UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

(Amendment Number 1)

 

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2014

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to              

 

Commission file number 000-55159

 

CES Synergies, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		460839941
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

39646 Fig Street

P.O. Box 1299

Crystal Springs, FL 33524

(Address of principal executive offices, including zip code)

 

813-783-1688

(Registrant’s telephone number, including area code)

 

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 whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ¨ Yes  þ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  ¨ Yes  þ No

 

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.  

þ Yes     ¨ No
 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   þ Yes     ¨ No  

 

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.  ¨

 

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.

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer (Do not check if smaller reporting company)	¨	Smaller reporting company	þ

 

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

 

As of June 30, 2014, the aggregate market value of the issued and outstanding common stock held by non-affiliates of the registrant, based upon the last sales price of our common stock of $0.24, was approximately $2,846,760. For purposes of the above statement only, all directors, executive officers and 10% shareholders are assumed to be affiliates.  This determination of executive officer and affiliate status is not necessarily a conclusive determination for any other purpose.

 

Number of shares of the registrant’s common stock outstanding as of March 17, 2015, was 46,730,500.

 

Documents incorporated by reference: None.

 

EXPLANATORY NOTE

 

CES Synergies, Inc. (the “Company”) is filing this Amendment No. 1 (the “Amendment”) to its Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission (the “SEC”) on March 25, 2015, solely to include a properly dated audit opinion. The Form 10-K had an audit opinion dated March 20, 2014. This Amendment has an audit opinion dated March 25, 2015. For convenience, Part II, Item 8, Financial Statements, is being re-filed. There are no other changes to the Form 10-K.

 

This Amendment also updates Part IV, Item 15, Exhibits of the Form 10-K to include the filing of new Exhibits 31.1, 31.2, 32.1 and 32.2, certifications of our Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a-14(a) and (b).

 

No other changes have been made to the Form 10-K other than that described above. This Amendment does not reflect subsequent events occurring after the original filing date of the Form 10-K or modify or update in any way disclosures made in the Form 10-K. Among other things, forward-looking statements made in the Form 10-K have not been revised to reflect events that occurred or facts that became known to us after filing of the Form 10-K, and such forward-looking statements should be read in their historical context. Furthermore, this Amendment should be read in conjunction with the Form 10-K and with our filings with the SEC subsequent to the Form 10-K.

 

 

PART I

 

ITEM 8.  FINANCIAL STATEMENTS

 

John Scrudato CPA

7 Valley View Drive

Califon, New Jersey 07830

908-534-0008

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

 

To the Board of Directors of

CES Synergies, Inc.

 

We have audited the accompanying balance sheet of CES Synergies, Inc. and its subsidiaries (“the Company”) as of December 31, 2014 and 2013, and the related statements of operations, stockholders’ equity, and cash flows for the years ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit 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 controls 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 audit provides a reasonable basis for our opinion.

 

In our opinion based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of CES Synergies, Inc. and its subsidiaries as of December 31, 2014 and 2013, and the results of its operations, stockholders’ equity, and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

/s/ John Scrudato CPA

Califon, New Jersey

March 25, 2015

 

 

CONSOLIDATED STATEMENT OF OPERATIONS

 

		Years ended December 31,
		2014				2013
Revenues		$	20,846,119			$	15,537,875
Cost of sales			16,142,507				11,852,022
Gross profit			4,703,612				3,685,853
General & administrative expenses			5,020,556				3,660,012
Net operating profit/ (loss)			(316,944	)			25,841
Other expenses, net			(104,728	)			(186,587	)
Net profit/(loss) before income taxes		$	(421,672	)		$	(160,746	)
Income taxes			(81,339	)			-
Net profit/(loss) after income taxes			(503,011	)			(160,746	)
Earnings per share
Basic and diluted		$	(0.01	)		$	(0.003	)
Shares used in computing earnings per share
Basic and diluted			46,730,500				46,525,000
Cash distributions declared per common share		$	-			$	0.02

