coincides with the term of

             the Renewed San Sebastian Gold Mine Exploitation Concession

             and consists of 1,470 acres owned by Misanse.  This lease

             agreement has been assigned to all of the Lenders named

             herein on May 12, 2003 and the assignment was included in

             the May 12, 2003 confirmation agreement as Exhibit B.

         (4) Renewed San Sebastian Gold Mine Exploitation

             Concession/License (Renewed SSGM) - approximately 1.2306

             square kilometers (304 acres), Department of La Union, El

             Salvador, Central America (pledged and assigned as

             collateral on May 10, 2004) Government of El Salvador

             Agreement No. 591.

             On September 6, 2002, at a meeting held with the El

             Salvadoran Minister of Economy and the DHM, it was agreed to

             submit an application for the Renewed SSGM for a 30-year

             term and to simultaneously cancel the concession obtained on

             July 23, 1987.  On September 26, 2002, the Company filed

             this application.  On February 28, 2003 (received March 3,

             2003) the DHM admitted to the receipt of the application and

             the Company proceeded to file public notices as required by

             Article 40 of the El Salvadoran Mining Law and its Reform

             (MLIR).  On April 16, 2003, the Company's El Salvadoran

             legal counsel filed with the DHM notice that it believed

             that it complied with the requirements of Article 40, and

             that there were no objections; and requested that the DHM

             make its inspection as required by MLIR Article 42.  The

             Company then provided a bond which was required by the DHM

             to protect third parties against any damage caused from the

             mining operations, and it simultaneously paid the annual

             surface tax.  On August 29, 2003 the Office of the Ministry

             of Economy formally presented the Company with the

             twenty-year Renewed SSGM which was dated August 18, 2003.

             This Renewed SSGM replaces the collateral that the same

             parties held with the previous concession.  On May 20, 2004

             (delivered June 4, 2004) the Government of El Salvador,

             under their Agreement Number 591, extended the exploitation

             concession for a period of 30 years.  A copy of the

             assignment dated May 10, 2004, is attached to the May 10,

             2004 confirmation letter as Exhibit B and the

             Renewed SSGM agreement is attached to Exhibit B and referred

             to as Exhibit 1.

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 7 of 11 Pages

         (5) San Cristobal Mill and Plant (SCMP) three-year lease by and

             between Commerce and Corporacion Salvadorena de Inversiones

             (Corsain), an El Salvadoran governmental agency, executed on

             Monday, April 26, 2004, retroactive to November 13, 2003.

             Pledged and assigned as collateral on May 10, 2004.

             The renewed three-year SCMP lease for the property located

             near the City of El Divisadero was finalized and executed on

             Monday, April 26, 2004, and is retroactive to November 13,

             2003.  This May 10, 2004 assignment is included in the May

             10, 2004 confirmation letter as Exhibit B and the lease

             agreement is attached to Exhibit B and referred to as

             Exhibit 2.

             On March 25, 2008 a nineteen-month lease retroactive to

             November 12, 2006 was executed by and between Corsain and

             Commerce.  The lease was renewed on June 12, 2008 for a

             six-month period to expire on December 11, 2008.  Reference

             is made to Exhibit 10.16 of Commerce's Form 10-K for its

             fiscal year ended March 31, 2008 for a copy of this lease.

         (6) Nueva Esparta Exploration Concession/License (Nueva Esparta)

             - 45 square kilometers (11,115 acres) Resolution No. 271

             On or about October 20, 2002, the Company filed an

             application with the DHM for the Nueva Esparta Exploration

             Concession/License which consists of 45 square kilometers

             and is located north and adjacent to the New SSGM.  On May

             25, 2004 the Government of El Salvador, under their

             Resolution No. 271, issued the Nueva Esparta Exploration

             Concession/License for a period of four years starting from

             the date following the notification of this resolution which

             was received on June 4, 2004.  This concession/license may

             be extended for two two-year periods or for a total of eight

             years.  This rectangular area is in the Departments of La

             Union (east) and Morazan (west) and in the jurisdiction of

             the City of Santa Rosa de Lima, El Salvador, Central

             America.  Included in the Nueva Esparta are eight other

             formerly operated gold and silver mines known as:  the

             Banadero Mine, the Carrizal Mine, the Copetillo Mine, the

             Grande Mine, the La Joya Mine, the Las Pinas Mine, the

             Montemayor Mine, and the Oro Mine.  A copy of the assignment

             dated May 9, 2005 was attached to the May 9, 2005

             confirmation letter as Exhibit C and the Nueva Esparta

             Exploration Concession is attached to Exhibit C and referred

             to as Exhibit 1.

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 8 of 11 Pages

         (7) Acknowledgment of collateral provided through March 31, 2008

             Commerce's Directors have on May 30, 2008 authorized and

             directed Commerce's Officers to assign all of the rights,

             titles, claims, remedies and interest in all of its assets

             that it has, including any assets owned by the Joint

             Venture, to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and

             from March 31, 2007 to include M&R, the Law Firm, CMI and

             EAM, collectively and individually referred to as Lenders,

             as additional collateral for all of the outstanding loans

             and obligations as of March 31, 2008, including all future

             advances of any kind.

5.   Cross Pledge Collateral Agreement

     GLSCO, ELM, the ELM RIRA, the SM RIRA and SM individually are

     entitled to specific collateral that has been pledged to them by

     Commerce, its subsidiaries, affiliates and the Joint Venture.  Upon

     default by Commerce, or its subsidiaries or affiliates or the Joint

     Venture, then GLSCO, ELM, the ELM RIRA, the SM RIRA and SM have the

     first right to the proceeds from the specific collateral pledged to

     each of them.  Commerce, its subsidiaries, affiliates, and the Joint

     Venture also have cross-pledged the collateral without diminishing

     the rights of the specific collateral pledged to each of the

     following:  GLSCO, ELM, the ELM RIRA, the SM RIRA and SM.  The

     purpose and the intent of the cross pledge of collateral is to

     assure GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM, that each of

     them would be paid in full; thus, any excess collateral that would

     be available is for the purpose of satisfying any debts and

     obligations due to each of the named parties.  The formula to be

     used (after deducting the payments made from the specific

     collateral) is to total all of the debts due to GLSCO, ELM, the ELM

     RIRA, the SM RIRA, SM, and from March 31, 2007 to include M&R, the

     Law Firm, CMI and EAM, and then to divide this total debt into each

     individual debt to establish each individual's percentage of the

     outstanding debt due.  This percentage then will be multiplied by

     the total of the excess collateral to determine the amount of

     proceeds each party should receive from the excess collateral.  Then

     the amount due to each of them would be distributed accordingly.

6.   Cancellation of Inter-Company Debts Upon Default

     Since certain of the collateral specifically or collectively pledged

     to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM and from March 31, 2007

     to include M&R, the Law Firm, CMI and EAM, consists of the common

     stock of Homespan, Ecomm, Sanseb,

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 9 of 11 Pages

     SLE, Misanse, UDI and the interest in the ownership of the Joint

     Venture, Commerce agreed, upon default of the payment of principal

     or interest to any of the individual Lender(s) mentioned herein,

     that it will automatically cancel any inter-company debts owed to

     Commerce by any of its wholly-owned subsidiaries or affiliates or

     the Joint Venture at such time as any of the stock or Joint Venture

     ownership is transferred to the collateral holders as a result of

     default of any promissory note.

7.   Guarantors

     This agreement further confirms that Commerce and all of the

     following are guarantors to the obligations due to SM and to the

     loans made by the SM RIRA to Commerce:  Joint Venture, Homespan,

     Ecomm, SLE, Sanseb and UDI.  They jointly and severally guarantee

     payment of the note(s) that they caused to be issued and also agree

     that these note(s) may be accelerated in accordance with the

     provisions contained in the agreement and/or any collateral or

     mortgages securing these notes.  Also, Commerce, all of its

     subsidiaries and the Joint Venture agree to the cross pledge of

     collateral for the benefit of GLSCO, ELM, the ELM RIRA, the SM RIRA,

     SM, and from March 31, 2007 to include M&R, the Law Firm, CMI and

     EAM.  Reference is made to Exhibit 5 included in the April 9, 1990

     confirmation letter.

8.   Re-Execution Agreement(s)

     In the event the SM RIRA and/or SM deems that it is necessary or

     advisable for the SM RIRA and/or SM to have Commerce re-execute any

     document(s) entered into, including, but not limited to the

     promissory note(s) or collateral agreement(s), Commerce will

     re-execute such document(s) reasonably required by the SM RIRA

     and/or SM.  Commerce also acknowledges that Commerce may be liable

     to pay certain costs related to any of the transactions entered into

     with the SM RIRA and/or SM.  If at a later date the SM RIRA and/or

     SM determines that an error has been made in the payment of such

     costs to the SM RIRA and/or SM, then the SM RIRA and/or SM may

     demand payment and Commerce does hereby agree to make such payment

     forthwith.  All requests for corrections of any errors and/or

     payment of costs shall be complied with by Commerce within seven (7)

     days of the SM RIRA's and/or SM's written request.   The failure of

     Commerce to comply with Commerce's obligation(s) hereunder shall

     constitute a default and shall entitle the SM RIRA and/or SM to the

     remedies available for default under any provisions of the

     agreements including, but not limited to the promissory note(s)

     and/or the collateral pledge agreement(s) and/or any other Commerce

     obligation(s).

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 10 of 11 Pages

9.   Omissions

     Commerce believes that it has included all of its obligations,

     monies due and has listed all of the collateral due to the SM RIRA

     and/or SM, however, since these transactions have taken place over

     a long period of time in which changes could have taken place, it is

     possible that inadvertently some item(s), particularly collateral,

     could have been omitted.  If that should prove to be a fact, then

     Commerce, the Joint Venture, Homespan, Ecomm, SLE, Sanseb, and UDI

     agree that those omissions of collateral, if any, are meant to be

     included as collateral under this confirmation agreement.

If you are in agreement with the contents of this letter, please sign

below and return one copy to Commerce.

Very truly yours,

COMMERCE GROUP CORP.

/s/ Christine M. Wolski

Christine M. Wolski

Secretary

<PAGE>

Mrs. Sylvia Machulak

Sylvia Machulak

Rollover Individual Retirement Account

May 30, 2008

Page 11 of 11 Pages

The contents of this letter are agreed by the following:

COMMERCE/SANSEB JOINT VENTURE             HOMESPAN REALTY COMPANY, INC.

as Guarantor (Joint Venture)              as Guarantor (Homespan)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

---------------------------------------   ----------------------------------

By:  Edward A. Machulak, Auth. Designee   By:  Edward A. Machulak, President

ECOMM GROUP INC.                          SAN LUIS ESTATES, INC.

as Guarantor (Ecomm)                      as Guarantor (SLE)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

---------------------------------------   ----------------------------------

By:  Edward A. Machulak, President        By:  Edward A. Machulak, President

SAN SEBASTIAN GOLD MINES, INC.            UNIVERSAL DEVELOPERS, INC.

as Guarantor (Sanseb)                     as Guarantor (UDI)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

---------------------------------------   ----------------------------------

By:  Edward A. Machulak, President        By:  Edward A. Machulak, President

Accepted by:                              Accepted by:

/s/ Sylvia Machulak                       /s/ Sylvia Machulak

---------------------------------------   ----------------------------------

Sylvia Machulak Rollover Individual       Sylvia Machulak as an individual

Retirement Account                        Date:  May 30, 2008

Date:  May 30, 2008

<PAGE>

                           EXHIBIT A TO EXHIBIT 99.4

                           RENEWED PROMISSORY NOTE

Borrower: Commerce Group Corp.            Lender:  Sylvia Machulak RIRA

          6001 North 91st Street                   903 West Green Tree Rd.

          Milwaukee, WI  53225                     Milwaukee, WI  53217

Principal Amount:      $994,865.84

Initial Rate:          3.000% + prime rate, but not less than 16.000%

Date of Renewed Note:  March 31, 2008

PROMISE TO PAY.  COMMERCE GROUP CORP. ("Borrower") promises to pay to the

SYLVIA  MACHULAK ROLLOVER INDIVIDUAL RETIREMENT ACCOUNT ("Lender"), or

order, in lawful money of the United States of America, the principal

amount of Nine Hundred Ninety Four Thousand Eight Hundred Sixty Five and

84/100 Dollars ($994,865.84), together with interest, paid monthly, on

the unpaid principal balance from March 31, 2008, until paid in full.

PAYMENT.  This is an open-ended, secured, on-demand payment, renewed

promissory note.  Interest is to be paid monthly.  The Lender, at its

discretion, can add the monthly interest due to the principal balance.

Unless otherwise agreed or required by applicable law, payments will be

applied first to any accrued unpaid interest; and then to principal.  The

annual interest rate for this Note is computed on a 365/360 basis; that

is, by applying the ratio of the annual interest rate over a year of 360

days, multiplied by the outstanding principal balance, multiplied by the

actual number of days the principal balance is outstanding and the

interest is payable monthly.  Borrower will pay Lender at Lender's

address shown above or at such other place as Lender may designate in

writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to

change from time to time based on changes in the prime rate as quoted in

the Wall Street Journal plus three percent, but not less than sixteen

percent per annum.  Borrower understands that Lender may make loans to

the Borrower based on other rates as well. The prime rate as of this date

is 5.250% per annum.  The interest rate to be applied to the unpaid

principal balance of this Note will be at a rate of 3.000 percentage

points over the prime rate, but not less than 16.000% per annum.  NOTICE:  

Under no circumstances will the interest rate on this Note be less than

16.000% per annum or more than the maximum rate allowed by applicable

law.

PREPAYMENT.  Borrower may pay without penalty all or a portion of the

amount owed earlier than it is due.  Early payments will not, unless

agreed to by Lender in writing, relieve Borrower of Borrower's obligation

to pay on demand, the entire amount due.  Rather, any payment will reduce

the principal balance due.  Borrower agrees not to send Lender payments

marked "paid in full," "without recourse," or similar language.  If

Borrower sends such a payment, Lender may accept it without losing any of

Lender's rights under this Note, and Borrower will remain obligated to

pay any further amount owed to Lender.

INTEREST AFTER DEFAULT.  Upon default, including failure to pay on

demand, Lender, at its option, may, if permitted under applicable law,

increase the variable interest rate on this Note to 6.000 percentage

points over the prime rate or over the 16.000% rate, whichever is higher.  

The interest rate will not exceed the maximum rate permitted by

applicable law.

DEFAULT.  Each of the following shall constitute an event of default

("Event of Default") under this Note:

     Payment Default.  Borrower fails to make any payment when demand is

     made under this Note.

     Other Defaults.  Borrower fails to comply with or to perform any

     other term, obligation, covenant or condition contained in this Note

     or in any of the related documents or to comply with or to perform

     any term, obligation, covenant or condition contained in any other

     agreement between Lender and Borrower.

<PAGE>

     Default in Favor of Third Parties.  Borrower or any Grantor defaults

     under any loan, extension of credit, security agreement, purchase or

     sales agreement, or any other agreement, in favor of any other

     creditor or person that may materially affect any of Borrower's

     property or Borrower's ability to repay this Note or perform

     Borrower's obligations under this Note or any of the related

     documents.

     False Statements.  Any warranty, representation or statement made or

     furnished to Lender by Borrower or on Borrower's behalf under this

     Note or the related documents is false or misleading in any material

     respect, either now or at the time made or furnished or becomes

     false or misleading at any time thereafter.

     Insolvency.  The dissolution or termination of Borrower's existence

     as a going business, the insolvency of Borrower, the appointment of

     a receiver for any part of Borrower's property, any assignment for

     the benefit of creditors, any type of creditor workout, or the

     commencement of any proceeding under any bankruptcy or insolvency

     laws by or against Borrower.

     Creditor or Forfeiture Proceedings.  Commencement of foreclosure or

     forfeiture proceedings, whether by judicial proceeding, self-help,

     repossession or any other method, by any creditor of Borrower or by

     any governmental agency against any collateral securing the loan.  

     However, this Event of Default shall not apply if there is a good

     faith dispute by Borrower as to the validity or reasonableness of

     the claim which is the basis of the creditor or forfeiture

     proceeding and if Borrower gives Lender written notice of the

     creditor or forfeiture proceeding and deposits with Lender monies or

     a surety bond for the creditor or forfeiture proceeding, in an

     amount determined by Lender, in its sole discretion, as being an

     adequate reserve or bond for the dispute.

     Events Affecting Guarantor.  Any of the preceding events occurs with

     respect to any Guarantor of any of the indebtedness or any Guarantor

     disputes the validity of, or liability under, any guaranty of the

     indebtedness evidenced by this Note.

     Adverse Change.  A material adverse change occurs in Borrower's

     financial condition, or Lender believes the prospect of payment or

     performance of this Note is impaired.

     Insecurity.  Lender in good faith believes itself insecure.

LENDER'S RIGHTS.  Upon default or upon demand, the Lender may declare the

entire unpaid principal balance on this Note and all accrued unpaid

interest immediately due, and then Borrower will pay that amount.

COLLATERAL.  Borrower acknowledges this Note is secured by all security

agreements, guarantees, mortgages, and other security instruments

previously granted, contemporaneously granted, and granted in the future,

and it has the collateral and other rights all as contained in a certain

confirmation agreement dated May 10, 2004 between all parties contained

therein, and as subsequently amended and updated from time to time.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help

collect this Note if Borrower does not pay.  Borrower will pay Lender

that amount.  This includes, subject to any limits under applicable law,

Lender's attorneys' fees and Lender's legal expenses, whether or not

there is a lawsuit, including attorneys' fees, expenses for bankruptcy

proceedings (including efforts to modify or vacate any automatic stay or

injunction), and appeals.  If not prohibited by applicable law, Borrower

also will pay any court costs, in addition to all other sums provided by

law.

GOVERNING LAW.  This Note will be governed by, construed and enforced in

accordance with the laws of the State of Wisconsin.  This Note has been

accepted by Lender in the State of Wisconsin.

<PAGE>

OTHER LOAN AGREEMENTS.  If Borrower and Lender have either previously or

contemporaneously entered into a Loan or Confirmation Agreements, it is

agreed that this Note is subject to the terms and conditions of such Loan

or Confirmation Agreements.  For purpose of this provision, Loan or

Confirmation Agreements shall include, but not be limited to, a Business

Loan Agreement or any other Loan or Confirmation Agreements.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon

Borrower, and upon Borrower's successors and assigns, and shall inure to

the benefit of Lender and Lender's heirs, executors, administrators,

successors and assigns.

GENERAL PROVISIONS.  This Note benefits Lender and its successors and

assigns, and binds Borrower and Borrower's successors, assigns, and

representatives.  Lender may delay or forgo enforcing any of its rights

or remedies under this Note without losing them.  Borrower and any other

person or corporation who signs, guarantees or endorses this Note, to the

extent allowed by law, waive presentment, demand for payment, and notice

of dishonor.  Upon any change in the terms of this Note, and unless

otherwise expressly stated in writing, no party who signs this Note,

whether as maker, guarantor, accommodation maker or endorser, shall be

released from liability.  All such parties agree that Lender may renew or

extend (repeatedly and for any length of time) this loan or release any

party or guarantor or collateral; or impair, fail to realize upon or

perfect Lender's security interest in the collateral; and take any other

action deemed necessary by Lender without the consent of or notice to

anyone.  All such parties also agree that Lender may modify this loan

without the consent of or notice to anyone other than the party with whom

the modification is made.  The obligations under this Note are joint and

several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE

PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS.  

BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY

NOTE.

BORROWER:

COMMERCE GROUP CORP.

/s/ Edward A. Machulak

----------------------------------

By:  Edward A. Machulak, President

/s/ Christine M. Wolski

-----------------------------------------------------

By:  Christine M. Wolski, Secretary

<PAGE>

                        EXHIBIT A-1 TO EXHIBIT 99.4

                 (Schedule of all transactions pertaining to

                   the activities relating to  Exhibit A to

             Exhibit 99.4 for the fiscal year ending March 31, 2008

                has been purposely omitted as it only reflects

                the calculations of the principal and interest.)

EX-99.5 HOLDERS RTS

                              EXHIBIT 99.5

                           COMMERCE GROUP CORP.

                           6001 NORTH 91ST ST.

                        MILWAUKEE, WI  53225-1795

                             414-462-5310

                           FAX 414-462-5312

                  E-MAIL  info@commercegroupcorp.com

                  WEBSITE  www.commercegroupcorp.com

                     AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)

                     AND/OR HOMESPAN REALTY CO., INC. (Homespan)

                     AND/OR ECOMM GROUP INC. (Ecomm)

                     AND/OR SAN LUIS ESTATES, INC. (SLE)

                     AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)

                     AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)

                     ALL LOCATED AT THE SAME ADDRESS

May 30, 2008

Mr. Edward A. Machulak                  Mr. Edward A. Machulak (EAM)

President                               as an individual

Circular Marketing, Inc. (CMI)          6001 North 91st Street

6001 North 91st Street                  Milwaukee, Wisconsin  53225

Milwaukee, Wisconsin  53225

Dear Mr. Machulak:

At today's Commerce Group Corp. (Commerce) Directors' meeting, the

Directors were informed about the annual confirmation, disclosure and

status letter from Commerce, its subsidiaries, its affiliates, and the

Joint Venture, and to establish and confirm the amount due and the

collateral pledged along with any other Commerce obligations or

agreements made to the Circular Marketing, Inc. (CMI) and to Edward A.

Machulak (EAM) both referred to as Lenders, as of Commerce's fiscal year

ended March 31, 2008.  Today, Commerce's Directors, by unanimous consent,

approved, ratified and confirmed the contents of this letter and

authorized me to submit its understanding of your status with Commerce,

which is as follows:

1.   Promissory Notes Due to CMI; None due to EAM.

     The total amount of all of the open-ended, secured, on-demand

     promissory notes (Notes) together with interest due to CMI is

     $102,181.46 as of March 31, 2008.  Commerce has renewed this

     promissory note as of March 31, 2008 and a copy is attached (Exhibit

     A).  A schedule including all of the transactions pertaining to the

     activities relating to this Note during this fiscal year ended March

     31, 2008 is also attached (Exhibit A-1).  These Note(s) bear

     interest, payable monthly, at the rate of 4% over the prime rate

     published in the Wall Street Journal, but not less than 16% per

     annum.  Commerce is no longer issuing monthly Notes for the payment

     of interest, etc., but pursuant to our understanding, Commerce is

     augmenting all additions and advances made by CMI, and it will

     deduct any payments or credits made by Commerce to the current

     open-ended, secured, on-demand, outstanding Notes issued or

     obligations owed to CMI and Commerce will provide an annual

     accounting and confirmation letter.

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 2 of 10 Pages

2.   Other Debts Due to CMI; None Due to EAM.

     In addition to the promissory note, Commerce owes CMI for services

     rendered such as the preparation, printing and mailing of Commerce's

     Annual Report, and for other services, the following as of March 31,

     2008:

     Services:  mailings, annual report and other charges       $90,215.00

     Service charges as of the fiscal year ended March 31, 2008  22,995.05

                                                               -----------

     Total                                                     $113,210.05

     The service charges are based on a charge of 16% per year,

     annualized at the end of each fiscal year pursuant to an attached

     schedule (Exhibit B)

     On May 9, 2005, Commerce's Directors authorized its Officers to

     issue renewed annual note(s) (Exhibit B of the May 9, 2005

     confirmation letter) so that the Lender will have a current

     substituted dated debt instrument.  The Directors acknowledged that

     the issuance of note(s) for each transaction are too cumbersome and

     are not practicable to manage.  Also, the length of time involved

     and the number of transactions make it impractical to devote the

     time and effort to issue a note for each transaction.  However,

     beginning with the fiscal year which ended March 31, 2007, the

     Directors are including the following as Lender(s):  John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc.  (CMI) and Edward A. Machulak as an individual

     (EAM).  Therefore, the Directors have unanimously agreed to continue

     to embrace this resolution which was adopted on May 9, 2005:

          WHEREAS, in the past 20 years or more the following parties:

     General Lumber & Supply Co., Inc. (GLSCO); Edward L. Machulak  as an

     individual and not as a Director or Officer of Commerce (ELM); the

     Edward L. Machulak Rollover Individual Retirement Account (ELM

     RIRA), the Sylvia Machulak Rollover Individual Retirement Account

     (SM RIRA), and Sylvia Machulak, as a consultant and as an individual

     (SM), hereafter collectively and individually identified as the

     Lender(s), have accounted for advancing cash funds, earning accrued

     interest, and for appropriate credit which was reconciled to the

     open-ended, secured, on-demand notes(s); and

          WHEREAS, the Directors desire to minimize the record keeping in

     these transactions without jeopardizing, diminishing, altering,

     changing or losing any rights that the Lenders have by changing the

     procedures in handling the recording of any notes(s) issued or to be

     issued; and

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 3 of 10 Pages

          WHEREAS, in order to provide an easier accounting facility by

     renewing the notes(s) on an annual basis to coincide with the

     Company's fiscal year (which presently ends on March 31) and to

     incorporate said renewed note(s) with the annual confirmation

     agreement(s); and

          WHEREAS, prior to the change to issue substituted renewed

     note(s), the initial promissory note(s) were considered to be

     open-ended, secured, on-demand and the additions and deductions were

     recognized by separate accounting records; therefore, be it

               RESOLVED, That the Directors authorize and empower the

          Officers to substitute and issue renewed consolidated

          promissory note(s) at the end of each fiscal year beginning

          with the Company's fiscal year ended March 31, 2005 to the

          following: General Lumber & Supply Co., Inc. (GLSCO); Edward L.

          Machulak  as an individual and not as a Director or Officer of

          Commerce (ELM); the Edward L.  Machulak Rollover Individual

          Retirement Account (ELM RIRA), the Sylvia Machulak Rollover

          Individual Retirement Account (SM RIRA), and Sylvia Machulak,

          as a consultant and as an individual (SM), hereafter

          collectively and individually identified as the Lender(s); and

               BE IT FURTHER RESOLVED, That the Officers of the Company

          are authorized and empowered to assure the Lender(s) that by

          substituting and consolidating the existing note(s) and issuing

          the renewed note(s) on the last day of the Company's fiscal

          year beginning with March 31, 2005 with the understanding that

          the intention is that the Lender(s) will not jeopardize, lose,

          diminish, risk, alter or change any rights, including the

          pledge of collateral, that are inherent with the initial

          note(s) by the issuance of annual renewed open-ended, secured,

          on-demand promissory note(s); and

               BE IT FURTHER RESOLVED, That the Directors acknowledge

          that the only purpose of the change and substitution to issue

          annual renewed notes(s) is for the convenience, reduced

          accounting and reducing the paperwork involved; and

               BE IT FURTHER RESOVED, That the Officers are authorized

          and empowered to perform any act that they deem necessary to

          accommodate the purpose of issuing annual renewed note(s).

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 4 of 10 Pages

     As of March 31, 2008, the following parties are collectively and

     individually identified as the Lender(s): General Lumber & Supply

     Co., Inc. (GLSCO); Edward L. Machulak  as an individual and not as a

     Director or Officer of Commerce (ELM); the Edward L. Machulak

     Rollover Individual Retirement Account (ELM RIRA), the Sylvia

     Machulak Rollover Individual Retirement Account (SM RIRA), Sylvia

     Machulak, as a consultant and as an individual (SM), John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc. (CMI) and Edward A. Machulak as an individual (EAM).

3.   Collateral Pledged

     The following collateral has been previously assigned to certain

     Lenders, and from March 31, 2007 forward includes John E. Machulak

     and Susan R. Robertson, husband and wife (M&R), the Machulak,

     Robertson & Sodos, S.C. Law Firm (Law Firm), Circular Marketing,

     Inc. (CMI) and Edward A.  Machulak as an individual (EAM) as of

     March 31, 2008, pursuant to resolutions adopted by the Directors:

     (1)  Commerce/Sanseb Joint Venture (Joint Venture)

          Both Commerce and San Sebastian Gold Mines, Inc. have assigned

          all of the rights, title, claims, remedies and interest that

          each has in the Joint Venture to the Lenders.  Reference is

          made to Historical information - San Sebastian Gold Mine

          Concession.

     (2)  New SSGM Exploration Concession/License (New SSGM) -

          approximately 40.7694 square kilometers (10,070 acres)

          Government of El Salvador Resolution No. 27.

          On October 20, 2002, the Company applied for the New SSGM,

          which covers an area of 42 square kilometers and includes

          approximately 1.2306 square kilometers of the Renewed SSGM.

          The New SSGM is in the jurisdiction of the City of Santa Rosa

          de Lima in the Department of La Union and in the Nueva Esparta

          in the Department of Morazan, Republic of El Salvador, Central

          America.  On February 24, 2003, the El Salvador Department of

          Hydrocarbons and Mines (DHM) issued the New SSGM for a period

          of four years starting from the date following the notification

          of this resolution which was received on March 3, 2003.  The

          New SSGM may be extended for two two-year periods, or for a

          total of eight years.  Besides the San Sebastian Gold Mine,

          three other formerly operative gold and silver mines known as

          the La Lola Mine, the Santa Lucia Mine, and the Tabanco Mine

          are included in the New SSGM and are being

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 5 of 10 Pages

explored.  The

          Company has

          complied as required by filing its annual activity report and

          it paid the annual surface tax.  This concession had been

          assigned collectively to all of the Lenders named herein on May

          12, 2003 and the assignment was included in the May 12, 2003

          confirmation agreement as Exhibit B.

     (3)  Lease agreement by and between Mineral San Sebastian Sociedad

          Anomina de Capital Variable (Misanse) and Commerce dated

          January 14, 2003

          The term of this lease agreement coincides with the term of the

          Renewed San Sebastian Gold Mine Exploitation Concession and

          consists of 1,470 acres owned by Misanse.  This lease agreement

          has been assigned to all of the Lenders named herein on May 12,

          2003 and the assignment was included in the May 12, 2003

          confirmation agreement as Exhibit B.

     (4)  Renewed San Sebastian Gold Mine Exploitation Concession/License

          (Renewed SSGM) - approximately 1.2306 square kilometers (304

          acres), Department of La Union, El Salvador, Central America

          (pledged and assigned as collateral on May 10, 2004) Government

          of El Salvador Agreement No. 591.

          On September 6, 2002, at a meeting held with the El Salvadoran

          Minister of Economy and the DHM, it was agreed to submit an

          application for the Renewed SSGM for a 30-year term and to

          simultaneously cancel the concession obtained on July 23, 1987.

          On September 26, 2002, the Company filed this application.  On

          February 28, 2003 (received March 3, 2003) the DHM admitted to

          the receipt of the application and the Company proceeded to

          file public notices as required by Article 40 of the El

          Salvadoran Mining Law and its Reform (MLIR).  On April 16,

          2003, the Company's El Salvadoran legal counsel filed with the

          DHM notice that it believed that it complied with the

          requirements of Article 40, and that there were no objections;

          and requested that the DHM make its inspection as required by

          MLIR Article 42.  The Company then provided a bond which was

          required by the DHM to protect third parties against any damage

          caused from the mining operations, and it simultaneously paid

          the annual surface t ax.  On August 29, 2003 the Office of the

          Ministry of Economy formally presented the Company with the

          twenty-year Renewed SSGM which was dated August 18, 2003.  This

          Renewed SSGM replaces the collateral that the same parties held

          with the previous concession.  On May 20, 2004 (delivered June

          4, 2004) the Government of El Salvador, under their Agreement

          Number 591, extended the exploitation concession for a period

          of 30 years.  A copy of the assignment dated May 10, 2004, is

          attached to the May 10, 2004 confirmation letter as Exhibit B

          and the Renewed SSGM agreement is attached to Exhibit B and

          referred to as Exhibit 1.

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 6 of 10 Pages

     (5)  San Cristobal Mill and Plant (SCMP) three-year lease by and

          between Commerce and Corporacion Salvadorena de Inversiones

          (Corsain), an El Salvadoran governmental agency, executed on

          Monday, April 26, 2004, retroactive to November 13, 2003.

          Pledged and assigned as collateral on May 10, 2004.

          The renewed three-year SCMP lease for the property located near

          the City of El Divisadero was finalized and executed on Monday,

          April 26, 2004, and is retroactive to November 13, 2003.  This

          May 10, 2004 assignment is included in the May 10, 2004

          confirmation letter as Exhibit B and the lease agreement is

          attached to Exhibit B and referred to as Exhibit 2.

          On March 25, 2008 a nineteen-month lease retroactive to

          November 12, 2006 was executed by and between Corsain and

          Commerce.  The lease was renewed on June 12, 2008 for a

          six-month period to expire on December 11, 2008.  Reference is

          made to Exhibit 10.16 of Commerce's Form 10-K for its fiscal

          year ended March 31, 2008 for a copy of this lease.

     (6)  Nueva Esparta Exploration Concession/License (Nueva Esparta) -

          45 square kilometers (11,115 acres) Resolution No. 271

          On or about October 20, 2002, the Company filed an application

          with the DHM for the Nueva Esparta Exploration

          Concession/License which consists of 45 square kilometers and

          is located north and adjacent to the New SSGM.  On May 25, 2004

          the Government of El Salvador, under their Resolution No. 271,

          issued the Nueva Esparta Exploration Concession/License for a

          period of four years starting from the date following the

          notification of this resolution which was received on June 4,

          2004.  This concession/license may be extended for two two-year

          periods or for a total of eight years.  This rectangular area

          is in the Departments of La Union (east) and Morazan (west) and

          in the jurisdiction of the City of Santa Rosa de Lima, El

          Salvador, Central America.  Included in the Nueva Esparta are

          eight other formerly operated gold and silver mines known as:

          the Banadero Mine, the Carrizal Mine, the Copetillo Mine, the

          Grande Mine, the La Joya Mine, the Las Pinas Mine, the

          Montemayor Mine, and the Or o Mine.  A copy of the assignment

          dated May 9, 2005 was attached to the May 9, 2005 confirmation

          letter as Exhibit C and the Nueva Esparta Exploration

          Concession is attached to Exhibit C and referred to as Exhibit

          1.

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 7 of 10 Pages

     (7)  Acknowledgment of collateral provided through March 31, 2008

          Commerce's Directors have on May 30, 2008 authorized and

          directed Commerce's Officers to assign all of the rights,

          titles, claims, remedies and interest in all of its assets that

          it has, including any assets owned by the Joint Venture, to

          GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from March 31,

          2007 to include M&R, the Law Firm, CMI and EAM, collectively

          and individually referred to as Lenders, as additional

          collateral for all of the outstanding loans and obligations as

          of March 31, 2008, including all future advances of any kind.

4.   Cross Pledge Collateral Agreement

     GLSCO, ELM, the ELM RIRA, the SM RIRA and SM individually are

     entitled to specific collateral that has been pledged to them by

     Commerce, its subsidiaries, affiliates and the Joint Venture.  Upon

     default by Commerce, or its subsidiaries or affiliates or the Joint

     Venture, then GLSCO, ELM, the ELM RIRA, the SM RIRA and SM have the

     first right to the proceeds from the specific collateral pledged to

     each of them.  Commerce, its subsidiaries, affiliates, and the Joint

     Venture also have cross-pledged the collateral without diminishing

     the rights of the specific collateral pledged to each of the

     following:  GLSCO, ELM, the ELM RIRA, the SM RIRA and SM.  The

     purpose and the intent of the cross pledge of collateral is to

     assure GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM, that each of

     them would be paid in full; thus, any excess collateral that would

     be available is for the purpose of satisfying any debts and

     obligations due to each of the named parties.  The formula to be

     used (after deducting the payments made from the specific

     collateral) is to total all of the debts due to GLSCO, ELM, the ELM

     RIRA, the SM RIRA, SM, and from March 31, 2007 to include M&R, the

     Law Firm, CMI and EAM, and then to divide this total debt into each

     individual debt to establish each individual's percentage of the

     outstanding debt due.  This percentage then will be multiplied by

     the total of the excess collateral to determine the amount of

     proceeds each party should receive from the excess collateral.  Then

     the amount due to each of them would be distributed accordingly.

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 8 of 10 Pages

5.   Cancellation of Inter-Company Debts Upon Default

     Since certain of the collateral specifically or collectively pledged

     to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM and from March 31, 2007

     to include M&R, the Law Firm, CMI and EAM, consists of the common

     stock of Homespan, Ecomm, Sanseb, SLE, Misanse, UDI and the interest

     in the ownership of the Joint Venture, Commerce agreed, upon default

     of the payment of principal or interest to any of the individual

     Lender(s) mentioned herein, that it will automatically cancel any

     inter-company debts owed to Commerce by any of its wholly-owned

     subsidiaries or affiliates or the Joint Venture at such time as any

     of the stock or Joint Venture ownership is transferred to the

     collateral holders as a result of default of any promissory note.

6.   Guarantors

     This agreement further confirms that Commerce and all of the

     following are guarantors to the obligations due to CMI and/or EAM

     and to the loans made by CMI and/or EAM to Commerce:  Joint Venture,

     Homespan, Ecomm, SLE, Sanseb and UDI.  They jointly and severally

     guarantee payment of the note(s) that they caused to be issued and

     also agree that these note(s) may be accelerated in accordance with

     the provisions contained in the agreement and/or any collateral or

     mortgages securing these notes.  Also, Commerce, all of its

     subsidiaries and the Joint Venture agree to the cross pledge of

     collateral for the benefit of GLSCO, ELM, the ELM RIRA, the SM RIRA,

     SM, and from March 31, 2007 to include M&R, the Law Firm, CMI and

     EAM.  Reference is made to Exhibit 5 included in the April 9, 1990

     confirmation letter.

7.   Re-Execution Agreement(s)

     In the event CMI and/or EAM deem that it is necessary or advisable

     for CMI and/or EAM to have Commerce re-execute any document(s)

     entered into, including, but not limited to the promissory note(s)

     or collateral agreement(s), Commerce will re-execute such

     document(s) reasonably required by CMI and/or EAM.  Commerce also

     acknowledges that Commerce may be liable to pay certain costs

     related to any of the transactions entered into with CMI and/or EAM.  

