4807 Rockside Road, Suite 510 Phone: (216) 524.8900
Independence, Ohio 44131 Fax: (216) 524.8777
http://www.hobe.com
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, 2013 and 2012, and the related statements of
income, stockholders' equity (deficit), and cash flows for the years then ended.
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, 2013 and 2012, and the results of its operations and its
cash flows for the years then ended 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 17, 2013
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On July 31, 2013, the Company converted accounts payable due to three
stockholders totaling $81,000 to additional paid-in capital.
On July 19, 2012, three stockholders of the Company exchanged accrued rents and
management fees totaling $81,000 for 810,000 shares of the Company's common
stock.
Notes to Financial Statements
July 31, 2013 and 2012
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. The
Company recognizes its revenue when the product is shipped or picked up by the
customer.
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 uncollectible receivables based on
prior experience. The allowance was $-0- at July 31, 2013 and 2012.
NOTES RECEIVABLE
The Company has three notes receivable totaling $40,889 and $47,852 at July 31,
2013 and 2012, respectively. The notes each carry an interest rate of 6.00% and
are due at varying dates between November 2013 and March 2016. The notes are
secured by equipment.
The Company has an additional note receivable in the amount of $22,561 and
$25,000 at July 31, 2013 and 2012, respectively . This note carries an interest
rate of 8.00%. The note is secured by equipment.
ADVERTISING AND MARKETING
Advertising and marketing costs are charged to operations when incurred.
Advertising costs were $6,450 and $1,650 for the years ended July 31, 2013, and
2012, respectively.
INVENTORIES
Inventories, which consist of parts and work in progress, are recorded at the
lower of cost or fair market value.
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Concrete Leveling Systems, Inc.
Notes to Financial Statements
July 31, 2013 and 2012
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, 2013, current liabilities exceed current assets by $121,151, and total
liabilities exceed total assets by $87,803. 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. However, in order to fabricate an improved 2013
model service unit, the Company has found it necessary to borrow funds to
purchase the components. 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 - 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, 2013 and 2012
NOTE 6 - INCOME TAXES
Income taxes on continuing operations at July 31 include the following:
2013 2012
-------- -------
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:
2013 2012
------------------- ------------------
% 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 (29,000) (34)% (38,500) (34)%
-------- ----- -------- -----
Income taxes at statutory rate $(29,000) (34)% $(38,500) (34)%
======== ===== ======== =====
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The components of and changes in the net deferred taxes were as follows:
2013 2012
---------- ----------
Deferred tax assets:
Net operating loss carryforwards $ 124,400 $ 124,600
Compensation and Miscellaneous 17,300 15,600
---------- ----------
Deferred tax assets 141,700 140,200
---------- ----------
Deferred tax liabilities:
Depreciation 0 100
---------- ----------
Total 141,700 140,100
Valuation Allowance (141,700) (140,100)
---------- ----------
Net deferred tax assets: $ 0 $ 0
========== ==========
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Concrete Leveling Systems, Inc.
Notes to Financial Statements
July 31, 2013 and 2012
NOTE 6 - 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, 2013 or 2012 due
to a valuation allowance, which increased by $1,600 and $40,500 in 2013 and
2012, 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 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
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Tax periods ended July 31, 2010, 2011, 2012 and 2013 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 7 - RELATED PARTIES
The Company leases warehouse and office space from one of its stockholders. Rent
expense to this stockholder totaled $15,000 for the years ended July 31, 2013
and 2012. Rent payable to this stockholder was $-0- at both July 31, 2013 and
2012. Accounts payable totaling $15,000 was forgiven by the stockholder on July
31, 2013. Accounts payable totaling $15,000 were converted to common stock
during year ended July 31, 2012.
The Company paid compensation fees to three of its stockholders. Compensation
fees expense to these stockholders totaled $66,000 for both years ended July 31,
2013 and 2012. Compensation fees payable to these stockholders were $-0- at both
July 31, 2013 and 2012. Accounts payable totaling $66,000 was forgiven on July
31, 2013. Accounts payable totaling $66,000 was converted to common stock during
the year ended July 31, 2012.
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. The
company waived its commissions on sales for the year ended July 31, 2013.
Commission expense totaled $-0- for the years ended July 31, 2013 and 2012. The
amounts payable to the related party were $36,074 at July 31, 2013 and 2012.
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Concrete Leveling Systems, Inc.
Notes to Financial Statements
July 31, 2013 and 2012
NOTE 7 - RELATED PARTIES (CONTINUED)
Four stockholders of the Company loaned a total of $62,750 to the Company at
various times during the years ended July 31, 2012 and 2011. The loans carry
interest rates from 8% to 12% and are due on demand.
Two stockholders of the Company advanced a total of $15,000 to the Company at
various times during the year ended July 31, 2013. The advances carry no
interest.
NOTE 8 - COMPARATIVE STATEMENTS
Certain prior-year amounts have been reclassified to conform to current-year
classifications.
NOTE 9 - SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through October 17, 2013, the
date the financial statements were available to be issued. There are no events
to report.
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