UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

___________

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act: None          

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o  No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.

Yes o  No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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  o

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

 

The aggregate market value of the registrant’s common stock held by non-affiliates as of February 28, 2014 was approximately $1,870,768  based upon the closing price of the common stock as quoted by the Over-the-Counter Bulletin Board (the “OTC Bulletin Board”)   

 

As of November 20, 2014, there were 12,485,647 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

 

 

PART IV

2

 

Information contained in this annual report contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are contained principally in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” and are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.   As used herein, “we,” “us,” “our” and the “Company” refers to Service Team Inc. and no subsidiaries.

 

The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our future financial performance; the continuation of historical trends; the sufficiency of our cash balances for future needs; our future operations; our sales and revenue levels and gross margins, costs and expenses; the relative cost of our operation as compared to our competitors; new product introduction, entry and expansion into new markets and utilization of new sales channels and sales agents; improvements in, and the relative quality of, our technologies and the ability of our competitors to copy such technologies; our competitive technological advantages over our competitors; brand image, customer loyalty and expanding our client base; the sufficiency of our resources in funding our operations; and our liquidity and capital needs.

 

Our forward-looking statements are based on our current expectations and beliefs concerning future developments, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass.  Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. 

 

Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

 

 

3

PART I

ITEM 1. BUSINESS – OVERVIEW OF OUR COMPANY

 

Service Team Inc. (the “Company”) was incorporated pursuant to the laws of the State of Nevada on June 6, 2011.  The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States.  The business proved to be unprofitable and the Company discontinued its warranty and repair operations.  On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock.   Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013.  Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies.  Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc. Trade Leasing is operated as a separate division of Service Team Inc.

 

Trade Leasing Division.  This division is involved in the manufacture and repair of truck bodies.  The company manufactures truck bodies that are attached to a truck chassis which consists of an engine, drive train, a frame with wheels, and in some cases, a cab.  The truck chassis is manufactured by third parties that are major automotive or truck companies.  These companies do not typically build specialized truck bodies.  The company is also involved in other products used by the trucking industry.   The company operates a complete manufacturing and repair facility in South Gate, California.  The facility manufactures both custom and standard production truck bodies in approximately 70 different models designed to fill the specialized demands of the user.   The vans are available for hauling dry freight or refrigerated freight.  The refrigerated vans are built with two to four inches of foam insulating that is sprayed in place for hauling refrigerated products such as meats, vegetables, flowers and similar products.  The Company installs different types of cooling systems in the trucks.  This varies from motor driven units installed outside the van body or refrigeration units driven off the engine of the truck.  Some refrigerated trucks use a system called “cold plate” where a large metal plate is cooled by power while the truck is parked.  The power is then unplugged and the truck will stay cool for many hours.  The Company’s customers are auto dealers and users of trucks; such as dairies, food distributors and local delivery. The company has approximately 400 customers. One customer, South Bay Ford, represented more than 10% of sales in the last 12 months. The company is not dependent on a few major customers. Trade Leasing purchases raw materials from approximately 25 suppliers.  There are several hundred similar suppliers of comparable materials in the local area. Trade Leasing Inc. purchases refrigeration units from Thermoking Corporation, a division of United Technologies and Carrier Corporation, a division of Ingersol Rand Corporation. The two companies represent more than 80% of the refrigeration unit market. There are several other manufactures of refrigeration units that represent a small part of the market. Trade Leasing Inc. employs 31 factory workers and four management personnel.  The management personnel make all of the sales and manage the factory. The company has all of the government licenses necessary to conduct its business. These include nine different city, county and state licenses covering vehicle transportation, air quality, hazard waste (Paint), land or building use, and sales tax.

Leasing Division

Service Team Inc. is in the process of organizing a division to finance the leasing of vehicles.  The Company has many customers of its manufacturing division that are potential customers of a leasing operation.

Acquisition of Trade Leasing, Inc.