     If at a later date CMI and/or EAM determine that an error has been

     made in the payment of such costs to CMI and/or EAM, then CMI and/or

     EAM may demand payment and Commerce does hereby agree to make such

     payment forthwith.  All requests for corrections of any errors

     and/or payment of costs shall be complied with by Commerce within

     seven (7) days of CMI's and/or EAM's written request.  The failure

     of Commerce to comply with Commerce's

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 9 of 10 Pages

obligation(s) hereunder shall

     constitute a default and shall entitle CMI and/or EAM to the

     remedies available for default under any provisions of the

     agreements including, but not limited to the promissory note(s)

     and/or the collateral pledge agreement(s) and/or any other Commerce

     obligation(s).

8.   Omissions

     Commerce believes that it has included all of its obligations,

     monies due and has listed all of the collateral due to CMI and/or

     EAM, however, since these transactions have taken place over  a long

     period of time in which changes could have taken place, it is

     possible that inadvertently some item(s), particularly collateral,

     could have been

     omitted.  If that should prove to be a fact, then Commerce, the

     Joint Venture, Homespan, Ecomm, SLE, Sanseb, and UDI agree that

     those omissions of collateral, if any, are meant to be included as

     collateral under this confirmation agreement.

If you are in agreement with the contents of this letter, please sign

below and return one copy to Commerce.

Very truly yours,

COMMERCE GROUP CORP.

/s/ Christine M. Wolski

Christine M. Wolski

Secretary

<PAGE>

Mr. Edward A. Machulak

as President of Circular Marketing, Inc.

and as an individual

May 30, 2008

Page 10 of 10 Pages

The contents of this letter are agreed by the following:

COMMERCE/SANSEB JOINT VENTURE            HOMESPAN REALTY COMPANY, INC.

as Guarantor (Joint Venture)             as Guarantor (Homespan)

/s/ Edward A. Machulak                   /s/ Edward A. Machulak

---------------------------------------  ----------------------------------

By:  Edward A. Machulak, Auth. Designee  By:  Edward A. Machulak, President

ECOMM GROUP INC.                         SAN LUIS ESTATES, INC.

as Guarantor (Ecomm)                     as Guarantor (SLE)

/s/ Edward A. Machulak                   /s/ Edward A. Machulak

---------------------------------------  ----------------------------------

By:  Edward A. Machulak, President       By:  Edward A. Machulak, President

SAN SEBASTIAN GOLD MINES, INC.           UNIVERSAL DEVELOPERS, INC.

as Guarantor (Sanseb)                    as Guarantor (UDI)

/s/ Edward A. Machulak                   /s/ Edward A. Machulak

---------------------------------------  ----------------------------------

By:  Edward A. Machulak, President       By:  Edward A. Machulak, President

Accepted by:                             Accepted by:

CIRCULAR MARKETING, INC.

/s/ Edward A. Machulak                   /s/ Edward A. Machulak

---------------------------------------  ----------------------------------

Edward A. Machulak, President            Edward A. Machulak as an individual

Date:  May 30, 2008                      Date:  May 30, 2008

<PAGE>

                        EXHIBIT A TO EXHIBIT 99.5

                         RENEWED PROMISSORY NOTE

Borrower: Commerce Group Corp.           Lender:  Circular Marketing, Inc.

          6001 North 91st Street                  6001 North 91st Street.

          Milwaukee, WI  53225                    Milwaukee, WI  53225

Principal Amount:      $102,181.46

Initial Rate:          4.000% + prime rate, but not less than 16.000%

Date of Renewed Note:  March 31, 2008

PROMISE TO PAY.  COMMERCE GROUP CORP. ("Borrower") promises to pay to

CIRCULAR MARKETING, INC. ("Lender"), or order, in lawful money of the

United States of America, the principal amount of One Hundred Two Thousand One

Hundred Eighty One and 46/100 Dollars ($102,181.46), together with

interest, paid monthly, on the unpaid principal balance from March 31,

2008, until paid in full.

PAYMENT.  This is an open-ended, secured, on-demand payment, renewed

promissory note.  Interest is to be paid monthly.  The Lender, at its

discretion, can add the monthly interest due to the principal balance.  

Unless otherwise agreed or required by applicable law, payments will be

applied first to any accrued unpaid interest; and then to principal.  The

annual interest rate for this Note is computed on a 365/360 basis; that

is, by applying the ratio of the annual interest rate over a year of 360

days, multiplied by the outstanding principal balance, multiplied by the

actual number of days the principal balance is outstanding and the

interest is payable monthly.  Borrower will pay Lender at Lender's

address shown above or at such other place as Lender may designate in

writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to

change from time to time based on changes in the prime rate as quoted in

the Wall Street Journal plus two percent, but not less than sixteen

percent per annum.  Borrower understands that Lender may make loans to

the Borrower based on other rates as well.  The prime rate as of this

date is 5.250% per annum.  The interest rate to be applied to the unpaid

principal balance of this Note will be at a rate of 2.000 percentage

points over the prime rate, but not less than 16.000% per annum.  NOTICE:  

Under no circumstances will the interest rate on this Note be less than

16.000% per annum or more than the maximum rate allowed by applicable

law.

PREPAYMENT.  Borrower may pay without penalty all or a portion of the

amount owed earlier than it is due.  Early payments will not, unless

agreed to by Lender in writing, relieve Borrower of Borrower's obligation

to pay on demand, the entire amount due.  Rather, any payment will reduce

the principal balance due.  Borrower agrees not to send Lender payments

marked "paid in full," "without recourse," or similar language.  If

Borrower sends such a payment, Lender may accept it without losing any of

Lender's rights under this Note, and Borrower will remain obligated to

pay any further amount owed to Lender.

INTEREST AFTER DEFAULT.  Upon default, including failure to pay on

demand, Lender, at its option, may, if permitted under applicable law,

increase the variable interest rate on this Note to 6.000 percentage

points over the prime rate or over the 16.000% rate, whichever is higher.  

The interest rate will not exceed the maximum rate permitted by

applicable law.

DEFAULT.  Each of the following shall constitute an event of default

("Event of Default") under this Note:

     Payment Default.  Borrower fails to make any payment when demand is

     made under this Note.

     Other Defaults.  Borrower fails to comply with or to perform any

     other term, obligation, covenant or condition contained in this Note

     or in any of the related documents or to comply with or to perform

     any term, obligation, covenant or condition contained in any other

     agreement between Lender and Borrower.

<PAGE>

     Default in Favor of Third Parties.  Borrower or any Grantor defaults

     under any loan, extension of credit, security agreement, purchase or

     sales agreement, or any other agreement, in favor of any other

     creditor or person that may materially affect any of Borrower's

     property or Borrower's ability to repay this Note or perform

     Borrower's obligations under this Note or any of the related

     documents.

     False Statements.  Any warranty, representation or statement made or

     furnished to Lender by Borrower or on Borrower's behalf under this

     Note or the related documents is false or misleading in any material

     respect, either now or at the time made or furnished or becomes

     false or misleading at any time thereafter.

     Insolvency.  The dissolution or termination of Borrower's existence

     as a going business, the insolvency of Borrower, the appointment of

     a receiver for any part of Borrower's property, any assignment for

     the benefit of creditors, any type of creditor workout, or the

     commencement of any proceeding under any bankruptcy or insolvency

     laws by or against Borrower.

     Creditor or Forfeiture Proceedings.  Commencement of foreclosure or

     forfeiture proceedings, whether by judicial proceeding, self-help,

     repossession or any other method, by any creditor of Borrower or by

     any governmental agency against any collateral securing the loan.

     However, this Event of Default shall not apply if there is a good

     faith dispute by Borrower as to the validity or reasonableness of

     the claim which is the basis of the creditor or forfeiture

     proceeding and if Borrower gives Lender written notice of the

     creditor or forfeiture proceeding and deposits with Lender monies or

     a surety bond for the creditor or forfeiture proceeding, in an

     amount determined by Lender, in its sole discretion, as being an

     adequate reserve or bond for the dispute.

     Events Affecting Guarantor.  Any of the preceding events occurs with

     respect to any Guarantor of any of the indebtedness or any Guarantor

     disputes the validity of, or liability under, any guaranty of the

     indebtedness evidenced by this Note.

     Adverse Change.  A material adverse change occurs in Borrower's

     financial condition, or Lender believes the prospect of payment or

     performance of this Note is impaired.

     Insecurity.  Lender in good faith believes itself insecure.

LENDER'S RIGHTS.  Upon default or upon demand, the Lender may declare the

entire unpaid principal balance on this Note and all accrued unpaid

interest immediately due, and then Borrower will pay that amount.

COLLATERAL.  Borrower acknowledges this Note is secured by all security

agreements, guarantees, mortgages, and other security instruments

previously granted, contemporaneously granted, and granted in the future,

and it has the collateral and other rights all as contained in a certain

confirmation agreement dated May 10, 2004 between all parties contained

therein, and as subsequently amended and updated from time to time.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help

collect this Note if Borrower does not pay.  Borrower will pay Lender

that amount.  This includes, subject to any limits under applicable law,

Lender's attorneys' fees and Lender's legal expenses, whether or not

there is a lawsuit, including attorneys' fees, expenses for bankruptcy

proceedings (including efforts to modify or vacate any automatic stay or

injunction), and appeals.  If not prohibited by applicable law, Borrower

also will pay any court costs, in addition to all other sums provided by

law.

GOVERNING LAW.  This Note will be governed by, construed and enforced in

accordance with the laws of the State of Wisconsin.  This Note has been

accepted by Lender in the State of Wisconsin.

<PAGE>

OTHER LOAN AGREEMENTS.  If Borrower and Lender have either previously or

contemporaneously entered into a Loan or Confirmation Agreements, it is

agreed that this Note is subject to the terms and conditions of such Loan

or Confirmation Agreements.  For purpose of this provision, Loan or

Confirmation Agreements shall include, but not be limited to, a Business

Loan Agreement or any other Loan or Confirmation Agreements.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon

Borrower, and upon Borrower's successors and assigns, and shall inure to

the benefit of Lender and Lender's heirs, executors, administrators,  

successors and assigns.

GENERAL PROVISIONS.  This Note benefits Lender and its successors and

assigns, and binds Borrower and Borrower's successors, assigns, and

representatives.  Lender may delay or forgo enforcing any of its rights

or remedies under this Note without losing them.  Borrower and any other

person or corporation who signs, guarantees or endorses this Note, to the

extent allowed by law, waive presentment, demand for payment, and notice

of dishonor.  Upon any change in the terms of this Note, and unless

otherwise expressly stated in writing, no party who signs this Note,

whether as maker, guarantor, accommodation maker or endorser, shall be

released from liability.  All such parties agree that Lender may renew or

extend (repeatedly and for any length of time) this loan or release any

party or guarantor or collateral; or impair, fail to realize upon or

perfect Lender's security interest in the collateral; and take any other

action deemed necessary by Lender without the consent of or notice to

anyone.  All such parties also agree that Lender may modify this loan

without the consent of or notice to anyone other than the party with whom

the modification is made.  The obligations under this Note are joint and

several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE

PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS.  

BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY

NOTE.

BORROWER:

COMMERCE GROUP CORP.

/s/ Edward A. Machulak

----------------------------------

By:  Edward A. Machulak, President

/s/ Christine M. Wolski

-----------------------------------------------------

By:  Christine M. Wolski, Secretary

<PAGE>

                      EXHIBIT A-1 TO EXHIBIT 99.5

              (Schedule of all transactions pertaining to

                 the activities relating to Exhibit A to

         Exhibit 99.5 for the fiscal year ending March 31, 2008

             has been purposely omitted as it only reflects

             the calculations of the principal and interest.)

<PAGE>

                      EXHIBIT B TO EXHIBIT 99.5

              (Schedule of all transactions pertaining to

                 the activities relating to Exhibit B to

         Exhibit 99.5 for the fiscal year ending March 31, 2008

             has been purposely omitted as it only reflects

             the calculations of the service charges.)

EX-99.6 ADVSER CONTR

                                 EXHIBIT 99.6

                              COMMERCE GROUP CORP.

                              6001 NORTH 91ST ST.

                           MILWAUKEE, WI  53225-1795

                               (414) 462-5310

                            FAX (414) 462-5312

                      E-MAIL  info@commercegroupcorp.com

                       WEBSITE www.commercegroupcorp.com

                     AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)

                     AND/OR HOMESPAN REALTY CO., INC. (Homespan)

                     AND/OR ECOMM GROUP INC. (Ecomm)

                     AND/OR SAN LUIS ESTATES, INC. (SLE)

                     AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)

                     AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)

                     ALL LOCATED AT THE SAME ADDRESS

May 30, 2008

Mr. John E. Machulak

Mrs. Susan R. Robertson

1400 West Good Hope Road

River Hills, Wisconsin  53209

Dear Mr. Machulak and Mrs. Robertson:

At today's Commerce Group Corp. (Commerce) Directors' meeting, the

Directors were informed about the annual confirmation, disclosure and

status letter from Commerce, its subsidiaries, its affiliates, and the

Joint Venture, and to establish and confirm the amount due and the

collateral pledged along with any other Commerce obligations or

agreements made to John E. Machulak and Susan R. Robertson, husband and

wife (M&R) referred to as Lenders, as of Commerce's fiscal year ended

March 31, 2008.  Today, Commerce's Directors, by unanimous consent,

approved, ratified and confirmed the contents of this letter and

authorized me to submit its understanding of your status with Commerce,

which is as follows:

1.   Promissory Notes

     The total amount of all of the open-ended, secured, on-demand

     promissory notes (Notes) together with interest due to M&R is

     $293,308.39 as of March 31, 2008.  Commerce has renewed this

     promissory note as of March 31, 2008 and a copy is attached (Exhibit

     A).  A schedule including all of the transactions pertaining to the

     activities relating to this Note during this fiscal year ended March

     31, 2008 is also attached (Exhibit A-1).  These Note(s) bear

     interest, payable monthly, at the rate of 3% over the prime rate

     established from time to time by the First National Bank of Chicago,

     Chicago, Illinois, (then Bank One; now the prime rate published in

     the Wall Street Journal), but not less than 16% per annum.  Commerce

     is no longer issuing monthly Notes for the payment of interest,

     etc., but pursuant to our understanding, Commerce is augmenting all

     additions and advances made by M&R and it will deduct any payments

     or credits made by Commerce to the current open-ended, secured,

     on-demand, outstanding Notes issued or obligations owed to M&R and

     Commerce will provide an annual accounting and confirmation letter.

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 2 of 10 Pages

     On May 9, 2005, Commerce's Directors authorized its Officers to

     issue renewed annual note(s) (Exhibit B of the May 9, 2005

     confirmation letter) so that the Lender will have a current

     substituted dated debt instrument.  The Directors acknowledged that

     the issuance of note(s) for each transaction are too cumbersome and

     are not practicable to manage.  Also, the length of time involved

     and the number of transactions make it impractical to devote the

     time and effort to issue a note for each transaction.  However,

     beginning with the fiscal year which ended March 31, 2007, the

     Directors are including the following as Lender(s):  John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc. (CMI) and Edward A. Machulak as an individual (EAM).  

     Therefore, the Directors have unanimously agreed to continue to

     embrace this resolution which was adopted on May 9, 2005:

          WHEREAS, in the past 20 years or more the following parties:

     General Lumber & Supply Co., Inc. (GLSCO); Edward L. Machulak  as an

     individual and not as a Director or Officer of Commerce (ELM); the

     Edward L. Machulak Rollover Individual Retirement Account (ELM

     RIRA), the Sylvia Machulak Rollover Individual Retirement Account

     (SM RIRA), and Sylvia Machulak, as a consultant and as an individual

     (SM), hereafter collectively and individually identified as the

     Lender(s), have accounted for advancing cash funds, earning accrued

     interest, and for appropriate credit which was reconciled to the

     open-ended, secured, on-demand notes(s); and

          WHEREAS, the Directors desire to minimize the record keeping in

     these transactions without jeopardizing, diminishing, altering,

     changing or losing any rights that the Lenders have by changing the

     procedures in handling the recording of any notes(s) issued or to be

     issued; and

          WHEREAS, in order to provide an easier accounting facility by

     renewing the notes(s) on an annual basis to coincide with the

     Company's fiscal year (which presently ends on March 31) and to

     incorporate said renewed note(s) with the annual confirmation

     agreement(s); and

          WHEREAS, prior to the change to issue substituted renewed

     note(s), the initial promissory note(s) were considered to be

     open-ended, secured, on-demand and the additions and deductions were

     recognized by separate accounting records; therefore, be it

               RESOLVED, That the Directors authorize and empower the

          Officers to substitute and issue renewed consolidated

          promissory note(s) at the end of each

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 3 of 10 Pages

          fiscal year beginning with the Company's fiscal year ended

          March 31, 2005 to the following: General Lumber & Supply Co.,

          Inc. (GLSCO); Edward L.  Machulak  as an individual and not as

          a Director or Officer of Commerce (ELM); the Edward L.  

          Machulak Rollover Individual Retirement Account (ELM RIRA), the

          Sylvia Machulak Rollover Individual Retirement Account (SM

          RIRA), and Sylvia Machulak, as a consultant and as an

          individual (SM), hereafter collectively and individually

          identified as the Lender(s); and

               BE IT FURTHER RESOLVED, That the Officers of the Company

          are authorized and empowered to assure the Lender(s) that by

          substituting and consolidating the existing note(s) and issuing

          the renewed note(s) on the last day of the Company's fiscal

          year beginning with March 31, 2005 with the understanding that

          the intention is that the Lender(s) will not jeopardize, lose,

          diminish, risk, alter or change any rights, including the

          pledge of collateral, that are inherent with the initial

          note(s) by the issuance of annual renewed open-ended, secured,

          on-demand promissory note(s); and

               BE IT FURTHER RESOLVED, That the Directors acknowledge

          that the only purpose of the change and substitution to issue

          annual renewed notes(s) is for the convenience, reduced

          accounting and reducing the paperwork involved; and

               BE IT FURTHER RESOVED, That the Officers are authorized

          and empowered to perform any act that they deem necessary to

          accommodate the purpose of issuing annual renewed note(s).

     As of March 31, 2008, the following parties are collectively and

     individually identified as the Lender(s): General Lumber & Supply

     Co., Inc. (GLSCO); Edward L. Machulak  as an individual and not as a

     Director or Officer of Commerce (ELM); the Edward L. Machulak

     Rollover Individual Retirement Account (ELM RIRA), the Sylvia

     Machulak Rollover Individual Retirement Account (SM RIRA), Sylvia

     Machulak, as a consultant and as an individual (SM), John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc. (CMI) and Edward A. Machulak as an individual (EAM).

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 4 of 10 Pages

2.   Collateral Pledged

     The following collateral has been previously assigned to certain

     Lenders, and from March 31, 2007 forward includes John E. Machulak and

     Susan R.  Robertson, husband and wife (M&R), the Machulak, Robertson

     & Sodos, S.C.  Law Firm (Law Firm), Circular Marketing, Inc. (CMI)

     and Edward A. Machulak as an individual (EAM) as of March 31, 2007,

     pursuant to resolutions adopted by the Directors:

     (1)  Commerce/Sanseb Joint Venture (Joint Venture)

          Both Commerce and San Sebastian Gold Mines, Inc. have assigned

          all of the rights, title, claims, remedies and interest that

          each has in the Joint Venture to the Lenders.  Reference is

          made to Historical information - San Sebastian Gold Mine

          Concession.