 

See accompanying Notes to Consolidated Financial Statements

 

 

CONSOLIDATED BALANCE SHEET

 

		December 31, 2014				December 31, 2013
ASSETS
Current assets
Cash		$	149,455			$	250,359
Advances to employees			14,006				20,223
Contracts receivable (net of allow. for bad debt)			6,365,274				3,965,709
Inventory			152,772				153,990
Cost and estimated earnings in excess of billings on uncompleted contracts			229,437				809,548
Total current assets			6,910,944				5,199,829
Property and equipment, net			2,117,217				2,160,818
Goodwill			1,446,855				1,446,855
Other assets			6,531				29,505
TOTAL ASSETS		$	10,481,547			$	8,837,007
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	2,570,259			$	1,260,709
Accrued payroll			82,391				123,356
Billings in excess of costs and estimated earnings on uncompleted contracts			598,645				518,612
Notes payable			1,750,300				-
Current portion long-term debt			595,757				472,372
Total current liabilities			5,597,352				2,375,049
Long-term debt, net of current portion			3,337,166				4,731,468
Total long-term liabilities			3,337,166				4,731,468
Stockholders' equity
Common stock, authorized: $0.001 par value, 250,000,000 shares, at December 31, 2014; $0.001 par value, 75,000,000 shares, at December 31, 2013 issued: 46,730,500 shares, at December 31, 2014; 46,525,000 shares, at December 31, 2013			46,730				46,525
Treasury stock, 80 shares, at cost			-				(129,356	)
Additional paid in capital			1,281,048				1,084,058
Retained earnings			219,251				722,263
Total stockholders' equity			1,547,029				1,730,490
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	10,481,547			$	8,837,007

 

See accompanying Notes to Consolidated Financial Statements

 

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

 

		Common Stock								Treasury Stock								Additional paid in				Accumulated
		Shares				Amount				Shares				Amount				Capital				surplus				Total
Balance at December 31, 2011			160				160				80				(129,356	)			1,130,424				2,560,467				3,561,695
Distributions			-				-				-				-				-				(1,136,877	)			(1,136,877	)
Net income for the year ended December 31, 2012			-				-				-				-				-				389,083				389,083
Balance at December 31, 2012			160				160				80				(129,356	)			1,130,424				1,812,673				2,813,901
Distributions			-				-				-				-				-				(929,663	)			(929,663	)
Adjustments to common stock and additional paid-in capital			39,524,840				39,365				-				-				(39,365	)			-				-
Issuance of common stock for employment and services			7,000,000				7,000				-				-								-				7,000
Net income/(loss) for the year ended December 31, 2013			-				-				-				-				-				(160,744	)			(160,744	)
Balance at December 31, 2013			46,525,000			$	46,525				80			$	(129,356	)		$	1,091,058			$	722,262			$	1,730,490
Adjustments to common stock and additional paid-in capital			-				-				(80	)			129,356				(129,356	)			-				-
Issuance of common stock for employment and services			93,000				93				-				-				94,457				-				94,550
Issuance of common stock (sold)			112,500				112				-				-				224,888				-				225,000
Net income/(loss) for the year ended December 31, 2014			-				-				-				-				-				(503,011	)			(503,011	)
Balance at December 31, 2014			46,730,500			$	46,730				-			$	-			$	1,281,048			$	219,251			$	1,547,029

 

