10-Q: Concrete Leveling Systems Reports Q2 Profit, Merger Pending

Concrete Leveling Systems, Inc. reported net income of $862 for the six months ended January 31, 2026, a significant improvement from a net loss in the prior year, while its long-pending merger with Jericho Associates remains subject to regulatory approval and financing.

Summary

• Net income of $862 for the six months ended January 31, 2026, compared to a net loss of $37,499 for the same period in 2025.
• Revenue for the six months ended January 31, 2026, surged to $55,150 from $308 in the prior year, driven by higher unit and parts sales.
• Cash balance increased significantly to $19,749 as of January 31, 2026, from $824 as of July 31, 2025.
• The proposed merger with Jericho Associates, Inc., which would establish a gaming and hospitality division, is still in progress as of March 23, 2026, awaiting regulatory approval, final documentation, and financing.
• The company faces substantial doubt about its ability to continue as a going concern, with current liabilities exceeding current assets by $621,820.
• Disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a low score due to severe going concern issues and ineffective internal controls, despite a temporary improvement in six-month net income and revenue. The long-delayed merger adds significant uncertainty.

Positives

• Achieved net income of $862 for the six months ended January 31, 2026, a significant turnaround from a $37,499 net loss in the prior year.
• Revenue for the six months ended January 31, 2026, increased substantially to $55,150 from $308 in the same period last year, primarily due to higher unit and parts sales.
• Cash balance improved to $19,749 as of January 31, 2026, up from $824 as of July 31, 2025.
• Generated positive cash flow from operating activities of $20,059 for the six months ended January 31, 2026, compared to a net cash outflow of $210 in the prior year.

Negatives

• Incurred a net loss of $15,817 for the three months ended January 31, 2026, compared to a net loss of $12,696 in the prior year's quarter.
• Current liabilities ($662,730) significantly exceed current assets ($40,910) by $621,820 as of January 31, 2026.
• The company's existing cash resources are insufficient to sustain operations for the next twelve months, with funds only projected to last through April 30, 2026.
• Disclosure controls and procedures were not effective as of January 31, 2026, due to material weaknesses in internal control over financial reporting.
• The long-pending merger with Jericho Associates, Inc. remains contingent on regulatory approval, finalization of closing documents, and completion of financing, nearly nine years after the initial agreement.

Risks

• Going Concern: Substantial doubt exists about the company's ability to continue as a going concern due to significant accumulated losses, negative cash flow since inception, and current liabilities exceeding current assets by $621,820.
• Liquidity Risk: Existing cash resources are insufficient to meet operating requirements for the next twelve months, with funds only projected to last through April 30, 2026.
• Merger Contingency: The finalization of the Jericho Associates merger, which is critical for the company's future business divisions and financial stability, is subject to regulatory review, closing documents, and financing, and has been pending since 2017.
• Financing Risk: Inability to generate sufficient revenue or obtain additional funds through debt or equity sales could prevent the execution of the business plan and lead to the company going out of business.
• Dilution Risk: The issuance of additional equity to raise funds would result in dilution to existing shareholders.
• Internal Control Weaknesses: Material weaknesses in internal control over financial reporting mean disclosure controls and procedures are not effective, posing risks to financial reporting reliability.
• Related Party Dependence: The company relies on advances from Jericho and other stockholders to fund operations, and the terms of these transactions may not be arm's length.
• Concentration of Credit Risk: Cash is maintained in a single financial institution, and balances may exceed federally insured limits.

Future Outlook

Management believes that with the addition of the gaming and hospitality business, the company will begin to generate increased revenue over the 2026 fiscal year. However, the company's existing cash resources are not sufficient to meet operating requirements for the next twelve months, and it will need to raise additional funds through debt or equity if revenue is insufficient. The long-pending merger with Jericho Associates, Inc. is still subject to final regulatory approval, closing documents, and financing.