     (2)  New SSGM Exploration Concession/License (New SSGM) -

          approximately 40.7694 square kilometers (10,070 acres)

          Government of El Salvador Resolution No. 27.

          On October 20, 2002, the Company applied for the New SSGM,

          which covers an area of 42 square kilometers and includes

          approximately 1.2306 square kilometers of the Renewed SSGM.  

          The New SSGM is in the jurisdiction of the City of Santa Rosa

          de Lima in the Department of La Union and in the Nueva Esparta

          in the Department of Morazan, Republic of El Salvador, Central

          America.  On February 24, 2003, the El Salvador Department of

          Hydrocarbons and Mines (DHM) issued the New SSGM for a period

          of four years starting from the date following the notification

          of this resolution which was received on March 3, 2003.  The

          New SSGM may be extended for two two-year periods, or for a

          total of eight years.  Besides the San Sebastian Gold Mine,  

          three other formerly operative gold and silver mines known as

          the La Lola Mine, the Santa Lucia Mine, and the Tabanco Mine

          are included in the New SSGM and are being explored.  The

          Company has complied as required by filing its annual activity

          report and it paid the annual surface tax.  This concession had

          been assigned collectively to all of the Lenders named herein

          on May 12, 2003 and the assignment was included in the May 12,

          2003 confirmation agreement as Exhibit B.

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 5 of 10 Pages

     (3)  Lease agreement by and between Mineral San Sebastian Sociedad

          Anomina de Capital Variable (Misanse) and Commerce dated

          January 14, 2003

          The term of this lease agreement coincides with the term of the

          Renewed San Sebastian Gold Mine Exploitation Concession and

          consists of 1,470 acres owned by Misanse.  This lease agreement

          has been assigned to all of the Lenders named herein on May 12,

          2003 and the assignment was included in the May 12, 2003

          confirmation agreement as Exhibit B.

     (4)  Renewed San Sebastian Gold Mine Exploitation Concession/License

          (Renewed SSGM) - approximately 1.2306 square kilometers (304

          acres), Department of La Union, El Salvador, Central America

          (pledged and assigned as collateral on May 10, 2004) Government

          of El Salvador Agreement No.  591.

          On September 6, 2002, at a meeting held with the El Salvadoran

          Minister of Economy and the DHM, it was agreed to submit an

          application for the Renewed SSGM for a 30-year term and to

          simultaneously cancel the concession obtained on July 23, 1987.  

          On September 26, 2002, the Company filed this application.  On

          February 28, 2003 (received March 3, 2003) the DHM admitted to

          the receipt of the application and the Company proceeded to

          file public notices as required by Article 40 of the El

          Salvadoran Mining Law and its Reform (MLIR).  On April 16,

          2003, the Company's El Salvadoran legal counsel filed with the

          DHM notice that it believed that it complied with the

          requirements of Article 40, and that there were no objections;

          and requested that the DHM make its inspection as required by

          MLIR Article 42.  The Company then provided a bond which was

          required by the DHM to protect third parties against any damage

          caused from the mining operations, and it simultaneously paid

          the annual surface tax.  On August 29, 2003 the Office of the

          Ministry of Economy formally presented the Company with the

          twenty-year Renewed SSGM which was dated August 18, 2003.  This

          Renewed SSGM replaces the collateral that the same parties held

          with the previous concession.  On May 20, 2004 (delivered June

          4, 2004) the Government of El Salvador, under their Agreement

          Number 591, extended the exploitation concession for a period

          of 30 years.  A copy of the assignment dated May 10, 2004, is

          attached to the May 10, 2004 confirmation letter as Exhibit B

          and the Renewed SSGM agreement is attached to Exhibit B and

          referred to as Exhibit 1.

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 6 of 10 Pages

     (5)  San Cristobal Mill and Plant (SCMP) three-year lease by and

          between Commerce and Corporacion Salvadorena de Inversiones

          (Corsain), an El Salvadoran governmental agency, executed on

          Monday, April 26, 2004, retroactive to November 13, 2003.

          Pledged and assigned as collateral on May 10, 2004.

          The renewed three-year SCMP lease for the property located near

          the City of El Divisadero was finalized and executed on Monday,

          April 26, 2004, and is retroactive to November 13, 2003.  This

          May 10, 2004 assignment is included in the May 10, 2004

          confirmation letter as Exhibit B and the lease agreement is

          attached to Exhibit B and referred to as Exhibit 2.

          On March 25, 2008 a nineteen-month lease retroactive to

          November 12, 2006 was executed by and between Corsain and

          Commerce.  The lease was renewed on June 12, 2008 for a

          six-month period to expire on December 11, 2008.  Reference is

          made to Exhibit 10.16 of Commerce's Form 10-K for its fiscal

          year ended March 31, 2008 for a copy of this lease.

     (6)  Nueva Esparta Exploration Concession/License (Nueva Esparta) -

          45 square kilometers (11,115 acres) Resolution No. 271

          On or about October 20, 2002, the Company filed an application

          with the DHM for the Nueva Esparta Exploration

          Concession/License which consists of 45 square kilometers and

          is located north and adjacent to the New SSGM.  On May 25, 2004

          the Government of El Salvador, under their Resolution No. 271,

          issued the Nueva Esparta Exploration Concession/License for a

          period of four years starting from the date following the

          notification of this resolution which was received on June 4,

          2004.  This concession/license may be extended for two two-year

          periods or for a total of eight years.  This rectangular area

          is in the Departments of La Union (east) and Morazan (west) and

          in the jurisdiction of the City of Santa Rosa de Lima, El

          Salvador, Central America.  Included in the Nueva Esparta are

          eight other formerly operated gold and silver mines known as:  

          the Banadero Mine, the Carrizal Mine, the Copetillo Mine, the

          Grande Mine, the La Joya Mine, the Las Pinas Mine, the

          Montemayor Mine, and the Oro Mine.  A copy of the assignment

          dated May 9, 2005 was attached to the May 9, 2005 confirmation

          letter as Exhibit C and the Nueva Esparta Exploration

          Concession is attached to Exhibit C and referred to as Exhibit

          1.

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 7 of 10 Pages

     (7)  Acknowledgment of collateral provided through March 31, 2008

          Commerce's Directors have on May 30, 2008 authorized and

          directed Commerce's Officers to assign all of the rights,

          titles, claims, remedies and interest in all of its assets that

          it has, including any assets owned by the Joint Venture, to

          GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from March 31,

          2007 to include M&R, the Law Firm, CMI and EAM, collectively

          and individually referred to as Lenders, as additional

          collateral for all of the

          outstanding loans and obligations as of March 31, 2008,

          including all future advances of any kind.

5.   Cross Pledge Collateral Agreement

     GLSCO, ELM, the ELM RIRA, the SM RIRA and SM individually are

     entitled to specific collateral that has been pledged to them by

     Commerce, its subsidiaries, affiliates and the Joint Venture.  Upon

     default by Commerce, or its subsidiaries or affiliates or the Joint

     Venture, then GLSCO, ELM, the ELM RIRA, the SM RIRA and SM have the

     first right to the proceeds from the specific collateral pledged to

     each of them.  Commerce, its subsidiaries, affiliates, and the Joint

     Venture also have cross-pledged the collateral without diminishing

     the rights of the specific collateral pledged to each of the

     following:  GLSCO, ELM, the ELM RIRA, the SM RIRA and SM.  The

     purpose and the intent of the cross pledge of collateral is to

     assure GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM, that each of

     them would be paid in full; thus, any excess collateral that would

     be available is for the purpose of satisfying any debts and

     obligations due to each of the named parties.  The formula to be

     used (after deducting the payments made from the specific

     collateral) is to total all of the debts due to GLSCO, ELM, the ELM

     RIRA, the SM RIRA, SM, and from March 31, 2007 to include M&R, the

     Law Firm, CMI and EAM, and then to divide this total debt into each

     individual debt to establish each individual's percentage of the

     outstanding debt due.  This percentage then will be multiplied by

     the total of the excess collateral to determine the amount of

     proceeds each party should receive from the excess collateral.  Then

     the amount due to each of them would be distributed accordingly.

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 8 of 10 Pages

6.   Cancellation of Inter-Company Debts Upon Default

     Since certain of the collateral specifically or collectively pledged

     to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM and from March 31, 2007

     to include M&R, the Law Firm, CMI and EAM, consists of the common

     stock of Homespan, Ecomm, Sanseb, SLE, Misanse, UDI and the interest

     in the ownership of the Joint Venture, Commerce agreed, upon default

     of the payment of principal or interest to any of the individual

     Lender(s) mentioned herein, that it will automatically cancel any

     inter-company debts owed to Commerce by any of its wholly-owned

     subsidiaries or affiliates or the Joint Venture at such time as any

     of the stock or Joint Venture ownership is transferred to the

     collateral holders as a result of default of any promissory note.

7.   Guarantors

     This agreement further confirms that Commerce and all of the

     following are guarantors to the obligations due to M&R and to the

     loans made by the M&R to Commerce:  Joint Venture, Homespan, Ecomm,

     SLE, Sanseb and UDI.  They jointly and severally guarantee payment

     of the note(s) that they caused to be issued and also agree that

     these note(s) may be accelerated in accordance with the provisions

     contained in the agreement and/or any collateral or mortgages

     securing these notes.  Also, Commerce, all of its subsidiaries and

     the Joint Venture agree to the cross pledge of collateral for the

     benefit of GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from March

     31, 2007 to include M&R, the Law Firm, CMI and EAM.  Reference is

     made to Exhibit 5 included in the April 9, 1990 confirmation letter.

8.   Re-Execution Agreement(s)

     In the event M&R deem that it is necessary or advisable for M&R to

     have Commerce re-execute any document(s) entered into, including,

     but not limited to the promissory note(s) or collateral

     agreement(s), Commerce will re-execute such document(s) reasonably

     required by M&R.  Commerce also acknowledges that Commerce may be

     liable to pay certain costs related to any of the transactions

     entered into with M&R.  If at a later date M&R determine that an

     error has been made in the payment of such costs to M&R, then M&R

     may demand payment and Commerce does hereby agree to make such

     payment forthwith.  All requests for corrections of any errors

     and/or payment of costs shall be complied with by Commerce within

     seven (7) days of M&R's written request.   The failure of Commerce

     to comply with Commerce's obligation(s) hereunder shall constitute a

     default and shall entitle M&R to the remedies available for default

     under any provisions of the agreements including, but not limited to the

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 9 of 10 Pages

     promissory note(s) and/or the collateral pledge agreement(s)

     and/or any other Commerce obligation(s).

9.   Omissions

     Commerce believes that it has included all of its obligations,

     monies due and has listed all of the collateral due to M&R, however,

     since these transactions have taken place over  a long period of

     time in which changes could have taken place, it is possible that

     inadvertently some item(s), particularly collateral, could have been

     omitted.  If that should prove to be a fact, then Commerce, the

     Joint Venture, Homespan, Ecomm, SLE, Sanseb, and UDI agree that

     those omissions of collateral, if any, are meant to be included as

     collateral under this confirmation agreement.

If you are in agreement with the contents of this letter, please sign

below and return one copy to Commerce.

Very truly yours,

COMMERCE GROUP CORP.

/s/ Christine M. Wolski

Christine M. Wolski

Secretary

<PAGE>

Mr. John E. Machulak

Mrs. Susan R. Robertson

May 30, 2008

Page 10 of 10 Pages

The contents of this letter are agreed by the following:

COMMERCE/SANSEB JOINT VENTURE             HOMESPAN REALTY COMPANY, INC.

as Guarantor (Joint Venture)              as Guarantor (Homespan)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

---------------------------------------   ----------------------------------

By:  Edward A. Machulak, Auth. Designee   By:  Edward A. Machulak, President

ECOMM GROUP INC.                          SAN LUIS ESTATES, INC.

as Guarantor (Ecomm)                      as Guarantor (SLE)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

---------------------------------------   ----------------------------------

By:  Edward A. Machulak, President        By:  Edward A. Machulak, President

SAN SEBASTIAN GOLD MINES, INC.            UNIVERSAL DEVELOPERS, INC.

as Guarantor (Sanseb)                     as Guarantor (UDI)

/s/ Edward A. Machulak                    /s/ Edward A. Machulak

---------------------------------------   ----------------------------------

By:  Edward A. Machulak, President        By:  Edward A. Machulak, President

Accepted by:                              Accepted by:

/s/ John E. Machulak                      /s/ Susan R. Robertson

---------------------------------------   ----------------------------------

John E. Machulak as an individual         Susan R. Robertson as an individual

Date:  May 30, 2008                       Date:  May 30, 2008

<PAGE>

                          EXHIBIT A TO EXHIBIT 99.6

                           RENEWED PROMISSORY NOTE

Borrower: Commerce Group Corp.             Lender:  John E. Machulak and

          6001 North 91st Street                    Susan R. Robertson

          Milwaukee, WI  53225                      1400 West Good Hope Road

                                                    Milwaukee, WI  53209

Principal Amount:         $293,308.39

Initial Rate:             3.000% + prime rate, but not less than 16.000%

Date of Renewed Note:     March 31, 2008

PROMISE TO PAY.  COMMERCE GROUP CORP. ("Borrower") promises to pay to

JOHN E.  MACHULAK AND SUSAN R. ROBERTSON, husband and wife ("Lender"), or

order, in lawful money of the United States of America, the principal

amount of Two Hundred Ninety Three Thousand Three Hundred Eight and

39/100 Dollars ($293,308.39), together with interest, paid monthly, on

the unpaid principal balance from March 31, 2008, until paid in full.

PAYMENT.  This is an open-ended, secured, on-demand payment, renewed

promissory note.  Interest is to be paid monthly.  The Lender, at its

discretion, can add the monthly interest due to the principal balance.

Unless otherwise agreed or required by applicable law, payments will be

applied first to any accrued unpaid interest; and then to principal.  The

annual interest rate for this Note is computed on a 365/360 basis; that

is, by applying the ratio of the annual interest rate over a year of 360

days, multiplied by the outstanding principal balance, multiplied by the

actual number of days the principal balance is outstanding and the

interest is payable monthly.  Borrower will pay Lender at Lender's

address shown above or at such other place as Lender may designate in

writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to

change from time to time based on changes in the prime rate as quoted in

the Wall Street Journal plus two percent, but not less than sixteen

percent per annum.  Borrower understands that Lender may make loans to

the Borrower based on other rates as well.  The prime rate as of this

date is 5.250% per annum.  The interest rate to be applied to the unpaid

principal balance of this Note will be at a rate of 2.000 percentage

points over the prime rate, but not less than 16.000% per annum.  NOTICE:  

Under no circumstances will the interest rate on this Note be less than

16.000% per annum or more than the maximum rate allowed by applicable

law.

PREPAYMENT.  Borrower may pay without penalty all or a portion of the

amount owed earlier than it is due.  Early payments will not, unless

agreed to by Lender in writing, relieve Borrower of Borrower's obligation

to pay on demand, the entire amount due.  Rather, any payment will reduce

the principal balance due.  Borrower agrees not to send Lender payments

marked "paid in full," "without recourse," or similar language.  If

Borrower sends such a payment, Lender may accept it without losing any of

Lender's rights under this Note, and Borrower will remain obligated to

pay any further amount owed to Lender.

INTEREST AFTER DEFAULT.  Upon default, including failure to pay on

demand, Lender, at its option, may, if permitted under applicable law,

increase the variable interest rate on this Note to 6.000 percentage

points over the prime rate or over the 16.000% rate, whichever is higher.

The interest rate will not exceed the maximum rate permitted by

applicable law.

DEFAULT.  Each of the following shall constitute an event of default

("Event of Default") under this Note:

     Payment Default.  Borrower fails to make any payment when demand is

     made under this Note.

     Other Defaults.  Borrower fails to comply with or to perform any

     other term, obligation, covenant or condition contained in this Note

     or in any of the related documents or to comply with or to perform

     any term, obligation, covenant or condition contained in any other

     agreement between Lender and Borrower.

<PAGE>

     Default in Favor of Third Parties.  Borrower or any Grantor defaults

     under any loan, extension of credit, security agreement, purchase or

     sales agreement, or any other agreement, in favor of any other

     creditor or person that may materially affect any of Borrower's

     property or Borrower's ability to repay this Note or perform

     Borrower's obligations under this Note or any of the related

     documents.

     False Statements.  Any warranty, representation or statement made or

     furnished to Lender by Borrower or on Borrower's behalf under this

     Note or the related documents is false or misleading in any material

     respect, either now or at the time made or furnished or becomes

     false or misleading at any time thereafter.

     Insolvency.  The dissolution or termination of Borrower's existence

     as a going business, the insolvency of Borrower, the appointment of

     a receiver for any part of Borrower's property, any assignment for

     the benefit of creditors, any type of creditor workout, or the

     commencement of any proceeding under any bankruptcy or insolvency

     laws by or against Borrower.

     Creditor or Forfeiture Proceedings.  Commencement of foreclosure or

     forfeiture proceedings, whether by judicial proceeding, self-help,

     repossession or any other method, by any creditor of Borrower or by

     any governmental agency against any collateral securing the loan.  

     However, this Event of Default shall not apply if there is a good

     faith dispute by Borrower as to the validity or reasonableness of

     the claim which is the basis of the creditor or forfeiture

     proceeding and if Borrower gives Lender written notice of the

     creditor or forfeiture proceeding and deposits with Lender monies or

     a surety bond for the creditor or forfeiture proceeding, in an

     amount determined by Lender, in its sole discretion, as being an

     adequate reserve or bond for the dispute.

     Events Affecting Guarantor.  Any of the preceding events occurs with

     respect to any Guarantor of any of the indebtedness or any Guarantor

     disputes the validity of, or liability under, any guaranty of the

     indebtedness evidenced by this Note.

     Adverse Change.  A material adverse change occurs in Borrower's

     financial condition, or Lender believes the prospect of payment or

     performance of this Note is impaired.

     Insecurity.  Lender in good faith believes itself insecure.

LENDER'S RIGHTS.  Upon default or upon demand, the Lender may declare the

entire unpaid principal balance on this Note and all accrued unpaid

interest immediately due, and then Borrower will pay that amount.

COLLATERAL.  Borrower acknowledges this Note is secured by all security

agreements, guarantees, mortgages, and other security instruments

previously granted, contemporaneously granted, and granted in the future,

and it has the collateral and other rights all as contained in a certain

confirmation agreement dated May 10, 2004 between all parties contained

therein, and as subsequently amended and updated from time to time.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help

collect this Note if Borrower does not pay.  Borrower will pay Lender

that amount.  This includes, subject to any limits under applicable law,

Lender's attorneys' fees and Lender's legal expenses, whether or not

there is a lawsuit, including attorneys' fees, expenses for bankruptcy

proceedings (including efforts to modify or vacate any automatic stay or

injunction), and appeals.  If not prohibited by applicable law, Borrower

also will pay any court costs, in addition to all other sums provided by

law.