See accompanying Notes to Consolidated Financial Statements

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Years ended December 31,
		2014				2013
Cash flows from operating activities
Net income (loss) from continuing operations		$	(503,011	)		$	(160,746	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation			578,427				623,726
(Gain) Loss on Asset Disposal			(400	)			(27,000	)
(Increase) decrease in contracts receivable			(2,399,565	)			(1,072,251	)
(Increase) decrease in inventory			1,218				(18,848	)
(Increase) decrease in other assets			29,191				2,738
(Increase) decrease in estimated earnings in excess of billings			580,111				(146,357	)
Increase (decrease) in accounts payable and accrued expenses			1,268,585				704,341
Increase (decrease) in billings in excess of costs and estimated earnings			80,033				479,875
Net cash provided by (used in) operating activities			(365,411	)			385,478
Cash flows from investing activities
Purchase property and equipment			(534,826	)			(639,156	)
Proceeds from disposal of equipment			400				27,000
Net cash provided by (used in) investing activities			(534,426	)			(612,156	)
Cash flows from financing activities
Payments on notes payable			(4,681,071	)			(534,967	)
Net proceeds from borrowings			5,160,454				1,802,225
Adjustments to common stock and additional paid-in capital			319,550				7,000
Distributions			-				(929,663	)
Net cash provided by (used in) financing activities			798,933				344,595
Net increase (decrease) in cash			(100,904	)			117,917
Cash, beginning of period			250,359				132,442
Cash, end of period		$	149,455			$	250,359

 

See accompanying Notes to Consolidated Financial Statements

 

 

NOTE 1 - Company Background

 

CES Synergies, Inc. (the “Company”) is a Nevada corporation formed on April 26, 2010. The Company is the parent company of Cross Environmental Services, Inc. (“CES”) which was incorporated in 1988 in the state of Florida. The Company acquired CES in a reverse merger transaction that closed on November 1, 2013, and CES is deemed the accounting acquirer under accounting rules (see Note 14). The Company is an asbestos and lead abatement contracting firm specializing in the removal of asbestos and lead from buildings and other structures, and demolition of structures. The Company’s services include removal of asbestos and lead, construction, installation, and repair of ceilings and insulation systems and demolition. Most of the Company’s jobs are located within the state of Florida, but the Company accepts and performs jobs throughout the southeastern United States.

 

NOTE 2 - Summary of Significant Accounting Policies

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements.

 

The Company follows the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and has adopted a year-end of December 31.

 

The preparation of financial statements in conformity with US 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 reporting period. Actual results could differ from those estimates.

 

Management further acknowledges that it is solely responsible for adopting sound accounting practices consistently applied, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

 

Basis of Presentation

 

The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. These include the accounts of CES, and its wholly owned subsidiaries, Cross Demolition, Inc., Cross Insulation, Inc., Cross Remediation, Inc., Cross FRP, Inc., Triple J Trucking, Inc., and Tenpoint Trucking, Inc. All significant intercompany account balances, transactions, profits and losses have been eliminated.

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

 

Fair Value of Financial Instruments

 

For certain financial instruments, including accounts receivable, accounts payable, accrued expenses, interest payable, advances payable and notes payable, the carrying amounts approximate fair value due to their relatively short maturities.

 

The Company has adopted ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

●

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

 

●

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

●

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The Company did not identify any non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with ASC 815.

 

In February 2007, the FASB issued ASC 825-10 “Financial Instruments.” ASC 825-10 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. ASC 825-10 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007.

 

The carrying amounts of cash and current liabilities approximate fair value due to the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments in the management of foreign exchange, commodity price, or interest rate market risks.

 

Revenue and Cost Recognition

 

The Company follows ASC 605-35 "Revenue Recognition: Construction type contracts" and recognizes revenues from fixed-price and modified fixed-price construction contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. This method is used because management considers total cost to be the best available measure of progress on the contracts.

 

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. Selling, general, and administrative costs are charged to expenses as incurred. Provisions for estimated losses on uncompleted contracts, if any, are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income which are recognized in the period in which the revisions are determined.

 

The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts," represents revenues recognized in excess of amounts billed.

 

 

The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenues recognized.

 

Contract retentions are included in contracts receivable.

 

Cash and Cash Equivalents

 

For purposes of reporting cash flows, the Company considers cash and cash equivalents to be all highly liquid deposits with maturities of three months or less. Cash equivalents are carried at cost, which approximates market value.

