Quarterly Report (10-q)

Date : 12/14/2018 @ 5:47PM
Source : Edgar (US Regulatory)
Stock : Concrete Leveling Systems Inc. (PC) (CLEV)
Quote : 4.0  0.0 (0.00%) @ 10:00PM

Quarterly Report (10-q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT   OF 1934

For the quarterly period ended October 31, 2018

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from  ______________ to ______________

Commission file number 000-53048

 
Concrete Leveling Systems, Inc.
(Exact name of small business issuer as specified in its charter)

Nevada
26-0851977
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)

5046 E. Boulevard, NW, Canton, OH  44718
(Address of principal executive officer)

(330) 966-8120
(Issuer's telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 232.405 of this chapter) during the preceding 12 month (or for such shorter period that the registrant was required to submit and post such files).  YES  [X] NO [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer [  ]
Accelerated filer [  ]
Non-accelerated filer [  ]
Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES  [  ] NO [X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  YES  [  ] NO [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  14,027,834 shares of common stock outstanding as of December 10, 2018
 


 
CONCRETE LEVELING SYSTEMS, INC.

Index

 
Page
Part I – FINANCIAL INFORMATION
 
   
Item 1.
Financial Statements
3
     
 
Balance Sheets as of October 31, 2018 (unaudited) and July 31, 2018 (Audited)
3
     
 
Statements of Operations for the three months ended October 31, 2018 and October 31, 2017 (unaudited)
4
     
 
Statements of Cash Flows for the three months ended October 31, 2018 and 2017 (unaudited)
5
     
 
Notes to Financial Statements (unaudited)
6
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
11
     
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
14
     
Item 4.
Controls and Procedures
14
     
Part II - OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
17
     
Item 1A.
Risk Factors 
17
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
17
     
Item 3.
Defaults Upon Senior Securities
17
     
Item 4.
Mine Safety Disclosures
17
     
Item 5.
Other Information
17
     
Item 6.
Exhibits
17
     
SIGNATURES
18

 
2

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Concrete Leveling Systems, Inc.
Balance Sheets
October 31 and July 31, 2018

 
   
October 31, 2018
   
July 31, 2018
 
   
(Unaudited)
   
(Audited)
 
Assets
           
             
Current Assets
           
Cash in bank
 
$
371
   
$
343
 
Inventory
   
23,521
     
23,611
 
Total Current Assets
   
23,892
     
23,954
 
                 
Property, Plant and Equipment
               
Equipment
   
700
     
700
 
Less: Accumulated depreciation
   
(700
)
   
(700
)
Total Property, Plant and Equipment
   
-
     
-
 
                 
Total Assets
 
$
23,892
   
$
23,954
 
                 
                 
Liabilities and Stockholders’ Equity (Deficit)
               
                 
Current Liabilities
               
Accounts payable
  $
16,836
    $
16,836
 
Advances - stockholders
   
205,203
     
187,032
 
Notes payable - stockholders
   
62,750
     
62,750
 
Accrued interest - stockholders
   
15,139
     
15,139
 
Other accrued expenses
   
8,450
     
8,458
 
Total Current Liabilities
   
308,378
     
290,215
 
                 
Commitments and Contingencies
               
                 
Stockholders’ Equity (Deficit)
               
Common stock (par value $0.001) 100,000,000 shares authorized:
               
14,027,834 shares issued and outstanding at October 31, 2018 and July 31, 2018
   
14,027
     
14,027
 
Additional paid-in capital
   
433,209
     
433,209
 
Retained (deficit)
   
(731,722
)
   
(713,497
)
Total Stockholders’ (Deficit)
   
(284,486
)
   
(266,261
)
                 
Total Liabilities and Stockholders’ (Deficit)
 
$
23,892
   
$
23,954
 
 
 
 
 
See accompanying notes to unaudited financial statements.