GOVERNING LAW.  This Note will be governed by, construed and enforced in

accordance with the laws of the State of Wisconsin.  This Note has been

accepted by Lender in the State of Wisconsin.

<PAGE>

OTHER LOAN AGREEMENTS.  If Borrower and Lender have either previously or

contemporaneously entered into a Loan or Confirmation Agreements, it is

agreed that this Note is subject to the terms and conditions of such Loan

or Confirmation Agreements.  For purpose of this provision, Loan or

Confirmation Agreements shall include, but not be limited to, a Business

Loan Agreement or any other Loan or Confirmation Agreements.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon

Borrower, and upon Borrower's successors and assigns, and shall inure to

the benefit of Lender and Lender's heirs, executors, administrators,

successors and assigns.

GENERAL PROVISIONS.  This Note benefits Lender and its successors and

assigns, and binds Borrower and Borrower's successors, assigns, and

representatives.  Lender may delay or forgo enforcing any of its rights

or remedies under this Note without losing them.  Borrower and any other

person or corporation who signs, guarantees or endorses this Note, to the

extent allowed by law, waive presentment, demand for payment, and notice

of dishonor.  Upon any change in the terms of this Note, and unless

otherwise expressly stated in writing, no party who signs this Note,

whether as maker, guarantor, accommodation maker or endorser, shall be

released from liability.  All such parties agree that Lender may renew or

extend (repeatedly and for any length of time) this loan or release any

party or guarantor or collateral; or impair, fail to realize upon or

perfect Lender's security interest in the collateral; and take any other

action deemed necessary by Lender without the consent of or notice to

anyone.  All such parties also agree that Lender may modify this loan

without the consent of or notice to anyone other than the party with whom

the modification is made.  The obligations under this Note are joint and

several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE

PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS.  

BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

COMMERCE GROUP CORP.

/s/ Edward A. Machulak

-----------------------------------------------------

By:  Edward A. Machulak, President

/s/ Christine M. Wolski

-----------------------------------------------------

By:  Christine M. Wolski, Secretary

<PAGE>

                        EXHIBIT A-1 TO EXHIBIT 99.6

                (Schedule of all transactions pertaining to

                   the activities relating to Exhibit A to

         Exhibit 99.6 for the fiscal year ending March 31, 2008

             has been purposely omitted as it only reflects

             the calculations of the principal and interest.)

EX-99.7 DISTR CONTR

                                 EXHIBIT 99.7

                            COMMERCE GROUP CORP.

                            6001 NORTH 91ST ST.

                      MILWAUKEE, WISCONSIN  53225-1795

                               (414) 462-5310

                            FAX (414) 462-5312

                       E-MAIL  info@commercegroupcorp.com

                      WEBSITE www.commercegroupcorp.com

                     AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)

                     AND/OR HOMESPAN REALTY CO., INC. (Homespan)

                     AND/OR ECOMM GROUP INC. (Ecomm)

                     AND/OR SAN LUIS ESTATES, INC. (SLE)

                     AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)

                     AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)

                     ALL LOCATED AT THE SAME ADDRESS

May 30, 2008

Mr. John E. Machulak

Machulak, Robertson & Sodos, S.C. (Law Firm)

1733 North Farwell Avenue

Milwaukee, Wisconsin  53202

Dear Mr. Machulak:

At today's Commerce Group Corp. (Commerce) Directors' meeting, the

Directors were informed about the annual confirmation, disclosure and

status letter from Commerce, its subsidiaries, its affiliates, and the

Joint Venture, and to establish and confirm the amount due and the

collateral pledged along with any other Commerce obligations or

agreements made to Machulak, Robertson & Sodos, S.C. (Law Firm) referred

to as Lender, as of Commerce's fiscal year ended March 31, 2008.  Today,

Commerce's Directors, by unanimous consent, approved, ratified and

confirmed the contents of this letter and authorized me to submit its

understanding of your status with Commerce, which is as follows:

1.   Accrued Legal Fees

     The Law Firm which represents Commerce in which a son of the

     President is a principal is owed the sum of $454,443.75 for 2,019.75

     hours of legal services rendered from July 1980 through February 29,

     2008.  By agreement on the date of payment, these fees are to be

     adjusted to commensurate with the current hourly fees charged by the

     Law Firm.  Such adjustment was made during this fiscal period to

     correspond with the current hourly rate change.

<PAGE>

Mr. John E. Machulak

Machulak, Robertson & Sodos, S.C. (Law Firm)

May 30, 2008

Page 2 of 8 Pages

     As of March 31, 2008, the following parties are collectively and

     individually identified as the Lender(s): General Lumber & Supply

     Co., Inc. (GLSCO); Edward L. Machulak  as an individual and not as a

     Director or Officer of Commerce (ELM); the Edward L. Machulak

     Rollover Individual Retirement Account (ELM RIRA), the Sylvia

     Machulak Rollover Individual Retirement Account (SM RIRA), Sylvia

     Machulak, as a consultant and as an individual (SM), John E.

     Machulak and Susan R. Robertson, husband and wife (M&R), the

     Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular

     Marketing, Inc. (CMI) and Edward A. Machulak as an individual (EAM).

2.   Collateral Pledged

     The following collateral has been previously assigned to certain

     Lenders, including John E. Machulak and Susan R. Robertson, husband

     and wife (M&R), the Machulak, Robertson & Sodos, S.C. Law Firm (Law

     Firm), Circular Marketing, Inc. (CMI) and Edward A.  Machulak as an

     individual (EAM) as of March 31, 2007, pursuant to resolutions

     adopted by the Directors:

     (1)  Commerce/Sanseb Joint Venture (Joint Venture)

          Both Commerce and San Sebastian Gold Mines, Inc. have assigned

          all of the rights, title, claims, remedies and interest that

          each has in the Joint Venture to the Lenders.  Reference is

          made to Historical information - San Sebastian Gold Mine

          Concession.

     (2)  New SSGM Exploration Concession/License (New SSGM) -

          approximately 40.7694 square kilometers (10,070 acres)

          Government of El Salvador Resolution No. 27.

          On October 20, 2002, the Company applied for the New SSGM,

          which covers an area of 42 square kilometers and includes

          approximately 1.2306 square kilometers of the Renewed SSGM.  

          The New SSGM is in the jurisdiction of the City of Santa Rosa

          de Lima in the Department of La Union and in the Nueva Esparta

          in the Department of Morazan, Republic of El Salvador, Central

          America.  On February 24, 2003, the El Salvador Department of

          Hydrocarbons and Mines (DHM) issued the New SSGM for a period

          of four years starting from the date following the notification

          of this resolution which was received on March 3, 2003.  The

          New SSGM may be extended for two two-year periods, or for a

          total of eight years.  Besides the San Sebastian Gold Mine,

          three other formerly operative gold and silver mines known as

          the La Lola Mine, the Santa Lucia Mine, and the Tabanco Mine

          are included in the New SSGM and are being

<PAGE>

Mr. John E. Machulak

Machulak, Robertson & Sodos, S.C. (Law Firm)

May 30, 2008

Page 3 of 8 Pages

          explored.  The Company has complied as required by filing its

          annual activity report and it paid the annual surface tax.  

          This concession had been assigned collectively to all of the

          Lenders named herein on May 12, 2003 and the assignment was

          included in the May 12, 2003 confirmation agreement as Exhibit

          B.

      (3) Lease agreement by and between Mineral San Sebastian Sociedad

          Anomina de Capital Variable (Misanse) and Commerce dated

          January 14, 2003

          The term of this lease agreement coincides with the term of the

          Renewed San Sebastian Gold Mine Exploitation Concession and

          consists of 1,470 acres owned by Misanse.  This lease agreement

          has been assigned to all of the Lenders named herein on May 12,

          2003 and the assignment was included in the May 12, 2003

          confirmation agreement as Exhibit B.

      (4) Renewed San Sebastian Gold Mine Exploitation Concession/License

          (Renewed SSGM) - approximately 1.2306 square kilometers (304

          acres), Department of La Union, El Salvador, Central America

          (pledged and assigned as collateral on May 10, 2004) Government

          of El Salvador Agreement No. 591.

          On September 6, 2002, at a meeting held with the El Salvadoran

          Minister of Economy and the DHM, it was agreed to submit an

          application for the Renewed SSGM for a 30-year term and to  

          simultaneously cancel the concession obtained on July 23, 1987.  

          On September 26, 2002, the Company filed this application.  On

          February 28, 2003 (received March 3, 2003) the DHM admitted to

          the receipt of the application and the Company proceeded to

          file public notices as required by Article 40 of the El

          Salvadoran Mining Law and its Reform (MLIR).  On April 16,

          2003, the Company's El Salvadoran legal counsel filed with the

          DHM notice that it believed that it complied with the

          requirements of Article 40, and that there were no objections;

          and requested that the DHM make its inspection as required by

          MLIR Article 42.  The Company then provided a bond which was

          required by the DHM to protect third parties against any damage

          caused from the mining operations, and it simultaneously paid

          the annual surface t ax.  On August 29, 2003 the Office of the

          Ministry of Economy formally presented the Company with the

          twenty-year Renewed SSGM which was dated August 18, 2003.  This

          Renewed SSGM replaces the collateral that the same parties held

          with the previous concession.  On May 20, 2004 (delivered June

          4, 2004) the Government of El Salvador, under their Agreement

          Number 591, extended the exploitation concession for a period

          of 30 years.  A copy of the assignment dated May 10, 2004, is

          attached to the May 10, 2004 confirmation letter as Exhibit B

          and the Renewed SSGM agreement is attached to Exhibit B and

          referred to as Exhibit 1.

<PAGE>

Mr. John E. Machulak

Machulak, Robertson & Sodos, S.C. (Law Firm)

May 30, 2008

Page 4 of 8 Pages

      (5) San Cristobal Mill and Plant (SCMP) three-year lease by and

          between Commerce and Corporacion Salvadorena de Inversiones

          (Corsain), an El Salvadoran governmental agency, executed on

          Monday, April 26, 2004, retroactive to November 13, 2003.

          Pledged and assigned as collateral on May 10, 2004.

          The renewed three-year SCMP lease for the property located near

          the City of El Divisadero was finalized and executed on Monday,

          April 26, 2004, and is retroactive to November 13, 2003.  This

          May 10, 2004 assignment is included in the May 10, 2004

          confirmation letter as Exhibit B and the lease agreement is

          attached to Exhibit B and referred to as Exhibit 2.

          On March 25, 2008 a nineteen-month lease retroactive to

          November 12, 2006 was executed by and between Corsain and

          Commerce.  The lease was renewed on June 12, 2008 for a

          six-month period to expire on December 11, 2008.  Reference is

          made to Exhibit 10.16 of Commerce's Form 10-K for its fiscal

          year ended March 31, 2008 for a copy of this lease.

      (6) Nueva Esparta Exploration Concession/License (Nueva Esparta) -

          45 square kilometers (11,115 acres) Resolution No. 271

          On or about October 20, 2002, the Company filed an application

          with the DHM for the Nueva Esparta Exploration

          Concession/License which consists of 45 square kilometers and

          is located north and adjacent to the New SSGM.  On May 25, 2004

          the Government of El Salvador, under their Resolution No. 271,

          issued the Nueva Esparta Exploration Concession/License for a

          period of four years starting from the date following the

          notification of this resolution which was received on June 4,

          2004.  This concession/license may be extended for two two-year

          periods or for a total of eight years.  This rectangular area

          is in the Departments of La Union (east) and Morazan (west) and

          in the jurisdiction of the City of Santa Rosa de Lima, El

          Salvador, Central America.  Included in the Nueva Esparta are

          eight other formerly operated gold and silver mines known as:

          the Banadero Mine, the Carrizal Mine, the Copetillo Mine, the

          Grande Mine, the La Joya Mine, the Las Pinas Mine, the

          Montemayor Mine, and the Or o Mine.  A copy of the assignment

          dated May 9, 2005 was attached to the May 9, 2005 confirmation

          letter as Exhibit C and the Nueva Esparta Exploration

          Concession is attached to Exhibit C and referred to as Exhibit

          1.

<PAGE>

Mr. John E. Machulak

Machulak, Robertson & Sodos, S.C. (Law Firm)

May 30, 2008

Page 5 of 8 Pages

      (7) Acknowledgment of collateral provided through March 31, 2008

          Commerce's Directors have on May 30, 2008 authorized and

          directed Commerce's Officers to assign all of the rights,

          titles, claims, remedies and interest in all of its assets that

          it has, including any assets owned by the Joint Venture, to

          GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from March 31,

          2007 to include M&R, the Law Firm, CMI and EAM, collectively

          and individually referred to as Lenders, as additional

          collateral for all of the outstanding loans and obligations as

          of March 31, 2008, including all future advances of any kind.

5.   Cross Pledge Collateral Agreement

     GLSCO, ELM, the ELM RIRA, the SM RIRA and SM individually are

     entitled to specific collateral that has been pledged to them by

     Commerce, its subsidiaries, affiliates and the Joint Venture.  Upon

     default by Commerce, or its subsidiaries or affiliates or the Joint

     Venture, then GLSCO, ELM, the ELM RIRA, the SM RIRA and SM have the

     first right to the proceeds from the specific collateral pledged to

     each of them.  Commerce, its subsidiaries, affiliates, and the Joint

     Venture also have cross-pledged the collateral without diminishing

     the rights of the specific collateral pledged to each of the

     following:  GLSCO, ELM, the ELM RIRA, the SM RIRA and SM.  The

     purpose and the intent of the cross pledge of collateral is to

     assure GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM, that each of

     them would be paid in full; thus, any excess collateral that would

     be available is for the purpose of satisfying any debts and

     obligations due to each of the named parties.  The formula to be

     used (after deducting the payments made from the specific

     collateral) is to total all of the debts due to GLSCO, ELM, the ELM

     RIRA, the SM RIRA, SM, and from March 31, 2007 to include M&R, the

     Law Firm, CMI and EAM, and then to divide this total debt into each

     individual debt to establish each individual's percentage of the

     outstanding debt due.  This percentage then will be multiplied by

     the total of the excess collateral to determine the amount of

     proceeds each party should receive from the excess collateral.  Then

     the amount due to each of them would be distributed accordingly.

6.   Cancellation of Inter-Company Debts Upon Default

     Since certain of the collateral specifically or collectively pledged

     to GLSCO, ELM, the ELM RIRA, the SM RIRA, SM and from March 31, 2007

     to include M&R, the Law Firm, CMI and EAM, consists of the common

     stock of Homespan, Ecomm, Sanseb, SLE, Misanse, UDI and the interest

     in the ownership of the Joint Venture, Commerce

<PAGE>

Mr. John E. Machulak

Machulak, Robertson & Sodos, S.C. (Law Firm)

May 30, 2008

Page 6 of 8 Pages

     agreed, upon default of the payment of principal or interest to any

     of the individual Lender(s) mentioned herein, that it will

     automatically cancel any inter-company debts owed to Commerce by any

     of its wholly-owned subsidiaries or affiliates or the Joint Venture

     at such time as any of the stock or Joint Venture ownership is

     transferred to the collateral holders as a result of default of any

     promissory note.

7.   Guarantors

     This agreement further confirms that Commerce and all of the

     following are guarantors to the obligations due to the Law Firm and

     to the loans made by the Law Firm to Commerce:  Joint Venture,

     Homespan, Ecomm, SLE, Sanseb and UDI.  They jointly and severally

     guarantee payment of the note(s) that they caused to be issued and

     also agree that these note(s) may be accelerated in accordance with

     the provisions contained in the agreement and/or any collateral or

     mortgages securing these notes.  Also, Commerce, all of its

     subsidiaries and the Joint Venture agree to the cross pledge of

     collateral for the benefit of GLSCO, ELM, the ELM RIRA, the SM RIRA,

     SM, and from March 31, 2007 to include M&R, the Law Firm, CMI and

     EAM.  Reference is made to Exhibit 5 included in the April 9, 1990

     confirmation letter.

8.   Re-Execution Agreement(s)

     In the event the Law Firm deems that it is necessary or advisable

     for the Law Firm to have Commerce re-execute any document(s) entered

     into, including, but not limited to the promissory note(s) or

     collateral agreement(s), Commerce will re-execute such document(s)

     reasonably required by the Law Firm.  Commerce also acknowledges

     that Commerce may be liable to pay certain costs related to any of

     the transactions entered into with the Law Firm.  If at a later date

     the Law Firm determines that an error has been made in the payment

     of such costs to the Law Firm, then the Law Firm may demand payment

     and Commerce does hereby agree to make such payment forthwith.  All

     requests for corrections of any errors and/or payment of costs shall

     be complied with by Commerce within seven (7) days of the Law Firm's

     written request.  The failure of Commerce to comply with Commerce's

     obligation(s) hereunder shall constitute a default and shall entitle

     the Law Firm to the remedies available for default under any

     provisions of the agreements including, but not limited to the

     promissory note(s) and/or the collateral pledge agreement(s) and/or

     any other Commerce obligation(s).

<PAGE>

Mr. John E. Machulak

Machulak, Robertson & Sodos, S.C. (Law Firm)

May 30, 2008

Page 7 of 8 Pages

9.    Omissions

      Commerce believes that it has included all of its obligations,

      monies due and has listed all of the collateral due to the Law

      Firm, however, since these transactions have taken place over  a

      long period of time in which changes could have taken place, it is

      possible that inadvertently some item(s), particularly collateral,

      could have been omitted.  If that should prove to be a fact, then

      Commerce, the Joint Venture, Homespan, Ecomm, SLE, Sanseb, and UDI

      agree that those omissions of collateral, if any, are meant to be

      included as collateral under this confirmation agreement.

If you are in agreement with the contents of this letter, please sign

below and return one copy to Commerce.

Very truly yours,

COMMERCE GROUP CORP.

/s/ Christine M. Wolski

Christine M. Wolski

Secretary

<PAGE>

Mr. John E. Machulak

Machulak, Robertson & Sodos, S.C. (Law Firm)

May 30, 2008

Page 8 of 8 Pages

The contents of this letter are agreed by the following:

COMMERCE/SANSEB JOINT VENTURE              HOMESPAN REALTY COMPANY, INC.

as Guarantor (Joint Venture)               as Guarantor (Homespan)

/s/ Edward A. Machulak                     /s/ Edward A. Machulak

---------------------------------------    ------------------------------

By:  Edward A. Machulak, Auth. Designee    By:  Edward A. Machulak, President

ECOMM GROUP INC.                           SAN LUIS ESTATES, INC.

as Guarantor (Ecomm)                       as Guarantor (SLE)

/s/ Edward A. Machulak                     /s/ Edward A. Machulak

---------------------------------------    ------------------------------

By:  Edward A. Machulak, President         By: Edward A. Machulak, President

SAN SEBASTIAN GOLD MINES, INC.             UNIVERSAL DEVELOPERS, INC.

as Guarantor (Sanseb)                      as Guarantor (UDI)

/s/ Edward A. Machulak                     /s/ Edward A. Machulak

---------------------------------------    ------------------------------

By:  Edward A. Machulak, President         By:  Edward A. Machulak, President

Accepted by:

MACHULAK, ROBERTSON & SODOS, S.C. (Law Firm)

/s/ John E. Machulak

--------------------------------------------

By:  John E. Machulak, Authorized Signer

Date:  May 30, 2008

EX-10

                              EXHIBIT 10.16

                  ENGLISH VERSION OF 2008 LEASE AGREEMENT

              BY AND BETWEEN COMMERCE GROUP CORP. AND CORSAIN

WE, GINO ROLANDO BETTAGLIO RIVAS of fifty four years of age, Bachelor in

Economy, of domicile in Antiguo Cuscatlan, Department of La Libertad,

bearer of my Sole Identity Document number zero two million one hundred

eighty three thousand eight hundred seventy seven acting in the name and

representation, in his capacity of President and Legal Representative of

the CORPORACION SALVADORENA DE INVERSIONES  that is abbreviated CORSAIN,

official Institution of Autonomous character, of this domicile, with Tax

Identification Number zero six hundred fourteen - zero ten thousand one

hundred eighty two zero zero one-one; who in the course of this document

will be called "THE LESSEE" OR CORSAIN; for the other part Mr. EDWARD A.