 

Concentrations of Credit Risk

 

The Company maintains cash balances at Centennial Bank located in Central Florida. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. At December 31, 2014 and 2013, the Company’s uninsured cash balances for those accounts were $0.

 

Special Purpose Entities

 

The Company does not have any off-balance sheet financing activities.

 

Contracts Receivable

 

Contracts receivable are recorded when invoices are issued and presented in the balance sheet net of the allowance for doubtful accounts. Contract receivables are written off when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the Company's historical average percentage of bad debts in relation to its revenue.

 

Inventory, Net

 

Inventories consist primarily of job materials and supplies and are priced at the lower of cost (first-in, first-out) or market.

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized. As property and equipment are sold or retired, the applicable cost and accumulated depreciation are removed from the accounts and any resulting gain or loss thereon is recognized as operating expenses.

 

Depreciation is calculated using the straight-line method over the estimated useful lives or, in the case of leasehold improvements, the term of the related lease, including renewal periods, if shorter. Estimated useful lives are as follows:

 

Equipment

3-10 years

 

The Company reviews property, plant and equipment and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based on estimated undiscounted cash flows. Measurement of the impairment loss, if any, is based on the difference between the carrying value and fair value.

 

 

Impairment of Long-Lived Assets and Amortizable Intangible Assets

 

The Company follows ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Through December 31, 2014, the Company had not experienced impairment losses on its long-lived assets.

 

Intangible Assets - Goodwill

 

Cost of investment in purchased company assets (Simpson & Associates, Inc.) in excess of the underlying fair value of net assets at date of acquisition (March 2001) is recorded as goodwill on the balance sheet. The amount of $1,396,855 was acquired in 2001 and an additional $50,000 was reclassified as goodwill in 2002. Goodwill is not amortized, but instead is assessed for impairment at least annually and upon the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of goodwill may be impaired. Measurement of the impairment loss, if any, is based on the difference between the carrying value and fair value of the reporting unit. The goodwill impairment test follows a two-step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the second step of the impairment test is performed for purposes of measuring the impairment. In the second step, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of goodwill, an impairment loss will be recognized in an amount equal to that excess. There were no material impairments to the carrying value of long-lived assets and intangible assets subject to amortization during the years ended December 31, 2014 and 2013.

 

Business Segments

 

ASC 280, “Segment Reporting” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has three operating segments as of December 31, 2014 and December 31, 2013.

 

Income Taxes

 

Tax expense comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends. Deferred tax would be recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. No deferred tax is recognized since the difference in carrying amount is not significant.

 

Net Income (Loss) Per Share

 

The Company computes net income (loss) per share in accordance with ASC 260-10, “Earnings Per Share.” The basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per share gives effect to all dilutive potential common shares outstanding during the period using the “as if converted” basis. For the years ended December 31, 2014 and 2013, there were no potential dilutive securities.

 

 

Common Stock

 

The Company currently has only one class of common stock. Each share of common stock is entitled to one vote. The authorized number of shares of common stock of the Company at December 31, 2014 was 250,000,000 and at December 31, 2013 was 75,000,000 shares, in each case with a nominal par value per share of $0.001. Authorized shares that have been issued and fully paid amounted to 46,730,500 common shares at December 31, 2014 compared to 46,525,000 common shares at December 31, 2013.

 

Comprehensive Income

 

Comprehensive income represents net income plus the change in equity of a business enterprise resulting from transactions and circumstances from non-owner sources. The Company’s comprehensive income was equal to net income for the periods ended December 31, 2014 and 2013.

 

NOTE 3 – Recent Accounting Pronouncements

 

No. 2012-02, July 2012, Intangibles—Goodwill and Other (Topic 350): In accordance with the amendments in this update, an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30.

 

No. 2012-06, October 2012, Business Combinations (Topic 805): When a reporting entity recognizes an indemnification asset (in accordance with Subtopic 805-20) as a result of a government-assisted acquisition of a financial institution and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs (as a result of a change in cash flows expected to be collected on the assets subject to indemnification), the reporting entity should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement (that is, the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets).