This acquisition was accounted for as an acquisition by entities under common control due to the fact that both Service Team, Inc. and Trade Leasing, Inc. were and continue to be commonly held by Hallmark Venture Group, Inc., and its affiliates. The ownership structure of the Company did not change as a result nor did any of its officers change positions.

 

 

4

ITEM 1A. RISK FACTORS

 

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

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

Not Applicable.

 

ITEM 2.  PROPERTIES

 

Service Team Inc. leases a manufacturing facility at 10633 Ruchti Road, South Gate, California 90280 on a year-to-year basis for $7,000 per month.  The location consists of three acres of land with two buildings—a fabrication building of 6,000 square feet and a final assembly building of 12,000 square feet.  The final assembly building includes a large spray booth capable of accommodating large trucks and office space for four offices.  

 

Our principal executive offices are located at 18482 Park Villa Place, Villa Park, California 92861.

 

ITEM 3.  LEGAL PROCEEDINGS

ITEM 4.  MINE SAFETY DISCLOSURES

 

Not Applicable.

 

 

 PART II

 

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Our common stock was approved for listing on the OTC Bulletin Board under the symbol SVTE on October 9, 2012.   As of November 21, 2014, there were 85 active shareholders and the total shares outstanding of 12,485,647.   The transfer agent for our common stock is Holladay Stock Transfer, Inc. 2939 N. 67th Place Scottsdale, Arizona 85251.

The following table shows the reported high and low closing bid quotations per share for our common stock based on information provided by the OTC Bulletin Board for the periods indicated. Quotations reflect inter-dealer prices, without markup, markdown or commissions and may not represent actual transactions. 

 

---

Trades in our common stock may be subject to Rule 15g-9 under the Exchange Act, which imposes requirements on broker-dealers who sell securities subject to the rule to persons other than established customers and accredited investors.  For transactions covered by the rule, broker-dealers must make a special suitability determination for purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.

 

Our shares are subject to rules applicable to “penny stock” which pertain to any equity security with a market price less than $5.00 per share or an exercise price of less than $5.00 per share.  Penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in our shares.

 

Dividend Policy

 

We have not paid or declared any cash dividends on our common stock in the past and do not foresee doing so in the foreseeable future.  We intend to retain any future earnings for the operation and expansion of our business.  Any decision as to future payment of dividends will depend on the available earnings, the capital requirements of our Company, our general financial condition and other factors deemed pertinent by our Board of Directors.

Sales of Unregistered Securities 

 

From the inception (June 6, 2011) to August 31, 2011, the Company sold 6,000,000 shares to the organizers of the Company for $29,027.  In the fiscal year ended August 31, 2012 the company sold   1,707,500 shares to various individuals for $168,806. In the fiscal year ended August 31, 2013 the Company then sold 359,814 shares to various individuals for $171,576.  In the fiscal year ended August 31, 2014 the Company then sold 118,333 shares to various individuals for $34,750.

 

Securities authorized for issuance under equity compensation plans

The Company has not reserved any securities for issuance under equity compensation plans.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

ITEM 6.  SELECTED FINANCIAL DATA.

 

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

 

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

Service Team Inc. (the “Company”) was incorporated pursuant to the laws of the State of Nevada on June 6, 2011.  The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States.  The business proved to be unprofitable and the Company discontinued its warranty and repair operations.  On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock.   Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013.  Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies.  Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc.

---

Results of Operations

The Company had sales of $1,334,127 for the fiscal year ended August 31, 2014, compared to $1,017,446 during the fiscal year ended August 31, 2013, an increase of $316,681 or 31% due to the first 12 month period of operations for the Company.  All of the sales are generated by Trade Leasing, Inc. The Service Products Division has no sales.

Cost of sales increased $177,519, from $919,185 to $1,096,704 from 2013 to 2014 which was due to the additional months of operations during fiscal year 2014.

Gross margin increased by $128,531 from $108,892 to $237,423 from 2013 to 2014 primarily due to the additional months of operation during 2014.