MACHULAK OF FIFTY SIX years of age, businessman, of American nationality,

bearer of passport number TWO ZERO SEVEN FIVE SIX SEVEN ONE ZERO ZERO,

issued by the immigration authorities of that country, the day of

December 18, of the year two thousand two, with expiration dat e of

December 17, of the year two thousand twelve, in capacity of Special

Power for the company COMMERCE GROUP CORP, corporation of the State of

Wisconsin, United States of America, who for not speaking or reading

Spanish is accompanied by his translator Mr. JOHN HOWARD CURRY, of sixty

seven years of age, businessman, of nationality of the United States of

America, bearer of passport number zero four five five two seven three

six two, issued by the Migratory Authorities of that country, the day of

July 13, of one thousand nine hundred ninety nine, with expiration date

of July 12, of two thousand nine; the company referred to above

henceforth will be called "THE LESSOR", through this instrument we agree

to sign a SIMPLE LEASING CONTRACT" which will be subject to the following

clauses:  I. DECLARATION OF DOMINION. That the leasing entity is owner

and current possessor of a portion of rustic land and constructions that

it contains, that was dismembered from a land of greater size of SIX TY

SIX HECTARES SEVENTY TWO AREAS FIVE POINT TWENTY FIVE CENTIAREAS,

equivalent to NINETY SIX MANZANAS EIGHT THOUSAND NINE HUNDRED SIXTY FOUR

POINT TWENTY THREE SQUARE VARAS, that forms part of the CORSAIN property,

known jointly as MONTECRISTO MINES, located in

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<PAGE>

Jurisdiction of Jocoro, Department of Morazan, inscribed in favor of

CORSAIN to Number ONE HUNDRED SEVENTY NINE of the Book TWO HUNDRED

SEVENTY FIVE  of the Registry of Property in Morazan whose description is

the following: Starting from the geodesic marker Valle Santiago in

direction  North fifty six degrees zero six point zero minutes West and a

distance of ninety six point fifty four meters one arrives at a point

from where with  direction  North  twenty  five  degrees  thirty four

point zero minutes East and a distance of one hundred meters,  one

arrives at another point from where with direction North twenty eight  

degrees  thirty four point three minutes East and a distance of one

hundred  meters one arrives at another point from where with  direction  

North  thirty  eight  degrees  thirty four point six minutes East and a

distance of three hundred meters one arrives at another point from where

with  direction  North forty one degrees  fifteen  point zero minutes

East and at a distance of three hundred meters is found the corner

South-West of the  property  that is  described  below,  whose  measures  

and  borders are the following:  TO THE WEST:  Straight line with

direction  North thirty six degrees forty two point sixty five minutes

West and a distance of eight  hundred  thirty eight point zero fifty six

meters,  bordering with lands of the general property of greater capacity

property of CORSAIN; TO THE NORTH: broken line that consists of thirty

one straight  lines;  the first with  direction  North  seventy  three

degrees twenty four point fifty eight minutes East and a distance of

sixty three meters  twenty one  centimeters;  the second  with  direction  

North forty three degrees  thirty six point thirty one minutes East and a

distance of forty meters sixty nine centimeters; the third with direction

North thirty six degrees  forty two point sixty six minutes  East and a

distance of fifty six meters  sixty eight centimeters;  the fourth with  

direction  North forty three degrees  eighteen  point  eighty four  

minutes East and a distance of eighty one meters thirty  centimeters,  

eight  millimeters;  the fifth with direction North seven  degrees  three  

point  twenty one  minutes  East and a distance of twenty meters eighty

four  centimeters,  eight  millimeters;  the sixth with  direction North  

seventy  degrees  fifty six point  seven  minutes  West and a distance of

thirteen  meters fifty  centimeters;  the seventh with a direction North

seventy degrees forty point  fourteen  minutes West and a distance of

forty seven meters sixty  centimeters,  six  millimeters;  the eighth

with direction  North and one degree  thirty six point forty seven  

minutes East and a distance of forty eight meters twenty one centimeters,  

four

                                   2

<PAGE>

millimeters; the ninth with direction North forty five degrees  fifty one

point ninety seven  minutes East and a distance of ninety eight meters

thirty seven  centimeters,  two millimeters;  the tenth with direction

North forty three degrees fifty nine point zero seven minutes East and a

distance of one hundred forty meters twenty three centimeters, one

millimeter; the eleventh with  direction  South twenty nine degrees

thirty seven point sixty minutes East and a distance of thirty one

meters, ninety three centimeters, five millimeters;  the twelfth with  

direction  South forty five degrees twenty three point  eighty  seven  

minutes  East and a distance of forty four  meters  eighty centimeters,  

three  millimeters;  the thirteenth with direction South forty one

degrees two point fifty one minutes  East and a distance of thirty  

meters forty five centimeters,  five  millimeters;  the fourteenth with

direction South sixty six degrees  sixteen point thirty one minutes East

and a distance of twenty five meters eighty seven  centimeters;  the

fifteenth  with  direction  North seventy three degrees  thirteen  point  

thirteen  minutes East and a distance of fifteen meters,  sixty nine  

centimeters;  the  sixteenth  with  direction  South eighty degrees  

seventeen  point fifty two  minutes  East and a distance of twenty nine

meters forty one centimeters,  four millimeters;  the seventeenth with

direction South five degrees forty eight point seventy four minutes West

and a distance of fifty two meters, sixty seven centimeters,  one

millimeter;  the eighteenth with direction  South twenty five  degrees

fifty eight point sixty nine minutes East and a distance of thirty two

meters,  twenty centimeters,  six millimeters;  the nineteenth  with

direction  South forty four degrees forty one point forty nine minutes

East and a distance of thirty two meters, ninety seven centimeters,  two

millimeters;  the twentieth with direction south sixty degrees thirty

nine point twenty  six  minutes  East and a  distance  of forty  six

meters,  twenty  five centimeters,  eight millimeters; the twenty first

with direction South fifty one degrees one point one seventy  one minutes

East and a distance of thirty  eight meters,  one millimeter;  the twenty

second with direction South seventy degrees forty two point eleven

minutes East and a distance of twenty six meters,  twenty centimeters,

two millimeters; the twenty third with direction South seventy nine

degrees  forty  nine  degrees  forty four point  forty five  minutes

East and a distance  of ten meters  fifty five  centimeters,  six

millimeters;  the twenty fourth with direction  North seventy degrees

sixty five point eight minutes East and a distance of twenty seven

                                   3

<PAGE>

meters twenty one centimeters, eight millimeters; the twenty  fifth with

direction  North fifty eight  degrees  twenty nine point twelve minutes

East and a distance of one hundred five meters,  fifty  eight

centimeters,  three  millimeters;  the twenty  sixth with direction

South eighty degrees thirty eight point ninety two minutes East and a

distance of twenty meters, sixty one centimeters,  seven millimeters; the

twenty seventh  with  direction  South fifty one degrees zero point

eighty four minutes East and a distance of eleven meters, ninety

centimeters,  five millimeters; the twenty  eighth with  direction  South

forty two degrees fifty three point thirty seven  minutes  East  and a  

distance  of  eighty  four  meters,  seventy  seven centimeters,  two

millimeters; the twenty ninth with direction South seventy six degrees  

forty seven point forty six minutes  East and a distance of eighty nine

meters, five centimeters,  seven millimeters; the thirtieth with

direction South seventy seven degrees forty five point  thirteen  minutes

East and a distance of thirty meters, eighty two centimeters,  nine

millimeters;  the thirty first with direction  South sixty four degrees

fifty one point fourteen  minutes East and a distance of sixteen  meters,  

thirty  centimeters,  eight  millimeters.  All the pieces border with

lands of Mr. Rene Gonzalez, deep ravine in the middle, TO THE EAST:

Broken line made up by twenty one straight lines: the first with

direction South forty one  degrees  forty  seven  point  sixty  eight

minutes  West and a distance of forty nine  meters,  fifty six

centimeters,  two  millimeters;  the second with direction  South twenty

seven degrees forty point eighty six minutes West and a distance  of

forty  five  meters,  twenty  three  centimeters,  eight millimeters;

the third with  direction  South twenty nine  degrees  fifty seven point

nineteen  minutes West and a distance of thirty two meters,  twenty eight

centimeters,  two millimeters;  the fourth with direction South eighteen

degrees twenty eight point zero one minutes West and a distance of eleven

meters, ninety five  centimeters,  six  millimeters;  the fifth with

direction  South seventeen degrees  thirty point  ninety seven  minutes

East and a distance of nine meters, seventy four centimeters,  two

millimeters; the sixth with direction South forty one degrees  thirty

five point fifty three minutes East and a distance of twenty seven

meters,  six centimeters,  three  millimeters;  the seventh with

direction South eighty seven  degrees  twenty three point ninety three

minutes East and a distance of thirty two meters, seventeen centimeters,

one millimeter; the eighth with direction  North eighty one degrees

                                   4

<PAGE>

zero point zero five minutes East and a distance of twenty meters, ninety

centimeters,  five millimeters; the ninth with direction  South eighty

eight  degrees zero seven point twenty five minutes East and a distance

of twenty eight meters, ninety seven centimeters;  the tenth with

direction  South eighty five  degrees  zero two point eleven  minutes

East and a distance of twenty six meters,  fifty seven  centimeters,  six

millimeters;  the eleventh  with  direction  South eighty two degrees

fifty eight point forty nine minutes East and a distance of twenty six

meters,  forty nine  centimeters,  one millimeter;  the twelfth with

direction  South  eleven  degrees zero zero point thirty six minutes and

a distance of twelve  meters,  seventy five  centimeters, five

millimeters; the thirteenth with direction South twelve degrees thirty

five point  seventeen  minutes  West  and  a  distance  of  sixty  nine

meters,  two centimeters, nine millimeters;  the fourteenth with

direction South six degrees twenty  four point  sixteen  minutes  East

and a  distance  of twenty six meters ninety three centimeters,  eight

millimeters; the fifteenth with direction South seventy  degrees  sixteen

point twenty nine minutes East and a distance of fifty five  meters  

forty eight  centimeters,  six  millimeters;  the  sixteenth  with

direction South sixty seven  degrees  fifty one point  fifty two minutes  

East and a distance of forty meters,  eighty  centimeters,  seven  

millimeters;  the  seventeenth  with direction  South thirty three

degrees twenty three point thirty two minutes East and a distance of

twenty two meters, fifty one centimeters, six millimeters; the eighteenth

with direction South four degrees eighty two point zero three minutes

West and a  distance  of twenty  six  meters,  seventy  four  

centimeters,  four millimeters;  the nineteenth  with direction  South

forty one degrees twenty six point twenty seven  minutes  West and a

distance of seventy  meters,  thirty one centimeters,  one  millimeter;  

the twentieth  with  direction  South twenty one degrees  forty nine

point  thirty one  minutes  East and a distance of forty six meters,  

seventy  three  centimeters,  nine  millimeters;  the twenty first with

direction  South  forty four  degrees  twenty  point  fifty  minutes  

East and a distance of sixty one meters,  eighty four centimeters,  four  

millimeters.  The first fifteen pieces border with lands of Mr. Rene

Gonzalez,  deep ravine in the middle;  the other six pieces border with

Colonia  Monte  Cristo;  TO THE SOUTH: Broken line made up of thirteen  

straight lines:  the first with direction South seventy  degrees  fifty

seven point fifty seven  minutes  West and a distance of fifty meters,

ninety two centimeters, six millimeters;

                                   5

<PAGE>

the second with direction South  sixty  seven  degrees  twenty  four

point  forty one  minutes  West and a distance of fifty seven meters,

eighty one centimeters,  six  millimeters;  the third with  direction

South sixty two degrees  thirty nine point  seventy  nine minutes West

and a distance of fifty nine meters,  thirteen  centimeters,  eight

millimeters;  the fifth with  direction  South fifty seven  degrees forty

eight point forty eight minutes West and a distance of thirty seven

meters, ninety six centimeters,  three  millimeters;  the seventh  with

direction  South fifty two degrees  forty five point forty four  minutes

West and a distance of forty three meters,  sixty two  centimeters, eight  

millimeters;  the eighth with direction South fifty four degrees fifty

five point forty one minutes West and a distance of one hundred twenty

six meters,  fourteen  centimeters,  two millimeters;  the ninth with  

direction  South fifty six degrees zero three point zero one minutes West

and a distance of two hundred thirty four meters,  ninety six  

centimeters, four  millimeters;  the tenth with direction  North seventy  

degrees twenty nine point twenty nine minutes West and a distance of two

meters,  three centimeters, six  millimeters;  the eleventh with  

direction  North twenty five degrees North zero four point twenty eight  

minutes East and a distance of one meter,  seventy one centimeters,  six

millimeters;  the twelfth with direction North seventy one degrees  fifty

three point forty one minutes  West and a distance of six meters, twenty

nine  centimeters,  six millimeters;  the thirteenth with direction South

thirteen  degrees  forty three point  ninety five minutes West and a

distance of sixteen  meters,  seventy  centimeters,  six  millimeters;  

arriving thus to the Southwest  corner  where  the  present  description  

started.  The  first  eight (straight line) sections border with lands

known as Montecristo  Isle,  property of CORSAIN.  The other five pieces

border with lands of Mr. Bartolo Berrios; the thirteen  prior pieces  

border with the Ruta Militar  Highway with Santa Rosa de Lima in the

middle.  That on the built area of the land that is leased  there is

found iron and wood  galleys  with roofs of  channeled,  laminated  

metal,  also property of CORSAIN.  II.) OBJECT OF THE CONTRACT. Both

parties agree that for having incurred in past due payments on the lease,

application of clause V) of the original contract was made in such sense

and having paid the past due amount, we agree to sign a new contract that

will be governed under the clauses that are detailed in this instrument.  

The representative of the lessor delivers in simple lease to the lessee

the portion of the land described above and in such

                                   6

<PAGE>

capacity the lessee's special Power receives the referred to property to

his complete satisfaction, obliging himself to return it to the lessor in

the same conditions at the termination of the lease term.  III) TERM AND

EXTENSION. The term of the lease is agreed to for nineteen months

starting counting from the day of November 12 of the year two thousand

six with expiration on the day of June 11 of the year two thousand eight,

both dates inclusive, which will be extended automatically each three

months, always and when, there does not exist an express statement on the

part of CORSAIN to terminate it in the established term with at least

thirty days of advance notice. If the Lessee complies with the clauses of

this contract in joint agreement  with the Lessor they may decide to

continue with the lease,  its conditions will be discussed and protected

under a new contract. In the case that the Lessee deoccupies the property

under lease before the end of the term it should pay and all the surface

taxes pending as if it were the end of the term.   IV) PRICE AND FORM OF

PAYMENT: The total price of the lease during the first year is EIGHTEEN

THOUSAND SIX HUNDRED EIGHT  DOLLARS WITH TWENTY ONE CENTS OF A DOLLAR OF

THE UNITED STATES OF AMERICA ($18,608.21) PLUS THE CORRESPONDING TAX FOR

THE Transfer of Real Estate and the Rendering of Services (VAT), payable

through monthly quotas, successive and beforehand, the first for ONE

THOUSAND FIVE HUNDRED FIFTY DOLLARS WITH SIXTY EIGHT CENTS OF A DOLLAR OF

THE UNITED STATES OF AMERICA, ($1,550.68), PLUS THE CORRESPONDING TAX FOR

THE Transfer of Real Estate and the Rendering of Services (VAT).  This

price will be increased annually in conformance to the inflation rate of

the United States of America and the increase will begin  once the

corresponding report is obtained from the Embassy of that country

accredited in E l Salvador and will be added to the corresponding monthly

quota effective on the twenty fifth day of the month of  each one of the

months included in the term.  V)  EFFECTS OF THE PAST DUE:  The delay in

payment of one of the quotas agreed to will cause the term to end, giving

the right to the Lessor to require the Lessee the immediate deoccupation

of the leased property, without need for any judicial process and require

him executively to pay the owed taxes as well as those that remain to be

complied with for the original term, including the termination of the

contract as the case may be.  VI) DEPOSIT.  Both parties agree

                                   7

<PAGE>

that the obligations contracted in the present instrument on the part of

the Lessor are guaranteed with the deposits made by it in favor of the

Lessee for the amount of ELEVEN THOUSAND SEVEN HUNDRED AND FORTY ONE

DOLLARS WITH FIFTY CENTS OF A DOLLAR OF THE UNITED STATE OF AMERICA

protected by income receipt number six thousand seven hundred and seventy

four-A, dated November 15 of one thousand nine hundred ninety three and

deposited to the account of CORSAIN dated February 16, one thousand nine

hundred ninety five for the amount of THREE HUNDRED AND THIRTY THREE

DOLLARS WWWITH FIFTY CENTS OF A DOLLAR OF THE UNITED STATES OF AMERICA,

that will serve to respond for the owed taxes or for payments which the

Lessee might incur and that were charges of the Lessor and which will be

returned to him in a term of thirty days following the termination of the

present contract, in case what was mentioned above does not happen.  VII)

SPECIAL CONDITIONS: The Lessor commits to: 1) inform in writing to

CORSAIN within thirty days following the date of this instrument, about

which installations will be used, upon not doing it, he will incur a fine

equivalent to one quarter of the lease price. 2) The Lessor will not be

responsible for the deterioration that these installations suffer and

that are not used by them.  3) Answer for all kinds of damages that may

be caused as a consequence of the operations that are done in the leased

property.  4) The Lessor may make use of the water resources that are

within the leased portion and of the sources known as Santa Francisca,

Adolfo, Quebrada Seca and Quebrada Honda for whose use the corresponding

rights of way for transit and aqueducts will be constituted, it ought to

use these by means of underground piping.  In addition the Lessee

authorizes to the Lessor to construct a tank in the source known as

Adolfo.  It is understood that the ac cess to the sources mentioned and

the use of the water coming from these does not have an exclusive

character for the Lessor; 5) The Lessor will have the right to use the

surface of the leased area to construct, maintain, repair installations,

machinery, materials and residues from the ore that will be brought to be

processed in said place, as well as build roads, trenches, deposits for

minerals, waste and ore, piping for potable water, telephone lines,

electric lines of transmission and distribution.  As well, it may build

all the facilities necessary to use  what is leased for the end of

crushing, milling and processing of raw material and precious mineral

                                   8

<PAGE>

ore, all on the account of the Lessor.  The use of what is leased should

be the most adequate in accordance with the works that the Lessor

proposes to carry out  on the property object of this contract and in

whose execution he is obliged to not cause any ecological damages; and 6)

In the case that Corsain decides to sell the property object of the

present contract, it is obliged to give a preferential right to COMMERCE

GROUIP to acquire dominion over it, always if the proposed conditions of

sale are accepted, to the contrary, CORSAIN remains free to terminate the

lease contract without anymore responsibility than to give the respective

notice to the Lessor.  VIII) RIGHTS OF THE LESSEE:  The Lessee will have

free access to the leased property for the purpose of inspection, being

able to delegate such faculty to the person or persons it deems

convenient, for which it will give prior notice to the Lessor of the

reasons for its decision with at least two days of anticip ation for

reasons of security.  IX). DESTINY OF USE.  The leased property will be

destined exclusively for the use of the surface of the leased area to

construct, maintain, repair installations, machinery, residues  of ore

that will be brought to be processed  in said place, as well to build

roads, trenches, deposits for minerals, waste and ore, piping for potable

water, telephone lines, electric transmission and distribution lines; to

construct all the facilities necessary to use what is leased to the end

of crushing, milling and processing raw materials and ore of precious

minerals.  X). PROHIBITIONS. A) The Lessee may not exploit any mineral

that might exist on the leased property in virtue of the fact that the

present contract only covers the use of the surface of the land  and the

use of the installations for the purpose of processing  and storing

mineral ore brought from outside of the same property.  If the Lessor

finds gold, silver, or other mineral and plans to exploit it, i t should

sign a new contract with the Corporacion Salvadorena de Inversiones

different from what by means of this instrument is being signed; b) The

Lessor commits to not store on the leased property inflammable, explosive

substances and all those that are prohibited by the law or that put the

Lessee at risk or its affiliates and in general any person or asset.  In

cases where by the nature of the work carried out by the Lessor it is

necessary to use any of the substances previously mentioned, it is

responsible exclusively for the consequences derived from their wrongful

use.