3

Concrete Leveling Systems, Inc.
Statements of Operations
For the Three Months Ended October 31, 2018 and 2017

 
     
3 Months Ended
   
3 Months Ended
 
     
October 31, 2018
   
October 31, 2017
 
     
(Unaudited)
   
(Unaudited)
 
             
Parts sales
 
$
325
   
$
265
 
                 
Cost of Sales
   
111
     
90
 
                 
Gross Margin
   
214
     
175
 
                 
Expenses
               
Selling, general and administrative
   
18,177
     
24,311
 
                 
(Loss) from Operations
   
(17,963
)
   
(24,136
)
                 
Other Income (Expense)
               
Interest income
   
-
     
366
 
Interest expense
   
(262
)
   
(257
)
Total Other Income (Expense)
   
(262
)
   
109
 
                 
Net (Loss) Before Income Taxes
   
(18,225
)
   
(24,027
)
                 
Provision for Income Taxes
   
-
     
-
 
                 
Net (Loss)
 
$
(18,225
)
 
$
(24,027
)
                 
                 
Net (Loss) per Share - Basic and Fully Diluted
 
$
(0.00
)
 
$
(0.00
)
                 
Weighted average number of common shares outstanding - basic and fully diluted
   
6,395,418
     
6,395,418
 

 
 
 
See accompanying notes to unaudited financial statements.
4

Concrete Leveling Systems, Inc.
Statements of Cash Flows
For the Three Months Ended October 31, 2018 and 2017

 
   
3 Months Ended
   
3 Months Ended
 
     
October 31, 2018
   
October 31, 2017
 
     
(Unaudited)
   
(Unaudited)
 
Cash Flows from Operating Activities
           
Net (loss)
 
$
(18,225
)
 
$
(24,027
)
Adjustments to reconcile net (loss) to net cash used in operating activities:
               
Increase in allowances for interest collectability
   
-
     
329
 
(Increase) in accounts receivable
   
-
     
(172
)
(Increase) in interest receivable
   
-
     
(365
)
Decrease in inventory
   
90
     
90
 
Decrease in prepaid expenses
   
-
     
200
 
Increase in accounts payable
   
-
     
22,332
 
(Decrease) Increase in other accrued expenses
   
(8
)
   
697
 
Net cash (used in) operating activities
   
(18,143
)
   
(916
)
                 
Cash Flows from Financing Activities
               
Advances from stockholders
   
18,171
     
1,000
 
                 
Net increase in cash
   
28
     
84
 
Cash and equivalents - beginning
   
343
     
(20
)
                 
Cash and equivalents - ending
 
$
371
   
$
64
 
                 
Supplemental Disclosure of Cash Flows Information
               
Interest
  $      
$
257
 
Income Taxes
 
$
-
   
$
-
 

 

 
See accompanying notes to unaudited financial statements.

5

Concrete Leveling Systems, Inc.
Notes to Financial Statements (Unaudited)
October 31, 2018 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 months ended October 31, 2018 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 October 31, 2018), the Company’s Chief Executive Officer will cancel all but 550,000 shares of common stock held (2,951,667 shares as of October 31, 2018), 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 October 31, 2018). Prior to the August 13, 2018 amendment to the agreement with Jericho, the Chief Executive Officer would cancel all but 523,000 shares of her common stock, subject to an 18-month non-dilution right in order to maintain an ownership percentage of 4.99%. The amendment provided that the Chief Executive Officer would retain an additional 27,000 shares of common stock and the non-dilution right was eliminated.

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.
 
6

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:

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.

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.

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.

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 Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) . This ASU is a comprehensive new revenue recognition model that requires a company to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company adopted the ASU on August 1, 2018, using the modified retrospective approach. The impact of adopting the ASU was not material to the financial statements.

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 October 31 and July 31, 2018.

Advertising and Marketing

Advertising and marketing costs are charged to operations when incurred. Advertising costs were $-0- and $1,769 for the three months ended October 31, 2018 and 2017.

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.
 
7

 
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 October 31, 2018, current liabilities exceed current assets by $284,486, and total liabilities exceed total assets by $284,486.

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

In May 2014, ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) was issued. The amendments in ASU 2014-09 affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in ASC 605, Revenue Recognition , and most industry-specific guidance.
 
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:
 
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
 
ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017 including interim periods within that reporting period. 

