NOTES TO FINANCIAL STATEMENTS
JULY 31, 2017 AND 2016
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.
On March 24, 2017, the Company entered into an agreement with Jericho Associates, Inc. (“Jericho”), a start-up company which plans to operate in the gaming, hospitality and entertainment industries. The Company issued Jericho 7,151,416 shares of the Company’s common stock, subject to a performance requirement, which provides that by September 24, 2017, if the management of Jericho does not identify at least one entity or business opportunity for acquisition, in order to supplement the Company’s current business operations, the shares issued as part of the agreement shall be returned to the Company. As of July 31, 2017, no acquisition has been identified in accordance with the agreement and the shares issued to Jericho are still contingent on the terms of the agreement.In July 2017, an additional 481,000 shares were issued to shareholders of Jericho under the same contingencies as the original shares. On September 22, 2017, the Company and Jericho mutually agreed to extend the performance requirement until December 24, 2017. On November 9, 2017, the Company and Jericho mutually agreed to extend the performance requirement until March 1, 2018.
Upon the successful completion of an acquisition of an entity or business opportunity, the Company’s Presidentwill cancel all shares of common stock held (879,167 shares as of July 31, 2017), the Company’s Chief Executive Officer will cancel all but 424,000 shares of common stock held (2,951,667 shares as of July 31, 2017), subject to an 18-month non-dilution right in order to maintain an ownership percentage of 4.99%, and the Company’s secretary will cancel all but 45,000 shares of common stock held (185,000 shares as of July 31, 2017).
Under ASC 718-10-25-20, there is no accounting related to the potential acquisition other than the issuance of the contingent shares at par value because the performance measure is the acquisition of a company. The achievement of this measure is not probable until the business is acquired.
Revenue Recognition
The Company recognizes revenue when product is shipped or picked up by the customer.
Earnings Per Share
Contingent shares are excluded from basicweighted average shares (ASC 260-10-45-13) and a two-class presentation of EPS is not applicable when a company is reporting a loss (ASC 260-10-45-67); therefore, the contingent shares are included in dilutive weighted average shares. Because the Company is reporting a loss, the Company will only report basic EPS and the contingent shares, along with the cancellation of shares by management, will be excluded from the computation.
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 at July 31, 2017 and 2016.
Advertising and Marketing
Advertising and marketing costs are charged to operations when incurred. Advertising costs were $-0- for the years ended July 31, 2017, and 2016.
Inventories
Inventories, which consist of parts and work in progress, are recorded at the lower of first-in first-out cost or net realizable value.
CONCRETE LEVELING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2017 AND 2016
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 2017, current liabilities exceed current assets by $267,550, and total liabilities exceed total assets by $264,906.
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 are 6.00% and are due in 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 $23,802 and $24,493 at July 31, 2017 and 2016 respectively.
NOTE 6 - OPERATING SEGMENT
The Company operates in one reportable segment, concrete leveling systems sales.
CONCRETE LEVELING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2017 AND 2016
NOTE 7 - INCOME TAXES
Income taxes on continuing operations at July 31 include the following:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Currently payable
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
A reconciliation of the effective tax rate with the statutory U.S. income tax rate at July 31 is as follows:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Pretax
|
|
|
|
|
|
Pretax
|
|
|
|
Income
|
|
|
Amount
|
|
|
Income
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes per statement of operations
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Loss for financial reporting purposes without tax expense or benefit
|
|
|
(13,400
|
)
|
|
|
(34
|
)
|
|
|
(9,400
|
)
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes at statutory rate
|
|
$
|
(13,400
|
)
|
|
|
(34
|
)%
|
|
$
|
(9,400
|
)
|
|
|
(34
|
)%
|
The components of and changes in the net deferred taxes were as follows:
Deferred tax assets:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
181,400
|
|
|
$
|
167,700
|
|
Allowances for uncollectable accounts
|
|
|
8,800
|
|
|
|
8,600
|
|
Compensation and miscellaneous
|
|
|
5,300
|
|
|
|
5,300
|
|
Deferred tax assets
|
|
|
195,500
|
|
|
|
181,600
|
|
Valuation Allowance
|
|
|
(195,500
|
)
|
|
|
(181,600
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets:
|
|
$
|
-
|
|
|
$
|
-
|
|
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, 2017 or 2016 due to a valuation allowance, which increased by $13,900 and $2,900 in 2017 and 2016, respectively.
CONCRETE LEVELING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2017 AND 2016
NOTE 7 – INCOME TAXES (CONTINUED)
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:
Year of Loss
|
|
Amount
|
|
Expiration Date
|
|
|
|
|
|
Period Ended July 31, 2008
|
|
$
|
62,107
|
|
2/28/2029
|
Period Ended July 31, 2009
|
|
$
|
68,766
|
|
2/28/2030
|
Period Ended July 31, 2010
|
|
$
|
25,311
|
|
2/28/2031
|
Period Ended July 31, 2011
|
|
$
|
96,481
|
|
2/28/2032
|
Period Ended July 31, 2012
|
|
$
|
113,260
|
|
2/28/2033
|
Period Ended July 31, 2014
|
|
$
|
29,399
|
|
2/28/2035
|
Period Ended July 31, 2015
|
|
$
|
33,483
|
|
2/28/2036
|
Period Ended July 31, 2016
|
|
$
|
50,290
|
|
2/28/2037
|
Period Ended July 31, 2017
|
|
$
|
39,301
|
|
2/28/2038
|
Tax periods ended July 31, 2013 through 2017 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, 2017 and 2016. The amount payable to the related party was $35,486 at July 31, 2017 and 2016.
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, 2017 and 2016. Effective July 31, 2013, further interest accrual was waived by the noteholders.
Two stockholders of the Company advanced a total of $117,000 to the Company at various times between November 2012 and July 2017. The balances on the advances are $117,000 and $89,400 at July 31, 2017 and 2016, respectively. The advances carry no interest.
NOTE 9 - SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through November 8, 2017, the date the financial statements were available to be issued. There are no events to report.