                                   9

<PAGE>

c) The Lessor cannot sublease in part or in total nor cede its rights to

the property given in lease without prior written permission from the

Lessee.  Any violation of the present prohibitions will be cause for

terminating the present contract.  XI) FINES. The fines that are imposed

for infractions to municipal sanitary regulations will be on the account

of the Lessor or any others that are related to the business. XII)

SPECIAL CLAUSE. The Lessee is exonerated from all responsibility when the

acts and transactions that the Lessor carries out are not in conformance

to the laws of the Republic; and indeed it is proven that it is doing

them, will also be cause for termination of the contract, thus ending the

original term and any extensions.  XIII. LOCAL REPAIRS. During the lease

term or its extensions the Lessor will make: 1) All the expenditures that

are generated by the construction and repair of buildings and for the

repair of machinery and equipment will be on the account of the Lessor,

2) Upon ending the term of the present lease, the improvements and

constructions that the Lessor may have done on the leased property  will

remain without any cost, in favor of CORSAIN with the exception of the

installations that are removable, equipment, machinery, spare parts,

inventories and raw material which the Lessor may withdraw always when

these are identified as its property and that with the withdrawal the

leased property not suffer any deterioration. XIV. TERMINATION. The term

of the present contract will end and the Lessee  will have the right to

declare it ended without the need for any judicial intervention and the

Lessor should deoccupy  immediately the leased property in any of the

                                  10

<PAGE>

following cases: a) For late payment of one of the lease quotas in the

form in which it has been agreed to in this instrument after sixty days

of having been notified  of the existence of the past due payment; b) For

an executed sentence coming from an execution brought  against the Lessor

by third parties or by CORSAIN for obligation distinct from the contents

in this document; c) If the Lessor subleases or cedes its right in the

lease  or if it permits access of third parties  so that they explore or

exploit the mines without the prior authorization of CORSAIN; d) For

having used the leased property for work that is distinct from those that

in conformance to this contract it plans to carry out; e) For

non-compliance of the obligations contracted according to what is

established in Roman number VII of this contract; f) For non-fulfillment

or contravention on the part of the Lessor of any of the obligations

consigned in this  instrument,  g) When the Lessor does not comply with

any of the obligations and special conditions stipulated in it, the

Lessee will have the right to retain all or part of the quantity given in

deposit to recover from the damages and harm caused; as well as fulfill

what is established in Clause VII of this contract.  XV).  SPECIAL

DOMICILE. For the purpose of the obligations contracted in the present

contract, both parties set as special domicile that of this city and to

the competence of whose Tribunals we submit.  Swearing to the above, we

sign in the city of San Salvador at twenty five days of the month of

March of the year two thousand eight.

LIC. GINO ROLANDO BETTAGLIA RIVAS     EDWARD A. MACHULAK

President of CORSAIN                  Power of Attorney of Commerce Group

Signatures plus that of John H. Curry

In the city of San Salvador, at nine hors of the day of March 25 of the

year two thousand eight; Before me ROLANDO MAAAURICIO CARRILLO CASTILLO,

Notary, from this domicile, APPEAR: For one party GINO ROLANDO BETTAGLIO

RIVAS of fifty four years of age, Bachelor in Economy, of domicile in

Antiguo Cuscatlan, Department of La Libertad, bearer of my Sole Identity

Document number zero two million one hundred eighty three thousand eight

hundred seventy seven acting in the name and representation, in his

capacity of President and Legal Representative of the CORPORACION

SALVADORENA DE INVERSIONES  that is abbreviated CORSAIN, official

Institution of Autonomous character, of this domicile, with Tax

Identification Number zero six hundred fourteen - zero ten thousand one

hundred eighty two zero zero one-one; who in the course of this document

will be called "THE LESSEE" OR CORSAIN; for the other part Mr. EDWARD A.

MACHULAK OF FIFTY SIX years of age, businessman, of American nationality,

bearer

                                  11

<PAGE>

of passport number TWO ZERO SEVEN FIVE SIX SEVEN ONE ZERO ZERO, issued by

the immigration authorities of that country, the day of December 18, of

the year two thousand two, with expiration date of December 17, of the

year two thousand twelve, in capacity of Special Power for the company

COMMERCE GROUP CORP, corporation of the State of Wisconsin, United States

of America, who for not speaking or reading Spanish is accompanied by his

translator Mr. JOHN HOWARD CURRY, of sixty seven years of age,

businessman, of nationality of the United States of America, bearer of

passport number zero four five five two seven three six two, issued by

the Migratory Authorities of that country, the day of July 13, of one

thousand nine hundred ninety nine, with expiration date of July 12, of

two thousand nine; the company referred to above henceforth will be

called "THE LESSOR", through this instrument we agree to sign a SIMPLE

LEASING CONTRACT" which will be subject to the following clauses: I.  

DECLARATION OF DOMINION. That the leasing entity is owner and current

possessor of a portion of rustic land and constructions that it contains,

that was dismembered from a land of greater size of SIXTY SIX HECTARES

SEVENTY TWO AREAS FIVE POINT TWENTY FIVE CENTIAREAS, equivalent to NINETY

SIX MANZANAS EIGHT THOUSAND NINE HUNDRED SIXTY FOUR  POINT TWENTY THREE

SQUARE VARAS, that forms part of the CORSAIN property, known jointly as

MONTECRISTO MINES, located in Jurisdiction of Jocoro, Department of

Morazan, inscribed in favor of CORSAIN to Number ONE HUNDRED SEVENTY NINE

of the Book TWO HUNDRED SEVENTY FIVE  of the Registry of Property in

Morazan whose description is the following: Starting from the geodesic

marker Valle Santiago in direction  North fifty six degrees zero six

point zero minutes West and a distance of ninety six point fifty four

meters one arrives at a point from where with  direction  North  twenty

five  degrees  thirty four point zero minutes East and a distance of one

hundred meters,  one arrives at another point from where with  direction

North twenty eight  degrees  thirty four point three minutes East and a

distance of one hundred  meters one arrives at another  point from where

with  direction  North  thirty  eight  degrees  thirty four point six

minutes East and a distance of three hundred meters one arrives at

another point from where with  direction  North

                                  12

<PAGE>

forty one degrees fifteen  point zero minutes East and at a distance of

three hundred meters is found the corner South-West of the  property

that is described  below,  whose  measures  and  borders are the

following:  TO THE WEST:  Straight line with direction  North thirty six

degrees forty two point sixty five minutes West and a distance of eight

hundred thirty eight point zero fifty six meters,  bordering with lands

of the general property of greater capacity property of CORSAIN; TO THE

NORTH: broken line that consists of thirty one straight  lines;  the

first with direction  North  seventy  three degrees twenty four point

fifty eight minutes East and a distance of sixty three meters  twenty one

centimeters;  the second  with  direction  North forty three degrees

thirty six point thirty one minutes East and a distance of forty meters

sixty nine centimeters; the third with direction North thirty six degrees

forty two point sixty six minutes  East and a distance of fifty six

meters  sixty eight  centimeters;  the fourth with  direction  North

forty three degrees  eighteen  point  eighty four  minutes East and a

distance of eighty one meters thirty  centimeters,  eight  millimeters;

the fifth with direction North seven  degrees  three  point  twenty one

minutes  East and a distance of twenty meters eighty four  centimeters,

eight  millimeters;  the sixth with  direction North  seventy  degrees

fifty six point  seven  minutes  West and a distance of thirteen  meters

fifty  centimeters;  the seventh with a direction North seventy degrees

forty point  fourteen  minutes West and a distance of forty seven meters

sixty  centimeters,  six  millimeters;  the eighth with direction  North

and one degree  thirty six point forty seven  minutes East and a distance

of forty eight meters twenty one centimeters,  four millimeters; the

ninth with direction North forty five degrees  fifty one point ninety

seven  minutes East and a distance of ninety eight meters thirty seven

centimeters,  two millimeters;  the tenth with direction North forty

three degrees fifty nine point zero seven minutes East and a distance of

one hundred forty meters twenty three centimeters, one millimeter; the

eleventh with  direction  South twenty nine degrees thirty seven point

sixty minutes East and a distance of thirty one meters, ninety three

centimeters, five millimeters;  the twelfth with  direction  South forty

five degrees twenty three point  eighty  seven  minutes  East and a

distance of forty four  meters  eighty centimeters,  three  millimeters;

the thirteenth with direction South forty one degrees two point fifty one

minutes  East and a distance of thirty  meters forty five centimeters,

five  millimeters; the fourteenth

                                  13

<PAGE>

with direction South sixty six degrees  sixteen point thirty one minutes

East and a distance of twenty five meters eighty seven centimeters;  the

fifteenth  with  direction  North seventy three degrees thirteen  point

thirteen  minutes East and a distance of fifteen meters, sixty nine

centimeters;  the  sixteenth  with  direction  South eighty degrees

seventeen  point fifty two  minutes  East and a distance of twenty nine

meters forty one centimeters,  four millimeters;  the seventeenth with

direction South five degrees forty eight point seventy four minutes West

and a distance of fifty two meters, sixty seven centimeters,  one

millimeter;  the eighteenth with direction  South twenty five  degrees  

fifty eight point sixty nine minutes East and a distance of thirty two

meters,  twenty centimeters,  six millimeters; the nineteenth  with  

direction  South forty four degrees forty one point forty nine minutes

East and a distance of thirty two meters, ninety seven centimeters,  two

millimeters;  the twentieth with direction south sixty degrees thirty

nine point twenty  six  minutes  East and a  distance  of forty  six  

meters,  twenty  five centimeters,  eight millimeters; the twenty first

with direction South fifty one degrees one point one seventy one minutes  

East and a distance of thirty  eight meters,  one millimeter;  the twenty

second with direction South seventy degrees forty two point eleven

minutes East and a distance of twenty six meters, twenty centimeters, two

millimeters; the twenty third with direction South seventy nine degrees  

forty  nine  degrees  forty four point  forty five  minutes  East and a

distance  of ten meters  fifty five centimeters,  six  millimeters;  the

twenty fourth with direction  North seventy degrees sixty five point

eight minutes East and a distance of twenty seven meters twenty one

centimeters, eight millimeters; the twenty fifth with  direction  North

fifty eight  degrees  twenty nine point twelve minutes East and a

distance of one hundred five meters,  fifty eight  centimeters,  three  

millimeters;  the twenty  sixth with direction  South eighty degrees

thirty eight point ninety two minutes East and a distance of twenty

meters, sixty one centimeters,  seven millimeters; the twenty seventh  

with  direction  South fifty one degrees zero point eighty four minutes

East and a distance of eleven meters, ninety centimeters,  five

millimeters; the twenty  eighth with  direction South forty two degrees

fifty three point thirty seven  minutes  East and a  distance  of  eighty  

four  meters,  seventy  seven centimeters, two millimeters; the twenty

ninth with direction South seventy six degrees  forty seven point forty

six minutes  East and a distance of eighty

                                  14

<PAGE>

nine meters, five centimeters,  seven millimeters; the thirtieth with

direction South seventy seven degrees forty five point  thirteen  minutes

East and a distance of thirty meters, eighty two centimeters,  nine

millimeters;  the thirty first with direction  South sixty four degrees

fifty one point fourteen  minutes East and a distance of sixteen  meters,

thirty  centimeters,  eight  millimeters.  All the pieces border with

lands of Mr. Rene Gonzalez, deep ravine in the middle, TO THE EAST:

Broken line made up by twenty one straight lines: the first with

direction South forty one  degrees  forty  seven  point  sixty  eight

minutes  West and a distance of forty nine  meters,  fifty six

centimeters,  two  millimeters;  the second with direction  South twenty

seven degrees forty point eighty six minutes West and a distance  of

forty  five  meters,  twenty  three  centimeters,  eight millimeters; the

third with  direction  South twenty nine  degrees  fifty seven point

nineteen  minutes West and a distance of thirty two meters,  twenty eight

centimeters,  two millimeters;  the fourth with direction South eighteen

degrees twenty eight point zero one minutes West and a distance of eleven

meters, ninety five  centimeters,  six  millimeters;  the fifth with

direction  South seventeen degrees  thirty point  ninety seven  minutes

East and a distance of nine meters, seventy four centimeters,  two

millimeters; the sixth with direction South forty one degrees  thirty

five point fifty three minutes East and a distance of twenty seven

meters,  six centimeters,  three  millimeters;  the seventh with

direction South eighty seven  degrees  twenty three point ninety three

minutes East and a distance of thirty two meters, seventeen centimeters,

one millimeter; the eighth with direction  North eighty one degrees zero

point zero five minutes East and a distance of twenty meters, ninety

centimeters,  five millimeters; the ninth with direction  South eighty

eight  degrees zero seven point twenty five minutes East and a distance

of twenty eight meters, ninety seven centimeters;  the tenth with

direction  South eighty five  degrees  zero two point eleven  minutes

East and a distance of twenty six meters,  fifty seven  centimeters,  six

millimeters;  the eleventh  with  direction  South eighty two degrees

fifty eight point forty nine minutes East and a distance of twenty six

meters,  forty nine  centimeters,  one millimeter;  the twelfth with

direction  South  eleven  degrees zero zero point thirty six minutes and

a distance of twelve  meters,  seventy five  centimeters, five

millimeters; the thirteenth with direction South twelve degrees thirty

five point  seventeen  minutes  West  and  a  distance  of  sixty  nine

meters,  two centimeters,

                                  15

<PAGE>

nine millimeters;  the fourteenth with direction South six degrees twenty

four point  sixteen  minutes  East and a  distance  of twenty six meters

ninety three centimeters,  eight millimeters; the fifteenth with

direction South seventy  degrees  sixteen point twenty nine minutes East

and a distance of fifty five  meters forty eight  centimeters,  six  

millimeters;  the  sixteenth  with direction South sixty seven  degrees  

fifty one point  fifty two minutes East and a distance of forty meters,  

eighty  centimeters,  seven millimeters;  the  seventeenth  with

direction  South thirty three degrees twenty three point thirty two

minutes East and a distance of twenty two meters, fifty one centimeters,

six millimeters; the eighteenth with direction South four degrees eighty

two point zero three minutes West and a  distance  of twenty  six  

meters,  seventy  four centimeters,  four millimeters;  the nineteenth  

with direction  South forty one degrees twenty six point twenty seven  

minutes  West and a distance of seventy  meters,  thirty one centimeters,  

one  millimeter; the twentieth  with  direction  South twenty one degrees  

forty nine point  thirty one  minutes  East and a distance of forty six

meters, seventy  three  centimeters,  nine  millimeters;  the twenty

first with direction  South  forty four  degrees  twenty  point  fifty  

minutes East and a distance of sixty one meters,  eighty four

centimeters,  four millimeters.  The first fifteen pieces border with

lands of Mr. Rene Gonzalez,  deep ravine in the middle;  the other six

pieces border with Colonia  Monte  Cristo;  TO THE SOUTH: Broken line

made up of thirteen straight lines:  the first with direction South

seventy  degrees  fifty seven point fifty seven  minutes  West and a

distance of fifty meters, ninety two centimeters, six millimeters; the

second with direction South sixty  seven  degrees  twenty  four point

forty one  minutes  West and a distance of fifty seven meters,  eighty

one centimeters,  six millimeters;  the third with  direction  South

sixty two degrees  thirty nine point  seventy  nine minutes West and a

distance of fifty nine meters,  thirteen  centimeters,  eight

millimeters;  the fifth with direction  South fifty seven  degrees  forty

eight point forty eight minutes West and a distance of thirty seven

meters, ninety six centimeters,  three  millimeters;  the seventh  with

direction  South fifty two degrees  forty five point forty four  minutes

West and a distance of forty three meters,  sixty two  centimeters,

eight millimeters;  the eighth with direction South fifty four degrees

fifty five point forty one minutes West and a distance of one hundred

twenty six meters,  fourteen  centimeters,  two

                                  16

<PAGE>

millimeters;  the ninth with direction  South fifty six degrees zero

three point zero one minutes West and a distance of two hundred thirty

four meters,  ninety six centimeters, four  millimeters;  the tenth with

direction  North seventy degrees twenty nine point twenty nine minutes

West and a distance of two meters,  three centimeters, six  millimeters;  

the eleventh with direction  North twenty five degrees North zero four

point twenty eight minutes East and a distance of one meter,  seventy one

centimeters,  six millimeters;  the twelfth with direction North seventy

one degrees  fifty three point forty one minutes  West and a distance of

six meters, twenty nine  centimeters,  six millimeters;  the thirteenth

with direction South thirteen  degrees  forty three point  ninety five

minutes West and a distance of sixteen  meters,  seventy  centimeters,

six  millimeters; arriving thus to the Southwest  corner  where  the  

present  description started.  The  first  eight (straight line) sections

border with lands known as Montecristo  Isle,  property of CORSAIN.  The

other five pieces border with lands of Mr. Bartolo Berrios; the thirteen  

prior pieces border with the Ruta Militar  Highway with Santa Rosa de

Lima in the middle.  That on the built area of the land that is leased  

there is found iron and wood  galleys  with roofs of  channeled,  

laminated metal, also property of CORSAIN.  II.) OBJECT OF THE CONTRACT.