The Company has adopted this new standard using the modified retrospective approach effective for the year ending July 31, 2019, including interim periods within that reporting period, and shall disclose qualitative and quantitative information on all of the following in regard to our contract with a customer.
 
 
a.
Revenue recognized from contracts with customers.
 
b.
Any impairment losses recognized on any receivables or contract assets arising from the firm’s contracts with customers.
 
c.
The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers.
 
d.
Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period.
 
e.
Revenue recognized in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods.
 
f.
Significant changes in the contract asset or liability balances during the reporting period.
 
g.
Performance obligation in contracts with customers

The effect on the current accounting policies was immaterial as the previous accounting for revenue from our customer contracts did not materially differ from the new standard.

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.
 

8

 
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 October 31, 2018, the Company had net operating loss carry forwards of approximately $573,464 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:
 
   
October 31, 2018
   
July 31, 2018
 
             
Currently payable
 
$
0
   
$
0
 
Deferred
   
0
     
0
 
                 
Total
 
$
0
   
$
0
 

A reconciliation of the effective tax rate with the statutory U.S. income tax rate is as follows:

   
October 31, 2018
   
July 31, 2018
 
         
% 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
   
(3,800
)
   
(21
)
   
(7,700
)
   
(21
)
                                 
Income taxes at statutory rate
 
$
(3,800
)
   
(21
)%
 
$
(7,700
)
   
(21
)%

The components of and changes in the net deferred taxes were as follows:

Deferred tax assets:

   
October 31, 2018
   
July 31, 2018
 
             
Net operating loss carryforwards
 
$
120,400
   
$
116,600
 
Allowances for uncollectable accounts
   
0
     
0
 
Compensation and miscellaneous
   
3,200
     
3,200
 
Deferred tax assets
   
123,600
     
119,800
 
Valuation Allowance
   
(123,600
)
   
(119,800
)
                 
Net deferred tax assets
 
$
0
   
$
0
 

Tax periods ended July 31, 2014 through 2018 are subject to examination by major taxing authorities.
 

9

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 three months ended October 31, 2018 and 2017. The amount payable to the related party was $0 at October 31 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 October 31 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 $120,166 to the Company at various times between November 2012 and October 2018. The balances on the advances are $120,166 and $119,166 at October 31 and July 31, 2018, respectively. The advances carry no interest.

Another stockholder of the Company paid invoices of the Company totaling $85,037 at various times during the three months ended October 31, 2018 and the year ended July 31, 2018. This amount is still owed to the stockholder at October 31, 2018.

NOTE 6 - SUBSEQUENT EVENTS

The Company has evaluated all subsequent events through December 14, 2018, the date the financial statements were available to be issued. There are no subsequent events to report.
 

10

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Concerning Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “should”, “likely” or similar expressions, indicates a forward-looking statement.

The identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:

·
Trends affecting the Company’s financial condition, results of operations, or future prospects;
·
The Company’s business and growth strategies;
·
The Company’s financing plans and forecasts;
·
The factors that we expect to contribute to our success and the Company’s ability to be successful in the future;
·
The Company’s business model and strategy for realizing positive results as sales increase;
·
Competition, including the Company’s ability to respond to such competition and its expectations regarding continued competition in the market in which the Company competes;
·
Expenses;
·
The Company’s ability to meet its projected operating expenditures and the costs associated with development of new projects;
·
The Company’s ability to pay dividends or to pay any specific rate of dividends, if declared;
·
The impact of new accounting pronouncements on its financial statements;
·
That the Company’s cash flows from operating activities will be sufficient to meet its projected operating expenditures for the next twelve months;
·
The Company’s market risk exposure and efforts to minimize risk;
·
Development opportunities and its ability to successfully take advantage of such opportunities;
·
Regulations, including anticipated taxes, tax credits or tax refunds expected;
·
The outcome of various tax audits and assessments, including appeals thereof, timing of resolution of such audits, the Company’s estimates as to the amount of taxes that will ultimately be owed and the impact of these audits on the Company’s financial statements;
·
The Company’s overall outlook including all statements under Management’s Discussion and Analysis or Plan of Operation;
·
That estimates and assumptions made in the preparation of financial statements in conformity with US GAAP may differ from actual results; and
·
Expectations, plans, beliefs, hopes or intentions regarding the future.

