See notes to financial statements and report of independent registered public accounting firm.
Notes to Financial Statements
July 31, 2019 and 2018
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 (“GAAP”) 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 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 July 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 July 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 July
31, 2019). 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 21, 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 was contingent on several factors, including Jericho, 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.There was no Closing of the Jericho/Vegas Winners Transaction as certain conditions to the Closing were not met.
Jericho and Vegas Winners are negotiating a new arrangement, but there can be no assurance that a new arrangement between Jericho and vegas Winners
will be consummated.
Due to the Jericho acquisition, the Company will operate two 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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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, which replaces most
existing revenue recognition guidance in 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, Revenue from Contracts with Customers. 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 July 31, 2019 and
2018.
Advertising and Marketing
Advertising and marketing costs are charged to operations when incurred. Advertising costs were $2,543 and $3,611 for the years ended July 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 GAAP 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 July 31, 2019, current liabilities
exceed current assets by $305,705, and total liabilities exceed total assets by $305,705.
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 – NEW ACCOUNTING PRONOUNCEMENTS
Management has considered all recent accounting pronouncements and believes they will not have a material effect on the Company’s financial statements.
NOTE 3 - 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 July 31, 2019, the Company had net operating loss carry forwards of approximately $594,594 that may be available to reduce future years’ taxable income in varying amounts through 2039.
The Company’s income tax returns are subject to examination by tax authorities. Generally, the statute of limitations related to the Company’s federal and state income tax return is three years from the date of
filing. The state impact of any federal changes of prior years remains subject to examination for a period of up to five years after formal notification to the states.
Management has evaluated tax positions in accordance with FASB ASC 740, Income Taxes, and has not identified any significant tax positions, other than those disclosed.
Income taxes on continuing operations include the following:
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July 31, 2019
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July 31, 2018
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Currently payable
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$
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-0-
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$
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-0-
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Deferred
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-0-
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-0-
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Total
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$
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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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July 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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Amount
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Income taxes per statement of operations
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$
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-0-
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0
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%
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$
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-0-
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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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(8,300
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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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Income taxes at statutory rate
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$
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(8,300
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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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(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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July 31, 2019
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July 31, 2018
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Net operating loss carryforwards
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$
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124,900
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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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128,100
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119,800
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Valuation Allowance
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(128,100
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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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$
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-0-
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$
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-0-
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Tax periods ended July 31, 2015 through 2019 are subject to examination by major taxing authorities.
NOTE 4 - 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 years ended July 31, 2019 and 2018. The amount payable to the related party was $0 at July 31, 2019 and 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 July 31, 2019 and 2018. Effective July 31, 2013, further interest accrual was waived by the noteholders. Accrued interest is $15,139 at July 31, 2019 and 2018.
One of the Company’s stockholders and a company owned by the stockholder advanced a total of $121,366 to the Company at various times between November 2012 and July 2019. The balances on the advances are $121,366 and
$119,166 at July 31, 2019 and 2018, respectively. The advances carry no interest.
Another stockholder of the Company paid invoices of the Company totaling $105,845 at various times during the years ended July 31, 2019 and 2018. The balances on these advances are $105,845 and $67,866 at July 31,
2019 and 2018, respectively. The advances carry no interest.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is
probable and can be reasonably estimated, it establishes the necessary accruals. As of July 31, 2019, the Company is not aware of any contingent liabilities that should be reflected in the financial statements.
NOTE 6 - SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through October 28, 2019, the date the financial statements were available to be issued. There are no subsequent events to report.