Both parties agree that for having incurred in past due payments on the

lease, application of clause V) of the original contract was made in such

sense and having paid the past due amount, we agree to sign a new

contract that will be governed under the clauses that are detailed in

this instrument.  The representative of the lessor delivers in simple

lease to the lessee the portion of the land described above and in such

capacity the lessee's special Power receives the referred to property to

his complete satisfaction, obliging himself to return it to the lessor in

the same conditions at the termination of the lease term.  III) TERM AND

EXTENSION. The term of the lease is agreed to for nineteen months

starting counting from the day of November 12 of the year two thousand

six with expiration on the day of June 11 of the year two thousand eight,

both dates inclusive, which will be extended automatically each three

months, always and when, there does not exis t an express statement on

the part of CORSAIN to terminate it in the established term with at least

thirty days of advance notice. If the Lessee complies with the clauses of

this contract in joint agreement  with the Lessor they may decide to

continue with the lease,  its conditions will be discussed and protected

under a new

                                  17

<PAGE>

contract.  In the case that the Lessee deoccupies the property under

lease before the end of the term it should pay and all the surface taxes

pending as if it were the end of the term.   IV) PRICE AND FORM OF

PAYMENT: The total price of the lease during the first year is EIGHTEEN

THOUSAND SIX HUNDRED EIGHT  DOLLARS WITH TWENTY ONE CENTS OF A DOLLAR OF

THE UNITED STATES OF AMERICA ($18,608.21) PLUS THE CORRESPONDING TAX FOR

THE Transfer of Real Estate and the Rendering of Services (VAT), payable

through monthly quotas, successive and beforehand, the first for ONE

THOUSAND FIVE HUNDRED FIFTY DOLLARS WITH SIXTY EIGHT CENTS OF A DOLLAR OF

THE UNITED STATES OF AMERIC A, ($1,550.68), PLUS THE CORRESPONDING TAX

FOR THE Transfer of Real Estate and the Rendering of Services (VAT).

This price will be increased annually in conformance to the inflation

rate of the United States of America and the increase will begin  once

the corresponding report is obtained from the Embassy of that country

accredited in El Salvador and will be added to the corresponding monthly

quota effective on the twenty fifth day of the month of  each one of the

months included in the term.  V)  EFFECTS OF THE PAST DUE:  The delay in

payment of one of the quotas agreed to will cause the term to end, giving

the right to the Lessor to require the Lessee the immediate deoccupation

of the leased property, without need for any judicial process and require

him executively to pay the owed taxes as well as those that remain to be

complied with for the original term, including the termination of the

contract as the case may be.  VI) DEPOSIT.  Both parties agree that the

obligations contrac ted in the present instrument on the part of the

Lessor are guaranteed with the deposits made by it in favor of the Lessee

for the amount of ELEVEN THOUSAND SEVEN HUNDRED AND FORTY ONE DOLLARS

WITH FIFTY CENTS OF A DOLLAR OF THE UNITED STATE OF AMERICA protected by

income receipt number six thousand seven hundred and seventy four-A,

dated November 15 of one thousand nine hundred ninety three and deposited

to the account of CORSAIN dated February 16, one thousand nine hundred

ninety five for the amount of THREE HUNDRED AND THIRTY THREE DOLLARS

WITH FIFTY CENTS OF A DOLLAR OF THE UNITED STATES OF AMERICA, that will

serve to respond for the owed taxes or for payments which the Lessee

might incur and that were charges of the Lessor and which will be

returned to him in a term of thirty days following the termination of the

                                  18

<PAGE>

present contract, in case what was mentioned above does not happen.  VII)

SPECIAL CONDITIONS: The Lessor commits to: 1) inform in writing to

CORSAIN within thirty day s following the date of this instrument, about

which installations will be used, upon not doing it, he will incur a fine

equivalent to one quarter of the lease price. 2) The Lessor will not be

responsible for the deterioration that these installations suffer and

that are not used by them.  3) Answer for all kinds of damages that may

be caused as a consequence of the operations that are done in the leased

property.  4) The Lessor may make use of the water resources that are

within the leased portion and of the sources known as Santa Francisca,

Adolfo, Quebrada Seca and Quebrada Honda for whose use the corresponding

rights of way for transit and aqueducts will be constituted, it ought to

use these by means of underground piping.  In addition the Lessee

authorizes to the Lessor to construct a tank in the source known as

Adolfo.  It is understood that the access to the sources mentioned and

the use of the water coming from these does not have an exclusive

character for the Lessor; 5) The Lessor will have the right to use the

surface of the leased area to construct, maintain, repair installations,

machinery, materials and residues from the ore that will be brought to be

processed in said place, as well as build roads, trenches, deposits for

minerals, waste and ore, piping for potable water, telephone lines,

electric lines of transmission and distribution.  As well, it may build

all the facilities necessary to use what is leased for the end of

crushing, milling and processing of raw material and precious mineral

ore, all on the account of the Lessor.  The use of what is leased should

be the most adequate in accordance with the works that the Lessor

proposes to carry out  on the property object of this contract and in

whose execution he is obliged to not cause any ecological damages; and 6)

In the case that Corsain decides to sell the property object of the

present contract, it is obliged to give a preferential right to COMMERCE

GROUIP to acquire dominion over it, al ways if the proposed conditions of

sale are accepted, to the contrary, CORSAIN remains free to terminate the

lease contract without anymore responsibility than to give the respective

notice to the

                                  19

<PAGE>

Lessor.  VIII) RIGHTS OF THE LESSEE:  The Lessee will have free access to

the leased property for the purpose of inspection, being able to delegate

such faculty to the person or persons it deems convenient, for which it

will give prior notice to the Lessor of the reasons for its decision with

at least two days of anticipation for reasons of security.  IX). DESTINY

OF USE.  The leased property will be destined exclusively for the use of

the surface of the leased area to construct, maintain, repair

installations, machinery, residues  of ore that will be brought to be

processed  in said place, as well to build roads, trenches, deposits for

minerals, waste and ore, piping for potable water, telephone lines,

electric transmission and distribution lines; to construct all the

facilities necessary to use what is leased to the end of crushing,

milling and processing raw materials and ore of precious minerals.  X).

PROHIBITIONS. A) The Lessee may not exploit any mineral that might exist

on the leased property in virtue of the fact that the present contract

only covers the use of the surface of the land  and the use of the

installations for the purpose of processing and storing mineral ore

brought from outside of the same property.  If the Lessor finds gold,

silver, or other mineral and plans to exploit it, it should sign a new

contract with the Corporacion Salvadorena de Inversiones different from

what by means of this instrument is being signed; b) The Lessor commits

to not store on the leased property inflammable, explosive substances and

all those that are prohibited by the law or that put the Lessee at risk

or its affiliates and in general any person or asset.  In cases where by

the nature of the work carried out by the Lessor it is necessary to use

any of the substances p reviously mentioned, it is responsible

exclusively for the consequences derived from their wrongful use.  c) The

Lessor cannot sublease in part or in total nor cede its rights to the

property given in lease without prior written permission from the Lessee.

Any violation of the present prohibitions will be cause for terminating

the present contract.  XI) FINES. The fines that are imposed for

infractions to municipal sanitary regulations will be on the account of

the Lessor or any others that are related to the business.  XII)  SPECIAL

CLAUSE. The Lessee is exonerated from all responsibility when the acts

and transactions that the Lessor carries out are not in conformance to

the laws of the Republic; and indeed it is proven that it is doing them,

will also be cause for termination of the contract, thus ending the

original term and

                                  20

<PAGE>

any extensions.  XIII. LOCAL REPAIRS. During the lease term or its

extensions the Lessor will make: 1) All the expenditures that are

generated by the constru ction and repair of buildings and for the repair

of machinery and equipment will be on the account of the Lessor, 2) Upon

ending the term of the present lease, the improvements and constructions

that the Lessor may have done on the leased property  will remain without

any cost, in favor of CORSAIN with the exception of the installations

that are removable, equipment, machinery, spare parts, inventories and

raw material which the Lessor may withdraw always when these are

identified as its property and that with the withdrawal the leased

property not suffer any deterioration. XIV.  TERMINATION. The term of the

present contract will end and the Lessee will have the right to declare

it ended without the need for any judicial intervention and the Lessor

should deoccupy  immediately the leased property in any of the following

cases: a) For late payment of one of the lease quotas in the form in

which it has been agreed to in this instrument after sixty days of having

been notified  of the e xistence of the past due payment; b) For an

executed sentence coming from an execution brought  against the Lessor

by third parties or by CORSAIN for obligation distinct from the contents

in this document; c) If the Lessor subleases or cedes its right in the

lease  or if it permits access of third parties  so that they explore or

exploit the mines without the prior authorization of CORSAIN; d) For

having used the leased property for work that is distinct from those that

in conformance to this contract it plans to carry out; e) For

non-compliance of the obligations contracted according to what is

established in Roman number VII of this contract; f) For non-fulfillment

or contravention on the part of the Lessor of any of the obligations

consigned in this instrument,  g) When the Lessor does not comply with

any of the obligations and special conditions stipulated in it, the

Lessee will have the right to retain all or part of the quantity given in

deposit to recover from the damages and harm caused; as well as fulfill

what is established in Clause VII of this contract.  XV).  SPECIAL

DOMICILE. For the purpose of the obligations contracted in the present

contract, both parties set as special domicile that of this city and to

the competence of whose Tribunals we submit.  I SWEAR: I) That the

signatures that appear at the end of the document that today is

recognized are AUTHENTIC for having been recognized as theirs by those

appearing in my presence, as well as the concepts that come up in it; II)

That I have verified the personal identity of those appearing by

                                  21

<PAGE>

means of the relevant identity documents; c) Being legitimate and

sufficient the juridical personality with which appears on the one hand

Lic. Gino Rolando Bettaglio Rivas for having in view : a) Founding Law of

the Corporacion Salvadorena de Inversiones published  in the Official

Daily (Federal Register)  Number two hundred thirty five Tome nine

hundred seventy three dated December twenty two  of one thousand nine

hundred eighty one  in whose article seventy seven the Legal

Representation of the Corporation is conferred to President and it

authorizes him to intervene in the acts and contracts that it signs and

in juridical or administrative actions in which it has interest, b)

Certification of Number DOS of the Act Number ONE HUNDRED THRITY FIVE of

the session celebrated by the Assembly of Governors of the Corporacion

Salvadorena de Inversiones  the day of May twenty eight  of the year two

thousand seven in which it ratifies the naming as its Director President  

Lic. GINO ROLANDO BETAGLIO RIVAS  for a pe riod of three years counting

from June first of the year two thousand four  by means of which it

ratifies the naming of GINO ROLANDO BETTAGLIO RIVAS  as President

Director of the Corporacion Salvadorena de Inversiones.  III) Being

legitimate and sufficient the juridical personality with which appears on

the one hand Mr. Edward L. Machulak for having in view: the General

Administrative Power granted in the city of Milwaukee, State of

Wisconsin, United States of America at sixteen hours of the day of

October twenty six o two thousand seven before the Notary Sylvia Machulak

by Mrs. Christine Wolski, in her character of Legal Representative of the

company COMMERCE GROUP CORP  and other, duly having Apostille conforming

to the Hague Convention dated October five  of one thousand nine hundred

seventy one dated February twenty six  of the year two thousand eight,

being in said power making the existence legitimate of the referred to

company and the personality of its expressed leader.  Thus did those

present express themselves and to whom I explained the legal effects of

this Notarial Act that is written in six working sheets and read as it

was  by me completely all that was written and in one single act without

interruption  they state their agreement, ratified its content and we

signed jointly  with the translator of the Power of Attorney of the

Lessor who stated he swears having translated to them all the content and

the concept detailed in

                                  22

<PAGE>

this document, the reason for which both parties

sign  for its being written conforming to their will.  I SWEAR.

Signatures of Lic. Gino Rolando Bettaglio Rivas;  Edward Machulak, John

H. Curry and the stamp and signature of the Notary.

                                  23

EX-99.9 CUST CONTRCT

COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES

SCHEDULE IV (1)

INDEBTEDNESS OF RELATED PARTIES - NON CURRENT

YEARS ENDED MARCH 31, 2008, 2007, AND 2006

Commerce/Sanseb Joint Venture (Joint Venture)

Name of Person (1)	Balance at Beginning of Period (3)	Additions to Indebtedness (2)	Deletions to Indebtedness	Balance at End of Period (3)
Year ended March 31, 2008 Joint Venture	$62,975,723	$8,423,644	$0	$71,399,367
Year ended March 31, 2007 Joint Venture	$55,153,966	$7,821,756	$0	$62,975,722
Year ended March 31, 2006 Joint Venture	$49,543,386	$5,610,580	$0	$55,153,966

(1)

Commerce Group Corp. (90% ownership) and San Sebastian Gold Mines, Inc. (10% ownership), Joint Venture (“Joint Venture”); includes the advances from three of the Company’s subsidiaries.

(2)

The purpose of the advances is to continue the exploration, exploitation and development of the SSGM and the other mining prospects and activities managed by the Joint Venture which are located in the Republic of El Salvador, Central America.  Also, funds were used to retrofit, rehabilitate, repair and to renovate the San Cristobal Mill and Plant acquired by the Joint Venture for the purpose of producing gold.  The standby maintenance and holding costs are also included.  The addition to indebtedness is netted to include any adjustments for payments or credits.

(3)

Beginning with September 30, 1987, the total indebtedness excludes the advances of $590,265 from three of the Company’s subsidiaries.

San Sebastian Gold Mines, Inc. (SSGM)

Name of Person (1)	Balance at Beginning of Period	Additions to Indebtedness (2)	Deletions to Indebtedness	Balance at End of Period
Year ended March 31, 2008 SSGM	$46,802,101	$4,724,253	$0	$51,526,354
Year ended March 31, 2007 SSGM	$42,304,616	$4,497,485	$0	$46,802,101
Year ended March 31, 2006 SSGM	$38,822,252	$3,482,364	$0	$42,304,616

(1)

San Sebastian Gold Mines, Inc. (SSGM) in which Commerce Group Corp. owns 82 1/2% of its issued and outstanding common shares.

(2)

The advances to SSGM primarily consist of the interest due to the Company on SSGM’s outstanding indebtedness.

EX-99.9 CUST CONTRCT

COMMERCE GROUP CORP.  AND CONSOLIDATED SUBSIDIARIES

SCHEDULE IV(2) - INDEBTEDNESS TO RELATED PARTIES

CURRENT YEARS ENDED MARCH 31, 2008, 2007, AND 2006

Identity of Debtor	Balance at Beginning of Period	Net Additions (Deletions) to Indebtedness (1)	Balance at End of Period
Year ended March 31, 2008
Late President of the Company	$11,372,962(a)	$1,981,319(a)	$    13,354,281
Late President’s RIRA	1,216,540(b)	213,331(b)	1,429,871
Late President’s Affiliated Company	2,673,458(c)	568,806(c)	3,242,264
Late President’s Wife’s RIRA	846,436(d)	148,430(d)	994,866
Late President’s Second Oldest Son/Daughter-in-Law	249,547(d)	43,761(d)	293,308
Current President as Principal of his own Company	51,454(d)	50,728(d)	102,182
Late President’s half brother	0	16,958(d)	16,958
Total, notes payable	$   16,410,397	$3,023,333(a)	$  19,433,730
Late President’s Accrued Salary	$  3,351,515(e)	$   104,271(e)	$    3,455,786
Current President’s Accrued Salary	$                   0	$      5,729	$           5,729
Late President’s Wife’s Consulting Fees	$      435,600(f)	$      36,000(f)	$       471,600
Legal fees (Late President’s Second Oldest Son is a principal)	$     415,035(g)	$    39,409(g)	$       454,444
Year ended March 31, 2007
Late President of the Company	$  9,698,413(a)	$1,674,549(a)	$    11,372,962
Late President’s RIRA	1,099,330(b)	117,210(b)	1,216,540
Late President’s Affiliated Company	2,043,648(c)	629,810(c)	2,673,458
Late President’s Wife’s RIRA	695,071(d)	151,365(d)	846,436
Late President’s Second Oldest Son/Daughter-in-Law	212,409(d)	37,138(d)	249,547
Current President as Principal of his own Company	0	51,454(d)	51,454
Total, notes payable	$   13,748,871	$2,661,526(a)	$   16,410,397
Late President’s Accrued Salary	$  3,172,765(e)	$   178,750(e)	$     3,351,515
Late President’s Wife’s Consulting Fees	$      399,600(f)	$     36,000(f)	$        435,600
Legal fees (Late President’s Second Oldest Son is a principal)	$     411,558(g)	$      3,477(g)	$        415,035
Identity of Debtor	Balance at Beginning of Period	Net Additions (Deletions) to Indebtedness (1)	Balance at End of Period
Year ended March 31, 2006
Late President of the Company	$7,909,686(a)	$1,788,727(a)	$  9,698,413(a)
Late President’s RIRA	1,022,396(b)	76,934(b)	1,099,330(b)
Late President’s Affiliated Company	1,659,755(c)	383,893(c)	2,043,648(c)
Late President’s Wife’s RIRA	591,628(d)	103,443(d)	695,071(d)
Late President’s Second Oldest Son	180,723(d)	31,686(d)	212,409(d)
Total, notes payable	$ 11,364,188	$2,384,683	$13,748,871
Late President’s Accrued Salary	$2,994,015(e)	$   178,750(e)	$ 3,172,765(e)
Late President’s Wife’s Consulting Fees	$    363,600(f)	$    36,000(f)	$     399,600(f)
Legal fees (Late President’s Second Oldest Son is a Principal)	$   332,981(g)	$    78,577(g)	$    411,558(g)

(1)(a)(b)

The net additions to the open-ended, secured, on-demand promissory notes issued to the late President of the Company, as an individual, and not as a Director or Officer of the Company, and his RIRA are from net cash advances and/or accrued interest.  

The late President’s RIRA on March 28, 2007 purchased 750,000 of the Company’s restricted common shares, par value $.10, at a price of $.10 each, for a total of $75,000.  Payment for this purchase was made by reducing the amount of Company debt due to the RIRA.

(1)(c)

The late President owns 55% of an Affiliated Company’s common shares.  The additions to the open-ended, secured, on-demand promissory note issued to an Affiliated Company result from cash advances, accrued interest, accrued office rent, vehicle rental and other expenses incurred on behalf of the Company.

(1)(d)

The additions resulted from accrued interest earned during the fiscal year.

(1)(e)

The late President’s salary of $96,250 was accrued through October 31, 2007.  In addition, the Directors, pursuant to a resolution, compensated the late President in the sum of  $8,020.83 for vacation pay.

(1)(f)

Twelve months of consulting fees at $3,000 per month for a total of $36,000.

(1)(g)

The addition of the amounts due to the Law Firm results for legal services rendered during this period.  An adjustment was made due to an increase in the Law Firm’s hourly rate to $225 x 2,019.75 hours through February 29, 2008.  The Company did not yet receive an invoice for March 2008.