Operating and other expenses decreased by $685,399 from $828,157 to $142,758 from 2013 to 2014 primarily due to a lack of stock based compensation expense during the 2014 fiscal year.

The above changes resulted in net income of $74,356 during the 2014 fiscal year compared to a net loss of $753,579 during the 2013 fiscal year, an increase in profitability of $827,935 primarily driven by lower stock based compensation during the 2014 fiscal year and as well as fewer operating expenses from the Service Products Division in 2014 compared to 2013.

   

Liquidity and Capital Resources

 

As of August 31, 2014, we had assets of $212,124 including current assets of $193,483.   We have related party promissory notes of $27,158, accrued payroll costs of $56,403, accrued interest of $3,987, contingent liabilities of $54,100, and accounts payable of $172,117.  Our major shareholder, Hallmark Venture Group, Inc., is owed $27,158.   The amount owed Hallmark Venture Group, Inc. is included in the notes payable.   Hallmark Venture Group, Inc. is prepared to advance us additional funds as needed. There is no firm payback date. It is to be repaid when we have funds available. Accrued expenses are for work performed by employees during the organizational stage of the Company. There is no firm date which these are to be paid. It is to be repaid when we have funds available.  We have raised $225,026 from the sale of our common stock during the fiscal years ended August 31, 2014 and 2013 years combined.  We believe our ability to achieve commercial success and continued growth will be dependent upon our continued access to capital either through additional sale of our equity or cash generated from operations. We will seek to obtain additional working capital through the sale of our securities. We will attempt to obtain additional capital through bank lines of credit; however, we have no agreements or understandings with third parties at this time.   Management believes that the acquisition of Trade Leasing, Inc. adds sales of more than one million dollars per year and a projected profit of more than one hundred thousand dollars.

The acquisition of Trade Leasing, Inc. adds sales of approximately $1,300,000 per year and a projected profit of more than $100,000.

 

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Our consolidated financial statements for the fiscal years ended August 31, 2014 and 2013 are attached hereto.

 

7

 

 

 

 

F-1

 

To the Board of Directors

Service Team Inc.

 

We have audited the accompanying consolidated balance sheets of Service Team Inc. as of August 31, 2014 and 2013, and the related consolidated statements of operations, changes in shareholders' deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 audits to obtain reasonable assurance about whether the consolidated 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 audits 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Service Team Inc. as of August 31, 2014 and 2013, and the results of its operations, changes in shareholders' deficit and cash flows for the period described above in conformity with accounting principles generally accepted in the United States of America.

 

 

 

www.mkacpas.com

Houston, Texas

December 1, 2014

 

         

F-2

The accompanying notes are an integral part of these consolidated financial statements.

---

SERVICE TEAM INC.

CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL

YEARS ENDING AUGUST 31, 2014 AND 2013

 

F-4

SERVICE TEAM INC.

 

The accompanying notes are an integral part of these consolidated financial statements.

F-5

The accompanying notes are an integral part of these consolidated financial statements.

 

---

SERVICE TEAM, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2014 AND 2013

 

 

 

Service Team Inc. (the “Company”) was incorporated pursuant to the laws of the State of Nevada on June 6, 2011.  The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States.  The business proved to be unprofitable and the Company discontinued its warranty and repair operations.  On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock.   Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013.  Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies.  Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc. Trade Leasing is operated as a separate division of Service Team Inc.

 

The Company has established a fiscal year end of August 31.

 

 

 

The consolidated financial statements presented in this report are the combined financial reports of Trade Leasing, Inc. and Service Team Inc. 

 

The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

 

The consolidated financial statements present the Balance Sheet, Statements of Operations, Shareholders’ Deficit and Cash Flows of the Company. These consolidated financial statements are presented in United States dollars. The accompanying audited, consolidated financial statements have been prepared in accordance with the instructions to Form 10-K.  All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.

 

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.  Actual results could differ from those estimates.