The following discussion and analysis was prepared to supplement information contained in the accompanying financial statements and is intended to provide certain details regarding the Company’s financial condition as of October 31, 2018, and the results of operations for the three months ended October 31, 2018.  It should be read in conjunction with the unaudited financial statements and notes thereto contained in this report as well as the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal years ended July 31, 2018 and 2017.
 
11

Overview

 


 
Concrete Leveling Systems, Inc. (“we”, “us”, “our” or the “Company”) was incorporated on August 28, 2007 in the State of Nevada. The Company's principal offices are located at 5046 East Boulevard Northwest, Canton, Ohio 44718. In Ohio, the Company does business under the trade name of CLS Fabricating, Inc. CLS has never declared bankruptcy, it has never been in receivership, and it has never been involved in any legal action or proceedings.
 
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 October 31, 2018), the Company’s Chief Executive Officer will cancel all but 550,000 shares of common stock held (2,951,667 shares as of October 31, 2018), 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 October 31, 2018). Prior to the August 13, 2018 amendment to the agreement with Jericho, the Chief Executive Officer would cancel all but 523,000 shares of her common stock, subject to an 18-month non-dilution right in order to maintain an ownership percentage of 4.99%. The amendment provided that the Chief Executive Officer would retain an additional 27,000 shares of common stock and the non-dilution right was eliminated.

 
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:
 
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.
 
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.
 
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.
 

For the Three Months Ended October 31, 2018 Compared to the Three Months Ended October 31, 2017

The Company generated $325 in revenue for the three-month period ended October 31, 2018, which compares to revenue of $265 for the three-month period ended October 31, 2017.  Our revenues increased during the three-month period ended October 31, 2018 due to increased sales of our concrete leveling equipment and parts.
 
12

 
Cost of sales for the three-month period ended October 31, 2018 was $111, which compares to cost of sales of $90 for the three-month period ended October 31, 2017.  Our revenues increased during the three months ended October 31, 2018, which resulted in a similar increase in our cost of sales during the period.
 
Operating expenses, which consisted of selling, general and administrative expenses for the three-month period ended October 31, 2018, were $18,177. This compares with operating expenses for the three-month period ended October 31, 2017 of $24,311.   Our operating expenses decreased during the three-month period ended October 31, 2018 due to a decrease in our professional fees.

As a result of the foregoing, we had a net loss of $18,225 for the three-month period ended October 31, 2018. This compares with a net loss of $24,027 for the three-month period ended October 31, 2017.

In its audited financial statements as of July 31, 2018, the Company was issued an opinion by its auditors that raised substantial doubt about the ability to continue as a going concern based on the Company's current financial position. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully develop and market our products and our ability to generate revenues.

Liquidity and Capital Resources

As of October 31, 2018, we had cash or cash equivalents of $371. As of July 31, 2018, we had cash or cash equivalents of $343.

We believe that with our existing cash flows, we do not have sufficient cash to meet our operating requirements for the next twelve months.  We believe that with the addition of our gaming and hospitality business, we will begin to generate increased revenue over the 2019 fiscal year.  However, if our revenue is not sufficient to allow us to meet our cash requirements during the next twelve months, the Company may need to raise additional funds through the sale of debt or equity securities.  We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. Failure to generate sufficient revenues or additional financing when needed could cause us to go out of business.

Net cash used in operating activities for the three months ended October 31, 2018 was $18,143. This compares to net cash used in operating activities of $916 for the three months ended October 31, 2017. This change is primarily due to a decrease in our accounts payable.

Cash flows provided by financing activities was $18,171 for the three-month period ended October 31, 2018 which compares to cash flows provided by financing activities of $1,000 for the three-month period ended October 31, 2017.  The change in cash flows provided by financing activities is due to an increase in advances from stockholders during the three-month period ended October 31, 2018.  We anticipate significant increases in cash flows provided by financing activities during the next 12 months, as we intend to raise capital through either debt or equity securities to fund our business.

