REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of Concrete Leveling Systems, Inc.
Canton, Ohio
We have audited the accompanying balance sheets of Concrete Leveling Systems,
Inc. as of July 31, 2016 and 2015, and the related statements of income,
stockholders' equity (deficit), and cash flows for each of the years in the
two-year period ended July 31, 2016. Concrete Leveling Systems, Inc.'s
management is responsible for these financial statements. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Concrete Leveling Systems, Inc.
as of July 31, 2016 and 2015, and the results of its operations and its cash
flows for each of the years in the two-year period ended July 31, 2016, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming Concrete
Leveling Systems, Inc. will continue as a going concern. As discussed in Note 1
to the financial statements, the nature of the industry in which the Company
operates raises substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding this matter are described in Note 1.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Hobe & Lucas
------------------------------------------
Hobe & Lucas
Certified Public Accountants, Inc.
Independence, Ohio
October 20, 2016
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Non-Cash Investing Activities: During the year ended July 31, 2016, a leveling
unit was repossessed and returned to inventory in satisfaction of a note
receivable of $6,415 and interest receivable of $342. Also during the year ended
July 31, 2016, a note receivable was refinanced and interest receivable of
$2,818 was capitalized.
Notes to Financial Statements
July 31, 2016 and 2015
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Concrete Leveling Systems,
Inc. (hereinafter the "Company"), is presented to assist in understanding the
financial statements. The financial statements and notes are representations of
the Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to accounting principles
generally accepted in the United States of America and have been consistently
applied in the preparation of the financial statements.
NATURE OF OPERATIONS
The Company manufactures for sale specialized equipment for use in the concrete
leveling industry. The Company's product is sold primarily to end users.
REVENUE RECOGNITION
The Company recognizes revenue when product is shipped or picked up by the
customer.
ACCOUNTS RECEIVABLE
The Company grants credit to its customers in the ordinary course of business.
The Company provides for an allowance for uncollectable receivables based on
prior experience. The allowance was $0 and $4,046 at July 31, 2016 and 2015,
respectively.
ADVERTISING AND MARKETING
Advertising and marketing costs are charged to operations when incurred.
Advertising costs were $-0- for the years ended July 31, 2016, and 2015.
INVENTORIES
Inventories, which consist of parts and work in progress, are recorded at the
lower of first-in first-out cost or fair market value.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
GOING CONCERN
The Company was formed on August 28, 2007 and was in the development stage
through July 31, 2009. The year ended July 31, 2010 was the first year during
which it was considered an operating company. The Company has sustained
substantial operating losses since its inception. In addition, the Company has
used substantial amounts of working capital in its operations. Further, at July
31, 2016, current liabilities exceed current assets by $227,723, and total
liabilities exceed total assets by $225,028.
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Concrete Leveling Systems, Inc.
Notes to Financial Statements
July 31, 2016 and 2015
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOING CONCERN (CONTINUED)
The Company is of the opinion that funds being received from installment sales
of its service units will provide a certain level of cash flow. Success will be
dependent upon management's ability to obtain future financing and liquidity,
and success of its future operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern. These financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE 2 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable and liabilities approximates
the fair value reported on the balance sheet.
NOTE 3 - NEW ACCOUNTING PROCEDURES
There are no new accounting procedures that impact the Company.
NOTE 4 - PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Depreciation is provided
for by using the straight-line and accelerated methods over the estimated useful
lives of the respective assets.
Maintenance and repairs are charged to expense as incurred. Major additions and
betterments are capitalized. When items of property and equipment are sold or
retired, the related cost and accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in the determination of net
income.
NOTE 5 - NOTES RECEIVABLE
Interest rates on notes receivable range from 6.00% to 8.00% and are due at
varying dates through April 2026.
Management has established an estimated allowance for loan losses and
uncollectable interest income based on its experience with specific debtors,
including payment history, condition and location of collateral, and estimated
cost of resale. The allowances totaled $24,493 and $42,972 at July 31, 2016 and
2015 respectively.