 

No. 2013-01, January 2013, Balance Sheet (Topic 210): The amendments in this Update affect entities that have derivatives accounted for in accordance with Topic 815, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. Entities with other types of financial assets and financial liabilities subject to a master netting arrangement or similar agreement also are affected because these amendments make them no longer subject to the disclosure requirements in Update 2011-11.

 

 

NOTE 4 - Contracts Receivable

 

Contracts Receivable consist of at:

 

		December 31, 2014				December 31, 2013
Billed
Completed Contracts		$	4,146,946			$	2,419,534
Contracts in Progress			1,652,910				936,929
Retained			766,418				810,246
Allowance for Bad Debts			(201,000	)			(201,000	)
Total		$	6,365,274			$	3,965,709

 

NOTE 5 - Property, Plant and Equipment

 

Property, plant and equipment and related accumulated depreciation consist of the following:

 

		December 31, 2014				December 31, 2013
Machinery and Equipment		$	3,847,408			$	3,569,815
Office Furniture and Equipment			172,635				91,676
Transportation and Earth Moving Equipment			8,717,743				8,548,243
Leasehold Improvements			30,189				24,000
Property, Plant and Equipment Gross			12,767,975				12,233,734
Less: Accumulated Depreciation			(10,650,758	)			(10,072,916	)
Property, Plant and Equipment Net		$	2,117,217			$	2,160,818

 

Depreciation expense for the twelve months ended December 31, 2014 and 2013 was $578,427 and $623,726, respectively.

 

 

NOTE 6 - Costs and Estimated Earnings on Contracts

 

For the year ended December 31, 2014:

 

		Revenues Earned				Cost of Revenues				Gross Profit
Revenue on completed contracts		$	14,877,686			$	12,028.147			$	2,849,539
Revenue on uncompleted contracts			5,968,434				4,114,360				1,854,074
Total for 12 months ended 12/31/14		$	20,846,120			$	16,142,507			$	4,703,613

 

		As of Dec 31, 2014:
Costs incurred on uncompleted contracts			4,482,275
Estimated earnings on uncompleted contracts			1,941,493
Revenues earned on uncompleted contracts			6,423,768
Billings to date			6,792,976
Total Net Amount		$	(369,208	)
Amount shown as cost and estimated earnings in excess of billings on uncompleted contracts		$	229,437
Amount shown as billings in excess of costs and estimated earnings on uncompleted contracts			(598,645	)
Total Net Amount		$	(369,208	)

 

For the twelve months ended December 31, 2013:

 

		Revenues Earned				Cost of Revenues				Gross Profit
Revenue on completed contracts		$	12,444,308			$	9,591,360			$	2,852,948
Revenue on uncompleted contracts			3,035,535				2,227,000				808,535
Total for 12 months ended 12/31/13		$	15,479,843			$	11,818,360			$	3,661,483

 

		As of Dec 31, 2013:
Costs incurred on uncompleted contracts		$	2,969,074
Estimated earnings on uncompleted contracts			1,319,248
Revenues earned on uncompleted contracts			4,288,322
Billings to date			3,997,387
Total Net Amount		$	290,935
Amount shown as cost and estimated earnings in excess of billings on uncompleted contracts		$	809,548
Amount shown as billings in excess of costs and estimated earnings on uncompleted contracts			(518,613	)
Total Net Amount		$	290,935

 

 

NOTE 7 – Long-Term Debt

 

Long-term debt consists of the following at December 31, 2014 and 2013:

 