 

---

 

Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at August 31, 2014 or August 31, 2013.

  

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.

 

 

All accounts receivable are due thirty (30) days from the date billed. If the funds are not received within thirty (30) days the customer is contacted to arrange payment. The Company uses the allowance method to account for uncollectable accounts receivable. All accounts were considered collectable at period end and no allowance for bad debts was considered necessary.  The allowance for doubtful accounts as of August 31, 2014 and August 31, 2013 was $2,802 and $5,961, respectively.

 

The Company’s wholly owned subsidiary, Trade Leasing, Inc., has more than 400 customers. One customer South Bay Ford represents about 20% and 12% of the total sales and 36% and 36% of total receivables during and as of the years ended August 31, 2014 and 2013, respectively.

 

The Company does not own inventory; therefore, there was no inventory on hand at August 31, 2014.

 

Equipment, vehicles and furniture, which are recorded at cost, consist primarily of fabrication equipment and is depreciated using the straight-line method over the estimated useful lives of the related assets (generally fifteen years or less). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives. There was depreciation expense of $303 and $0 during the fiscal years ended August 31, 2014 or August 31, 2013.

Net property and equipment were as follows at August 31, 2014 and August 31, 2013:

Service Team Inc. leases a manufacturing facility at 10633 Ruchti Road, South Gate, California 90280 on a year-to-year basis for $7,000 per month.  The location consists of three acres of land with two buildings a fabrication building of 6,000 square feet and a final assembly building of 12,000 square feet.  The final assembly building includes a large spray booth capable of accommodating large trucks and office space for four offices. 

Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Hallmark Venture Group, Inc., a related party, at no charge. As a result of this contribution of office space, $0 and $6,000 of imputed rent expense was recorded for the fiscal years ended August 31, 2014 and 2013, respectively.

 

---

 

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 on June 6, 2011. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has various financial instruments that must be measured under the new fair value standard including: cash, convertible notes payable, accrued expenses, promissory notes payable, accounts receivable and accounts payable. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

Cash, accounts receivable, accounts payable, promissory notes and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.

 

The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2014 on a recurring basis:

 

 

---

The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2013 on a recurring basis:

 

 

 

In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical operating results and the uncertainty of the economic conditions, the Company has recorded a full valuation allowance against its deferred tax assets at August 31, 2014 and 2013 where it cannot conclude that it is more likely than not that those assets will be realized.

 

 

Trade Leasing Division

The Trade Leasing Division receives orders from customers to build or repair truck bodies. The company builds the requested product. At the completion of the product the truck is delivered to the customer.  If the customer accepts the product Trade Leasing Inc. issues an invoice to the customer for the job. The invoice is entered into our accounting system and is recognized as revenue at that time.

In the Trade Leasing Division we use the completed contract method for truck bodies built, which typically have construction periods of 15 days or less. Contracts are considered complete when title has passed, the customer has accepted the product and we do not retain risks or rewards of ownership of the truck bodies. Losses are accrued if manufacturing costs are expected to exceed manufacturing contract revenue.  Manufacturing expenses are primarily composed of aluminum cost, which is the largest component of our raw materials cost and the cost of labor. 

 

As described above, in accordance with the requirements of ASC 605-10-599, the Company recognizes revenue when (1) persuasive evidence of an arrangement exists (contracts); (2) delivery has occurred; (3) the seller’s price is fixed or determinable (per the customer’s contract); and (4) collectability is reasonably assured (based upon our credit policy).

 

 

The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

 

 

In December of 2004, the FASB issued a standard which applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are based on the fair value of those equity instruments. For any unvested portion of previously issued and outstanding awards, compensation expense is required to be recorded based on the previously disclosed methodology and amounts. Prior periods presented are not required to be restated. We adopted the standard as of inception.  The Company has not issued any stock options to its Board of Directors and officers as compensation for their services.  If options are granted, they will be accounted for at a fair value as required by the FASB ASC 718.