Management Comments

• Management believes the estimated fair value of the use of these facilities [stockholder's warehouse and office space] is not material to the accompanying financial statements.
• Management believes the Company has funds currently to finance its operations through April 30, 2026.
• Management believes that with the addition of our gaming and hospitality business, we will begin to generate increased revenue over the 2026 fiscal year.
• 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.
• Management is continuing to assess and implement remediation measures to address the previously disclosed material weaknesses [in internal control over financial reporting], including enhancements to governance, accounting, and financial reporting processes. These efforts are ongoing and may require additional time and resources.

Industry Context

StockSavvy.ai notes that Concrete Leveling Systems operates in two distinct industries: concrete leveling and, pending merger finalization, gaming and hospitality. The concrete leveling division appears to be generating some revenue, but the company's future growth strategy is heavily reliant on the successful completion of the Jericho Associates merger, which would diversify its operations into the highly competitive and regulated casino gaming and hospitality sectors. The prolonged nature of this merger process (since 2017) suggests significant hurdles in a complex industry landscape.

Comparison to Industry Standards

• Given the company's current scale, significant going concern issues, and the highly contingent nature of its proposed entry into the gaming and hospitality industry, direct comparisons to established global benchmarks or specific comparable companies are not feasible based on the information provided.
• The concrete leveling division's revenue of $55,150 over six months is extremely modest for a publicly traded entity, and the gaming venture is still in regulatory review and financing stages, making performance metrics incomparable to operational casino or hospitality groups.

Corporate Governance

Related Party Transactions

• The company uses warehouse and office space belonging to one of its stockholders without charge.
• Four stockholders loaned a total of $62,750 to the company between 2010 and 2012, with interest rates from 8.00% to 12.00%, due on demand. Interest accrual was waived by noteholders effective July 31, 2013.
• A stockholder and a company owned by the stockholder advanced $124,817 between 2012 and 2020, with $124,217 converted to a 7.25% note payable on December 31, 2020.
• Jericho Associates, Inc., the proposed merger partner, advanced approximately $378,210 to fund operating expenses, which are non-interest-bearing and expected to be repaid upon merger consummation.
• A stockholder advanced $7,171 to the company, which carries no interest.

Stakeholder Impact

• Shareholders: Potential for significant dilution if new equity is issued to address liquidity issues. The long-pending Jericho merger creates uncertainty regarding the company's future business model and value. Ineffective internal controls pose a risk to the accuracy and reliability of financial information.
• Creditors: Existing creditors, particularly related parties, face risks due to the company's going concern issues and limited cash resources. Repayment of advances from Jericho is contingent on the merger.
• Management/Employees: The company's ability to continue operations beyond April 30, 2026, is uncertain without additional funding or revenue, potentially impacting job security.
• Customers (Concrete Leveling): The company's financial instability could impact its ability to sustain operations and fulfill future obligations.

Next Steps

• Generate sufficient revenue to sustain operations.
• Obtain financing through the sale of debt and/or equity securities if revenue is insufficient.
• Complete the regulatory review, finalization of closing documents, and financing arrangements for the Jericho Associates merger project.
• Address and remediate material weaknesses in internal control over financial reporting.
• Adopt ASU 2023-09 for income tax disclosures in the annual financial statements for the year ending July 31, 2026.
• Evaluate the impact of ASU 2024-03 on financial statement disclosures.

Key Dates

Recommendation

Despite a reported net income for the six-month period, the company faces severe going concern issues, with cash projected to last only until April 30, 2026. Current liabilities vastly exceed current assets, and disclosure controls are ineffective. The long-delayed, highly contingent merger with Jericho Associates, Inc. adds significant uncertainty to the company's future. Without immediate and substantial capital infusion or a definitive resolution to the merger, the company's ability to continue operations is highly questionable, making it a high-risk investment.

Keywords

Concrete Leveling Systems, CLEV, 10-Q, Quarterly Report, Financial Results, Net Income, Revenue Growth, Going Concern, Jericho Associates, Merger, Gaming Industry, Hospitality Industry, Casino Development, Regulatory Approval, Liquidity, Internal Controls, Related Party Transactions, SEC Filing