		12/31/2014				12/31/2013
Demand loan from Shareholder, Clyde Biston, Payable in monthly payments of $4,632, interest rate of 4.25%.		$	273,273			$	118,130
Line of credit, Centennial Bank, Dade City, FL variable interest of 1.25% over prime, current rate 3.25%, secured by land, improvements, and accounts receivable. Line of credit matures April 30, 2015.		$	1,750,300			$	-
Installment loan from shareholder, Clyde Biston. Payable in monthly payments of $23,994, interest rate of 6.15%.		$	2,721,450			$	-
Line of credit, Centennial Bank, Dade City, FL, variable interest of 1.25% over prime, year-end rate 3.25%, secured by land, improvements, and accounts receivable. Line of credit closed out April 30, 2014.		$	-			$	3,983,486
Various installment loans payable in monthly payments, interest rates ranging from 0% to 9.5%, secured by various equipment, vehicles, and property.		$	938,200			$	1,102,224
Total			5,683,223				5,203,840
Less: Current portion			(2,346,057	)			(472,372	)
Long-term debt, less current portion		$	3,337,166			$	4,731,468

 

 

NOTE 8 – Commitments and Contingencies

 

Principal payments on long-term debt are due as follows:

  

Year ending December 31,
2015		$	2,346,057
2016			549,004
2017			341,474
2018			231,751
2019+			2,214,937
		$	5,683,223

 

Contingencies

 

None.

 

NOTE 9 – Earnings per Share

 

		12/31/2014				12/31/2013
Net Income/ (Loss)		$	(503,011	)		$	(160,746	)
Weighted-average common shares outstanding
Basic:			46,730,500				46,525,000
Weighted-average common stock
Equivalents			-				-
Stock Options			-				-
Warrants			-				-
Convertible Notes			-				-
Weighted-average common shares outstanding
Diluted			46,641,884				46,525,000
Earnings/(loss) per common shares outstanding
Basic and Diluted		$	(0.0108	)		$	(0.003	)

 

 

NOTE 10 - Operating Lease Agreements

 

In the past, the Company rented certain equipment/office space under month to month operating lease agreements. Lease expenses incurred as of December 31, 2014 and 2013 under such agreements were $378,485, and $131,424, respectively.

 

NOTE 11 - Related Party Transactions

 

For the purposes of these financial statements, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

 

Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties. Our President and Chief Executive Officer owns a majority of our shares, meaning he can exert significant influence over corporate decisions and strategy. Related party transactions for the period include the following:

 

Leased Facilities

 

The Company operates primarily out of facilities owned by the majority shareholder of the Company. Beginning in June 1995, the Company was allowed to use the facilities rent-free. As of November 1, 2013, the Company entered into a lease agreement with the shareholder for rental of the facilities. Rental expenses incurred for the twelve months ended December 31, 2014 under the lease agreement for the shareholder-owned facilities were $210,222.

 

NOTE 12 - 401K Salary Deferral Plan

 

The Company has established a deferred benefit plan for office and managerial staff with one year or more of service. The plan allows employees to contribute through salary withholding. The Company may match the contribution up to 3% of the gross wages of the employee. Amounts contributed by the Company for the twelve months ended December 31, 2014 and 2013 are $0 and $0, respectively.

 

NOTE 13 – Income Tax Provisions

 

Management of the Company considers the likelihood of changes by tax authorities in its filed income tax returns and recognizes a liability for or discloses potential significant changes that management believes are more likely than not to occur upon examination by tax authorities. Management has not identified any uncertain tax positions in filed income tax returns that require recognition or disclosure in the accompanying financial statements. The Company’s income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination.

 

 

For financial reporting purposes, income before income taxes includes the following components:

 

		2014				2013
United States		$	(503,011	)		$	(153,746	)
Foreign			-				-
Total		$	(503,011	)		$	(153,746	)

 

The expense(benefit) for income taxes consists of:
Current:		2014				2013
Federal		$	69,025			$	-
State			12,314				-
Foreign			-				-
Total			81,339			$	-
Deferred and other:
Federal		$	-			$	-
State			-				-
Foreign			-				-
Total tax expense		$	81,339			$	-

 

NOTE 14 – Reverse Acquisition

 