 

---

 

The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised. As of August 31, 2014 and 2013, because the Company does not have any potentially dilutive securities, there was no difference between the basic and diluted net income (loss) per share.

 

 

F-11

F-12

This acquisition was accounted for as an acquisition by entities under common control due to the fact that both Service Team, Inc. and Trade Leasing, Inc. were and continue to be commonly held by Hallmark Venture Group, Inc., and its affiliates. The ownership structure of the Company did not change as a result nor did any of its officers change positions.

 

The Company’s authorized capital is 74,000,000 common shares with a par value of $0.001 per share and 100,000 preferred shares with a par value of $0.001 per share.  

 

During the fiscal year ended August 31, 2013 the company sold 359,814 shares to various individuals for cash of $171,576.  An additional cash amount of $28,700 was received from the stock receivable at August 31, 2012.

On April 16, 2013, the Company granted 300,000 restricted shares to Newport Capital Consultants for consulting services to be performed over the two year period beginning on that date.  As there were no claw-back provisions on the shares, the Company expensed fully the fair value of the shares on the Agreement date valued at $195,000 based upon the closing market price on the date of grant.  In addition, 300,000 trading shares were contributed by U.S. Affiliated, Inc. which was accounted for as a capital contribution of shares which were transferred to Newport Capital Consultants as additional stock compensation expense of $195,000 based upon the closing market price on the date of grant.

On May 31, 2013, the Company issued 4,000,000 shares to Hallmark Venture Group, Inc. as consideration its interest in the 25,000 shares of Trade Leasing, Inc., on June 5, 2013; the shares were booked at par value issuance cost, prepaid deposits of $9,000 were recognized, with an increase to additional paid in capital of $5,000 due to treatment requirements for stock granted for an acquisition of an entity under common control.  The transaction was accounted for as an acquisition of entity under common control which requires booking the transaction at historical cost.

During the fiscal year ended August 31, 2013, $28,000 of capital was contributed by Hallmark Venture Group, Inc., in payment of lease expenses for Trade Leasing, Inc.

---

 

During the six months ended February 28, 2014 the Company sold 63,333 shares for $25,000 of cash from an unrelated investor.

 

During the three months ended May 31, 2014 the Company sold 55,000 shares for $9,750 of cash from three unrelated investors.

 

During the twelve months ended August 31, 2014, $10,716 of interest expense was imputed from a promissory note with related party Hallmark Venture Group, Inc. based upon the average balance during the period at an interest rate of 10 percent.

 

No preferred shares have been issued.

 

As of August 31, 2014 and August 31, 2013, the Company has not granted any stock options.  

 

We have accounted for stock based compensation under the provisions of FASB Accounting Standards codification (ASC) 718-10-55.  (Prior authoritative literature:  FASB Statement 123 (R), Share-based payment.)  This statement requires us to record any expense associated with the fair value of stock based compensation.  Determining fair value requires input of highly subjective assumptions, including the expected price volatility.  Changes in these assumptions can materially affect the fair value estimate.

   

On June 21, 2013, for value received, the Company gave a convertible promissory note to Howard Nunn, Jr., in the original principal amount of $23,003 (the “Nunn Note”). The Nunn Note has a maturity date of September 30, 2013, and principle and accrued interest at the rate of twelve percent (12%). The Note holder has an option to convert the Note into Common Stock at the price of $0.50 per share.  During 2014, the Company borrowed an additional $9,155 from Howard Nunn under the same note and repaid $5,000.

On August 10, 2014, Hallmark Venture Group, Inc. acquired the Note, with principal of $27,158 and accrued interest of $3,987, to Howard Nunn, Jr. for 80,000 shares of Service Team Inc. Common Stock owned by Hallmark Venture Group, Inc.  The Note was then canceled and the amounts due on the Note were added to the amounts due Hallmark Venture Group, Inc.  The option to convert to shares was voided.