As of October 31, 2018, our total assets were $23,892 and our total liabilities were $308,378.  As of July 31, 2018, our total assets were $23,954 and our total liabilities were $290,215.

Critical Accounting Policies and Estimates

We believe that the following critical policies affect our more significant judgments and estimates used in preparation of our financial statements.
 
We disclose those accounting policies that we consider to be significant in determining the amounts to be utilized for communicating our consolidated financial position, results of operations and cash flows in the first note to our financial statements included elsewhere herein. Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with these principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results are likely to differ from these estimates, but management does not believe such differences will materially affect our financial position or results of operations.
 
13

Fair value estimates used in preparation of the financial statements are based upon certain market assumptions and pertinent information available to our management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable, and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

We believe that the following accounting policies are the most critical because they have the greatest impact on the presentation of our financial condition and results of operations.

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 October 31, 2018, our liabilities exceed our assets by $284,486.

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.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Foreign Currency Transactions
 
None.
 
ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information

ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.  Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
 
14

As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and our principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were not effective.

Management Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting.  In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.  Our management, with the participation of our principal executive officer and principal financial officer have conducted an assessment, including testing, using the criteria in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (" COSO ") (2013).  Our system of internal control over financial reporting is designed 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.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.  Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of October 31, 2018.  The ineffectiveness of the Company's internal control over financial reporting was due to the following material weaknesses, which are indicative of many small companies with small staff:

(i)
inadequate segregation of duties consistent with control objectives;
(ii)
lack of a code of ethics;
(iii)
lack of a whistleblower policy;
(iv)
lack of an independent board of directors or board committees related to financial reporting; and
(iv)
lack of multiple levels of supervision and review.

We believe that the weaknesses identified above have not had any material effect on our financial results. While not being legally obligated to have an audit committee, it is our management’s view that such a committee, including an independent financial expert member, is an utmost important entity level control over the Company’s financial statements. Currently, the board of directors acts in the capacity of the audit committee. However, we are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the 2019 fiscal year, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.
 
Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.  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 the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management's Remediation Plan

The weaknesses and their related risks are not uncommon in a company of our size because of the limitations in the size and number of staff. Due to our size and nature, segregation of all conflicting duties has not always been possible and may not be economically feasible.
 

15

 
However, we plan to take steps to enhance and improve the design of our internal control over financial reporting.  During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above.  To remediate such weaknesses, we plan to implement the following changes in the current fiscal year as resources allow:

(i)
appoint additional qualified personnel to address inadequate segregation of duties and implement modifications to our financial controls to address such inadequacies; and
(ii)
adopt a written whistleblower policy and code of ethics; and
(iii)
appoint an independent board of directors, including board committees related to financial controls and reporting.

The remediation efforts set out herein will be implemented in the 2018 and 2019 fiscal years.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Management believes that despite our material weaknesses set forth above, our financial statements for the three month period ended October 31, 2018 are fairly stated, in all material respects, in accordance with U.S. GAAP.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting during the three month period ended October 31, 2018.
 

16

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

To the best of the Company’s knowledge and belief, no legal proceedings are currently pending or threatened.

ITEM 1A. RISK FACTORS.

We are not required to provide this information as we are a Smaller Reporting Company.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities during this quarter.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

There are no defaults upon any senior securities.

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 OTHER INFORMATION

None.

ITEM 6 – EXHIBITS

31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Edward A. Barth.
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Suzanne I. Barth.
32
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Edward A. Barth. and Suzanne I. Barth.
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Schema
101.CAL*
XBRL Taxonomy Calculation Linkbase
101.DEF*
XBRL Taxonomy Definition Linkbase
101.LAB*
XBRL Taxonomy Label Linkbase
101.PRE*
XBRL Taxonomy Presentation Linkbase

*
Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
17

 
SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
CONCRETE LEVELING SYSTEMS, INC.
   
   
Date: October 14, 2018
By: /s/ Edward A. Barth
   
 
Edward A. Barth, Principal Executive Officer
   
   
   
Date: October 14, 2018
By: /s/ Suzanne I. Barth
   
 
Suzanne I. Barth, Principal Financial Officer


 
18

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