On November 1, 2013, CES entered into an Agreement and Plan of Merger (the “Merger Agreement”), with CES Acquisitions, Inc. (“Subsidiary”), and CES Synergies, Inc., a shell company that traded on the OTC bulletin board. Pursuant to the Merger Agreement, the Subsidiary merged into CES, such that CES became a wholly-owned subsidiary of the Company (the “Merger”); and the Company issued 35,000,000 shares of the Company’s common stock to the shareholders of CES (the “Acquisition Shares”), representing approximately 75.2% of the Company’s aggregate issued and outstanding common stock following the closing of the Merger Agreement. The share exchange is being accounted for as a recapitalization, and not as a business combination under the scope of FASB ASC Topic 805. CES is the acquirer for accounting purposes and CES Synergies, Inc., is the acquired company. Accordingly, CES’s subchapter S corporate status was terminated on November 1, 2013.

 

NOTE 15 – Subsequent Events

 

The Company has performed an evaluation of subsequent events through, March 3, 2015, the date the accompanying financial statements were issued and did not identify any material subsequent transactions that require disclosure.

 

 

NOTE 16 - Segment Information

 

The accounting standards for reporting information about operating segments define operating segments as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company is organized by line of business. While the Chief Executive Officer evaluates results in a number of different ways, the line of business management structure is the primary basis for which the allocation of resources and financial results are assessed. Under the aforementioned criteria, the Company operates in three operating and reporting segments: remediation, demolition and insulation.

 

Remediation is one segment of the Company that derives its income from mold remediation and abatement services for a broad range of environments. Demolition offers full scale commercial demolition and wrecking down to interior and selective demolition and strip down services. Our third segment, Insulation, derives its revenue from re-insulation and insulation of new and remodeling projects.

 

The information provided below is obtained from internal information that is provided to the Company’s chief operating decision maker for the purpose of corporate management. The Company uses operating income (loss) to measure segment performance as recorded below:

 

		Years ended December 31,
		2014				2013
Remediation Segment
Revenue		$	9,976,891			$	7,964,558
Cost of Revenues			7,073,954				6,052,171
Gross Profit			2,902,937				1,912,387
General & Administrative Expense			2,710,398				2,015,969
Other (Income)/Expense			7,308				(3,825	)
Net Income (Loss) from Segment		$	185,231			$	(99,757	)

 

		Years ended December 31,
		2014				2013
Demolition Segment
Revenue		$	10,370,300			$	6,764,215
Cost of Revenues			8,749,506				5,217,714
Gross Profit			1,620,794				1,546,501
General & Administrative Expense			2,213,444				1,571,123
Other (Income)/Expense			16,248				(24,762	)
Net Income (Loss) from Segment		$	(608,898	)		$	(49,384	)

 

		Years ended December 31,
		2014				2013
Insulation Segment
Revenue		$	553,389			$	743,467
Cost of Revenues			463,973				594,311
Gross Profit			89,416				149,156
General & Administrative Expense			169,630				155,404
Other (Income)/Expense			(870	)			(1,643	)
Net Income from Segment		$	(79,344	)		$	(4,605	)

 

 

ITEM 15. EXHIBITS

 

Exhibit Number		Description
31.1		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

	CES SYNERGIES, INC.
Dated: September 11, 2015	By:	/s/ John Tostanoski
		Name: John Tostanoski
		Title: Chief Executive Officer (principal executive officer)

  

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

SIGNATURE		TITLE		DATE
/s/ John Tostanoski		Chief Executive Officer, Director		September 11, 2015
John Tostanoski		(principal executive officer)
/s/ Sharon Rosenbauer		Chief Financial Officer		September 11, 2015
Sharon Rosenbauer		(principal financial and accounting officer)
/s/ Clyde A. Biston		President, Chairman		September 11, 2015
Clyde A. Biston
/s/ Jeff Chartier		Director		September 11, 2015
Jeff Chartier
/s/ Luisa Ingargiola		Director		September 11, 2015
Luisa Ingargiola
/s/ Earl Young		Director		September 11, 2015
Earl Young

 

 

F-19