The Company evaluated the Nunn Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.75 below the market price on June 21, 2013 of $1.25 provided a value of $23,003; which was recorded as an increase to additional paid in capital and a reduction of debt due to the discount. The discount was amortized accordingly to the effective interest method over the term of the convertible note in the amounts of $6,833 and $16,170 for the fiscal years ended August 31, 2014 and 2013. As of August 31, 2013, the remaining debt discount balance was $6,833.  Accrued interest was $0 and $537 as of August 31, 2014 and 2013, respectively.

---

On August 25, 2011, the Company entered into a loan agreement with Hallmark Venture Group, Inc., with no maturity date or interest rate. During the fiscal years ended August 31, 2014 and August 31, 2013, the Company has received funds of $5,280 and $141,493, respectively, and repaid funds of $205,279 and $48,258, respectively.  During the fiscal years ended August 31, 2014 and August 31, 2013, the Company has imputed interest at a reasonable rate of 10 percent totaling $10,716 and $15,338, respectively.

  

On August 25, 2011, the Company entered into a loan agreement with Hallmark Venture Group, Inc., with no maturity date or interest rate. During the fiscal years ended August 31, 2014 and August 31, 2013, the Company has received funds of $5,280 and $141,493, respectively, and repaid funds of $205,279 and $48,258, respectively.  During the fiscal years ended August 31, 2014 and August 31, 2013, the Company has imputed interest at a reasonable rate of 10 percent totaling $10,716 and $15,338, respectively.

On May 31, 2013, the Company issued 4,000,000 shares to Hallmark Venture Group, Inc. as consideration its interest in the 25,000 shares of Trade Leasing, Inc., on June 5, 2013; the shares were booked at par value issuance cost, prepaid deposits of $9,000 were recognized, with an increase to additional paid in capital of $5,000 due to treatment requirements for stock granted for an acquisition of an entity under common control.  The transaction was accounted for as an acquisition of entity under common control which requires booking the transaction at historical cost.

During the fiscal year ended August 31, 2013, $28,000 of capital was contributed by Hallmark Venture Group, Inc., in payment of lease expenses for Trade Leasing, Inc.

Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Hallmark Venture Group, Inc., a related party, at no charge.  As a result of this contribution of office space, $0 and $6,000 of imputed rent expense was recorded for the fiscal years ended August 31, 2014 and 2013, respectively.

 

The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.

 

No provision for federal income taxes has been recorded due to the net operating loss carry forwards totaling approximately $548,338 as of August 31, 2014 that will be offset against future taxable income.  The available net operating loss carry forwards of approximately $548,338 will expire in various years through 2032. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future tax loss carry forwards.

 

---

The actual income tax provisions differ from the expected amounts calculated by applying the statutory income tax rate to the Company’s loss before income taxes.  The components of these differences are as follows at August 31, 2014 and August 31, 2013:

 

 

 

Our operations are managed through two operating segments, as shown below. We disclose the results of each of our operating segments in accordance with ASC 280, Segment Reporting. Each of the operating segments is managed under a common structure chaired by our Chief Executive Officer and discrete financial information for both of the segments is available. Our Chief Executive Officer uses the operating results of each of the two operating segments for performance evaluation and resource allocation and, as such, is the chief operating decision maker. The activities of each of our segments from which they earn revenues and incur expenses are described below:

 

 

 

---

Summarized financial information concerning reportable segments is shown in the following table for the fiscal years ended:

 

F-17

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, an issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, 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 and includes those policies and procedures that:

 

 

Under the supervision of our president, being our principal executive officer, and our chief financial officer, being our principal financial officer and principal accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2014 using the criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This evaluation 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, our management concluded our internal control over financial reporting was not effective as at August 31, 2014.

