Notes to Financial Statements
January 31, 2019 and July 31, 2018
NOTE 1 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with GAAP for interim
financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three and six months ended January 31, 2019 are not necessarily indicative of the results that may be expected for the year ending July 31, 2019. Notes to the unaudited interim
financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2018 have been omitted. These interim financial statements are condensed and should be read in conjunction
with the audited financial statements and the footnotes thereto for the fiscal year ended July 31, 2018 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on October 29, 2018.
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 March 1, 2018, 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. In July 2017, an additional 481,000 shares were issued to shareholders of Jericho under the same contingencies as the original shares.
On February 25, 2018, Jericho identified the
acquisition of 50% interests in two LLCs (the “LLCs”). The LLCs have a Term Sheet agreement to develop a casino and hotel resort, and provide certain gaming equipment on a shared profit basis. The project is in the process of regulatory
review, finalization of closing documents, and completion of financing. Notwithstanding the identification of the business opportunity, the shares issued to Jericho remain contingent
upon the regulatory review, the finalization of closing documentation, and the completion of financing arrangements for the project. 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 to March 1, 2018. Also, upon the regulatory review, the finalization of closing
documentation, and the completion of financing arrangements for the project, the Company’s President will cancel all shares of common stock held (879,167 shares as of January 31, 2019), the Company’s Chief Executive Officer will cancel all
but 550,000 shares of common stock held (2,951,667 shares as of January 31, 2019), 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 January 31, 2019). On August 13, 2018, the Chief Executive Officer and Jericho agreed that the
Chief Executive Officer
would retain an additional 27,000 shares of common stock in consideration of the elimination of the non-dilution right.
On August 19, 2018, Jericho announced that it had entered into an agreement to acquire all of the issued and
outstanding shares of VegasWinners, Inc. a newly formed Nevada corporation (the “Jericho/VegasWinners Transaction”). Vegas Winners, Inc. was incorporated in the State of Nevada to engage in the business of providing sports gaming information,
analysis, advice and predictions. The acquisition by Jericho is contingent on several factors, including the making of a loan of $300,000 to VegasWinners, Inc., obtaining a minimum of $1,100,000 in funding by Jericho to provide to
VegasWinners, Inc. and certain VegasWinners, Inc. performance criteria. On October 18, 2018, Jericho advanced $232,500 of the $300,000 interim loan to VegasWinners, Inc.
All of the issued and outstanding shares of VegasWinners, Inc. will be acquired from, Wayne Allyn Root (“Root”), of
Las Vegas, Nevada, the sole shareholder of VegasWinners, Inc., in exchange for 5 shares of Jericho. Upon the closing of the Jericho/VegasWinners Transaction, the Company will issue to Root, 300,000 shares of the Company’s common stock in
exchange for Root’s 5 common shares of Jericho.
Root is the Chief Executive Officer and President of Vegas Winners, Inc. and has entered into a three year
employment agreement with VegasWinners, Inc.
In connection with acquisition of VegasWinners, Inc., Jericho has entered into a three year Employment Agreement
with Root, which provides that upon the closing of the Jericho VegasWinners Transaction, and the closing of the Registrants acquisition of Jericho, Root will become the Vice President of Marketing, Media, Entertainment and Communications for
Jericho.
Due to the Jericho acquisition, the Company will operate three business segments, which will be operated
simultaneously and consist of the following:
1)
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The concrete leveling division of the business will fabricate and market a concrete leveling service unit
utilized in the concrete leveling industry. This unit secures to the back of a truck and consists of a mixing device to mix lime with water and a pumping device capable of pumping the mixture under pressure into pre-drilled holes in
order to raise the level of any flat concrete surface.
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2)
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The gaming and hospitality division of the business will focus on casino gaming, hospitality,
entertainment and leisure time industries, and will pursue opportunities in the tribal and commercial casino gaming industries, both in California and Nevada. The Company will also operate in the casino gaming technology industry,
and is seeking opportunities to partner, joint venture, or acquire companies developing casino games that combine traditional casino games with the challenge of video games and the playability of social games, meaning games that pit
the player’s skill against the skill of another player as opposed to the casino itself.
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3)
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The business of providing sports gaming information, analysis, advice and predictions to the gaming
industry and the general public, will be operated by VegasWinners, Inc.