NOTE 6 - OPERATING SEGMENT
The Company operates in one reportable segment, concrete leveling systems sales.
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Concrete Leveling Systems, Inc.
Notes to Financial Statements
July 31, 2016 and 2015
NOTE 7 - INCOME TAXES
Income taxes on continuing operations at July 31 include the following:
2016 2015
-------- --------
Currently payable $ 0 $ 0
Deferred 0 0
-------- --------
Total $ 0 $ 0
======== ========
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A reconciliation of the effective tax rate with the statutory U.S. income tax
rate at July 31 is as follows:
2016 2015
------------------- ------------------
% of % of
Pretax Pretax
Income Amount Income Amount
------ ------ ------ ------
Income taxes per statement of operations $ 0 0% $ 0 0%
Loss for financial reporting purposes without tax
expense or benefit (9,400) (34) (15,700) (34)
-------- ------- -------- -------
Income taxes at statutory rate $ (9,400) (34)% $(15,700) (34)%
======== ======= ======== =======
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The components of and changes in the net deferred taxes were as follows:
2016 2015
---------- ----------
Deferred tax assets:
Net operating loss carryforwards $ 167,700 $ 145,700
Allowances for uncollectable accounts 8,600 15,900
Compensation and miscellaneous 5,300 17,100
---------- ----------
Deferred tax assets 181,600 178,700
---------- ----------
Valuation Allowance (181,600) (178,700)
---------- ----------
Net deferred tax assets: $ 0 $ 0
========== ==========
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Concrete Leveling Systems, Inc.
Notes to Financial Statements
July 31, 2016 and 2015
NOTE 7 - INCOME TAXES (CONTINUED)
Deferred taxes are provided for temporary differences in deducting expenses for
financial statement and tax purposes. The principal source for deferred tax
assets are net operating loss carryforwards and accrued compensation. No
deferred taxes are reflected in the balance sheet at July 31, 2016 or 2015 due
to a valuation allowance, which increased by $2,900 and $15,600 in 2016 and
2015, respectively.
The Company has incurred losses that can be carried forward to offset future
earnings if conditions of the Internal Revenue Code are met. These losses are as
follows:
Expiration
Year of Loss Amount Date
------------ -------- ---------
Period Ended July 31, 2008 $ 62,107 2029
Period Ended July 31, 2009 $ 68,766 2030
Period Ended July 31, 2010 $ 25,311 2031
Period Ended July 31, 2011 $ 96,481 2032
Period Ended July 31, 2012 $113,260 2033
Period Ended July 31, 2014 $ 29,399 2035
Period Ended July 31, 2015 $ 33,483 2036
Period Ended July 31, 2016 $ 50,290 2037
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Tax periods ended July 31, 2012 through 2016 are subject to examination by major
taxing authorities.
There are no interest or tax penalty expenses reflected in the Balance Sheets or
Statements of Operations.
NOTE 8 - RELATED PARTIES
The Company uses warehouse and office space belonging to one of its
stockholders. The stockholder does not charge the Company rent or other fees for
the use of these facilities.
On July 31, 2009 the Company entered into a distribution agreement with another
company owned by one of the Company's stockholders. The agreement gives the
related party exclusive distribution rights for the Company's products.
Commission expense totaled $-0- for the years ended July 31, 2016 and 2015. The
amount payable to the related party was $35,486 and $35,654 at July 31, 2016 and
2015.
Four stockholders of the Company loaned a total of $62,750 to the Company at
various times during the years ended July 31, 2010 through 2012. The loans carry
interest rates from 8.00% to 12.00% and are due on demand. The balances on the
loans are $62,750 at both July 31, 2016 and 2015. Effective July 31, 2013,
further interest accrual was waived by the noteholders.
Two stockholders of the Company advanced a total of $89,400 to the Company at
various times between November 2012 and July 2016. The balances on the advances
are $89,400 and $74,300 at July 31, 2016 and 2015, respectively. The advances
carry no interest.
NOTE 9 - SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through October 20, 2016, the
date the financial statements were available to be issued. There are no events
to report.
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