 

---

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of our internal control over financial reporting as of August 31, 2014, we determined that there were control deficiencies that constituted material weaknesses which are indicative of many small companies with small staff, such as:

 

 

These control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements could not have been prevented or detected on a timely basis.  As a result of the material weaknesses described above, we concluded that we did not maintain effective internal control over financial reporting as of August 31, 2014, based on criteria established in Internal Control Integrated Framework issued by COSO. Our management is currently evaluating remediation plans for the above deficiencies.   During the period covered by this annual report on Form 10-K, we have not been able to remediate the weaknesses described above.   However, we plan to take steps to enhance and improve the design of our internal control over financial reporting.   

 

ITEM 9B. OTHER INFORMATION.

 

None.

9

 

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

Directors and Executive Officers

 

The following table sets forth the names of the members of the Company’s Board of Directors, Executive Officers, and the position with the Company held by each.

 

 

Each director is elected to hold office for a one-year period or until the next annual meeting of shareholders and until his/her successor has been qualified and elected following the one-year of service. The Officers serve at the discretion of the Company’s directors.  There are no understandings between any of the directors or officers of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director.

 

Management’s Biographies

 

The following is a brief account of business experience for each director and executive officer of the Company.

 

CARLOS ARREOLA, PRESIDENT, DIRECTOR, CHIEF EXECUTIVE OFFICER

 

Mr. Carlos Arreola, President of Service Team Inc., brings a wealth of experience in the repair and maintenance of televisions and similar appliances.  A brief summary of his work history is as follows:

 

 

Mr. Arreola has received extensive training in the repair and maintenance of electronic devices. He has received a degree from the Electronic Technical Institute and has specialized training in digital micro processing from the General Electric Institute and Colman College.  Mr. Arreola also holds a theological degree from Christian Services Training Institution.

 

---

 

ROBERT L. CASHMAN-VICE PRESIDENT, SECRETARY, DIRECTOR, CHIEF FINANCIAL OFFICER, CHIEF ACCOUNTING OFFICER

 

Mr. Robert L. Cashman has a diverse background and brings a wealth of experience to the Service Team Inc. organization.  A brief outline of his employment background is as follows:

 

 

Mr. Cashman has received some prestigious awards from the business community including membership in the Young Presidents Organization, and the INC Magazine Hall of Fame.

 

Mr. Cashman has also received numerous awards for his continued involvement in civic activities including a member of the Orange County Airport Commission (24 years), operators of the John Wayne Airport, serving on the Governing Board of the local and national YMCA (12 years), and a long term involvement with the Boy Scouts of America on both the local and national basis.  He currently serves on the City of Anaheim’s Work Force Development Board, the city agency that allocates federal funding for educational programs in the city. Mr. Cashman served as an aviation officer (pilot) in the Korean War, owns and flies his own airplane and serves on the boards of several aviation organizations.  He is a graduate of the University of California, Los Angeles (UCLA).

 

Legal Proceedings

In February, 2013, an employee of Service Team Inc. sold 50,000 shares of Service Team Inc. stock to a resident of Colorado.  In the opinion of the state of Colorado, the employee was acting as an unlicensed broker and the stock had not been registered with the state of Colorado.  This was the only sale of stock to a resident of Colorado.  Service Team Inc. rescinded the sale and refunded the money to the purchaser.  On July 31, 2014 the State of Colorado issued a Consent Cease and Desist Order concerning, Service Team, Inc., Mr. Cashman and Mr. Arreola to cease and desist from engaging in offering or selling unregistered securities in or from the State of Colorado or offering to sell or selling any security in or from the State of Colorado unless in compliance with or not in violation of any provision of the Colorado Securities Act.

CORPORATE GOVERNANCE

 

Director Independence

 

At the present time, we have two directors who are both “insiders.”  Director, Carlos Arreola, also serves as President, CEO and Director, Robert L. Cashman, also serves as Vice President, Secretary, and Chief Financial Officer.  We are currently recruiting outside directors who have some knowledge of our business.  New directors are nominated by either of the present directors and voted on by the Board of Directors.  Each director is elected to hold office for a one year period or until the next Annual Meeting of Shareholders and until his/her successor has been qualified and elected following the one year of service.  We have not adopted a formal code of ethics as we only have two officers and directors and will adopt a code of ethics when we have appointed independent directors.  The Officers serve at the discretion of the Company’s directors.  There are no understandings between any of the directors or officers of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director.  Robert L. Cashman serves as Chairman and Secretary of the Board.