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Under Accounting Standards Codification (“ASC”) 718-10-25-20,
Compensation – Stock Compensation
, 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
In May 2014, the FASB issued Accounting
Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers
, which replaces most existing revenue recognition guidance in the U.S. GAAP and is intended to improve and converge with international standards the financial reporting requirement for revenue from contracts with
customers. ASU 2014-09 and its amendments were included primarily in ASC 606. The core principle of ASC 606 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled
to receive for those goods or services. ASC 606 also requires additional disclosures about the nature, amount, timing and uncertainly of revenue and cash flows arising from customer contracts, including significant judgments and changes in
judgments. The Company adopted ASC 606 effective August 1, 2018, using the modified retrospective method. There was no impact to the opening balance of reinvested earnings as of August 1, 2018.
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 January 31, 2019 and July 31, 2018.
Advertising and
Marketing
Advertising and marketing costs are charged to operations when incurred. Advertising costs were $463 and $1,769 for
the six months ended January 31, 2019 and 2018.
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 (estimated selling price less costs of completion, disposal and transportation).
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.
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.
Going Concern
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 January 31, 2019, current liabilities exceed current assets by $291,784, and total liabilities exceed total assets by $291,784.
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 PRONOUNCEMENTS
There are no new accounting pronouncements expected to have a material impact on the Company.
NOTE 4 - INCOME
TAXES
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carry forwards, is required to the extent
that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
In the event the future tax consequences of differences between the financial reporting bases and the tax bases of
the Company’s assets and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the
deferred tax asset when it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax
liabilities, projected future taxable income, and tax planning strategies.
As of January 31, 2019, the Company had net operating loss carry forwards of approximately $580,762 that may be
available to reduce future years’ taxable income in varying amounts through 2039.
The Company’s income tax returns are subject to examination by tax authorities. Generally, the statute of
limitations related to the Company’s federal and state income tax return is three years from the date of filing. The state impact of any federal changes of prior years remains subject to examination for a period up to five years after formal
notification to the states.
Management has evaluated tax positions in accordance with FASB ASC 740,
Income Taxes
, and has not identified any significant tax positions, other than those disclosed.
Income taxes on continuing operations include the following:
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January 31, 2019
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July 31, 2018
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Currently payable
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$
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0
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$
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0
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Deferred
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0
|
|
|
|
0
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|
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Total
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$
|
0
|
|
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$
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0
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A reconciliation of the effective tax rate with the statutory U.S. income tax rate is as follows:
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January 31, 2019
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July 31, 2018
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% of
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% of
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Pretax
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Pretax
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Income
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Amount
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Income
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|
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Amount
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|
|
|
|
|
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Income taxes per statement of operations
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$
|
0
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0
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%
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$
|
0
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|
|
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0
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%
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Loss for financial reporting purposes without tax expense or benefit
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(5,300
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)
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(21
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)
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(7,700
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)
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(21
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)
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|
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Income taxes at statutory rate
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$
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(5,300
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)
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|
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(21
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)%
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$
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(7,700
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)
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|
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(21
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)%
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The components of and changes in the net deferred taxes were as follows:
Deferred tax assets:
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January 31, 2019
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July 31, 2018
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|
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Net operating loss carryforwards
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$
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121,900
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|
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$
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116,600
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Compensation and miscellaneous
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3,200
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3,200
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Deferred tax assets
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125,100
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119,800
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Valuation Allowance
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(125,100
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)
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(119,800
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)
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Net deferred tax assets
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$
|
0
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$
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0
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Tax periods ended July 31, 2014 through 2018 are subject to examination by major taxing authorities.
NOTE 5 -
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. Commissions are earned when the sale of a leveling unit is completed. Commission expense totaled $-0- for the six months
ended January 31, 2019 and 2018. The amount payable to the related party was $0 at January 31, 2019 and July 31, 2018.
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 January 31, 2019 and July 31, 2018. Effective July 31, 2013, further interest accrual was
waived by the noteholders.
One of the Company’s stockholders and a company owned by the stockholder advanced a total of $120,466 to the
Company at various times between November 2012 and January 2019. The balances on the advances are $120,466 and $119,166 at January 31, 2019 and July 31, 2018, respectively. The advances carry no interest.
Another stockholder of the Company paid invoices of the Company totaling $91,121 at various times during the six
months ended January 31, 2019 and the year ended July 31, 2018. The balances on these advances are $91,121 and $67,866 at January 31, 2019 and July 31, 2018, respectively. The advances carry no interest.
NOTE 6 -
SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through March 10, 2019, the date the financial statements were
available to be issued. There are no subsequent events to report.