 

---

Carlos Arreola, the Company’s Chief Executive Officer, serves as a member of the Board.

 

The Board of Directors has held five Special Directors’ Meetings since the inception of the Company.  All the directors attended all of the meetings.  It is a policy of the Company that all Board Members attend all Board Meetings and the Annual Meeting.

Committees

 

At the present time, the Board of Directors serves as an Audit Committee, Nominating Committee and Compensation Committee.  None of these committees have had any meetings since the inception of the Company.  It is planned that as we add independent Board Members we will activate these committees.

 

NOMINATING COMMITTEE:  Director Carlos Arreola and Director Robert L. Cashman participate in consideration of director nominees.  At the present time Service Team is too small to warrant a Nominating Committee.

 

AUDIT COMMITTEE:  Due to only having two directors, we do not have a separate Audit Committee or a Financial Expert as defined in Rule S-K, Rule 407.  The Board of Directors serves as the Audit Committee.

 

COMPENSATION COMMITTEE:   The Board of Directors acts as the Compensation Committee. The directors feel Service Team is too small to have a Compensation Committee at this time.  As additional directors are appointed, a formal Compensation Committee will be established.

 

SHAREHOLDER COMMUNICATIONS:  Shareholders may send written communications on the Company’s web site: www.serviceteam.com

 

ITEM 11.  EXECUTIVE COMPENSATION.

 

Service Team Inc. has made no provisions for paying cash or non-cash compensation to its officers and directors.  No salaries are being paid at the present time to our officers and directors and none have been paid or owed from inception to date. At present we do not have a stock incentive plan in place.  We have not granted any options to our officers and directors.

 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following table sets forth the beneficial ownership of common stock of the Company by the officers and directors, as a group.  

 

 

** Robert L. Cashman is a beneficial owner of Hallmark Venture Group, Inc.

 

 

---

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Transactions with Related Persons.

 

On June 5, 2013, Service Team Inc. entered into an agreement with Hallmark Venture Group, Inc. to exchange 4,000,000 shares of Service Team Inc. Common stock for 25,000 shares (100 %) of the stock of Trade Leasing Inc.

Robert L. Cashman, Secretary and Chief Financial Officer of Service Team Inc., is the beneficial owner of Hallmark Venture Group Inc.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.

   

Audit Fees.  The aggregate fees billed by M&K CPAS, PLLC for professional services rendered for the audit of our annual financial statements included in our Annual Report on Form 10-K and the reviews of the financial statements included in our quarterly reports on Form 10-Q totaled $16,500 for the fiscal year ended August 31, 2014, and $15,500 for the fiscal year ended August 31, 2013.

 

Audit-Related Fees. The aggregate fees billed by our independent accounting firm related to assurance and related services totaled $0 for the fiscal year ended August 31, 2014, and $0 for the fiscal year ended August 31, 2013.

 

Tax Fees. The aggregate fees billed by our independent accounting firm for professional services rendered for tax compliance, tax advice and tax planning totaled $0 for the fiscal years ended August 31, 2014 and 2013.

 

All Other Fees. The aggregate of all other fees for services provided by our independent accounting firm were $0 for the fiscal year ended August 31, 2014 and $0 for the fiscal year ended August 31, 2013.

 

 

 

 

13

 

ITEM 15.  EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES.

 

The following documents are filed as part of this report:

 

1.          Consolidated Financial Statements

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

2.          Consolidated Financial Statement Schedules

 

None.

 

3.           Exhibits

 

10.3              Agreement Between Trade Leasing and Service Team Inc. filed on Form 8-K June 15, 2013

 

 

* Filed herewith.  

 

 

 

---

 

 

SIGNATURES

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

15