Tax2014C-CS140630 1
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ZAGROS CONSTRUCTION CO.
dba URBAN CONSTRUCTION GROUP
' Addison,Texas
FINANCIAL STATEMENTS
AND
' SUPPLEMENTARY INFORMATION
For the Six Months Ended June 30,2014
and
INDEPENDENT ACCOUNTANT'S COMPILATION REPORT
�6h
ERSARY
e Rock,
ZAGROS CONSTRUCTION CO
dba URBAN CONSTRUCTION GROUP
FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
For the Six Months Ended June 30,2014
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Contents Page
Independent Accountant's Compilation Report 1
�. Balance Sheet ••• 2
Statement of Income •• 3
Statement of Retained Deficiency 4
Ike
Statement of Cash Flows 5
Notes to Financial Statements
Note 1 —Summary of Significant Accounting Policies 6-7
Note 2—Contracts Receivables .. 7
Note 3—Costs and Estimated Earnings on Uncompleted Contracts 7
Note 4—Backlog 8
Note 5—Income Taxes 8
Note 6—Long-Term Debt 9
Note 7—Related Party Transactions 9
Note 8—Subsequent Events 9
Note 9—Operating Lease 9
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Supplementary Information
Schedule 1 —Schedule of Revenue and Cost of Revenues Earned 10
Schedule 2—Earnings from Contracts . 11
Schedule 3—Contracts Completed ... 12
Schedule 4—Contracts in Progress 13
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BERRY & ASSOCIATES, P.A.
Certified Public Accountants
American Institute of CPAs Arkansas Society of CPAs Texas Society of CPAs
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To the Stockholders
ZAGROS CONSTRUCTION CO.
dba URBAN CONSTRUCTION GROUP
Addison,Texas
INDEPENDENT ACCOUNTANT'S COMPILATION REPORT
We have compiled the accompanying balance sheet of Zagros Construction Co.dba Urban Construction Group as of June
30,2014,and the related statements of income and retained deficiency and cash flows for the six months then ended.We
have not audited or reviewed the accompanying financial statements and accordingly,do not express an opinion or provide
any assurance about whether the financial statements are in accordance with accounting principles generally accepted in
the United States of America.
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
accounting principles generally accepted in the United States of America and for designing, implementing, and
maintaining internal control relevant to the preparation and fair presentation of the financial statements.
Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist
management in presenting financial information in the form of financial statements without undertaking to obtain or
provide any assurance that there are no material modifications that should be made to the financial statements.
The supplementary information contained in Schedules 1 through 4 is presented for purposes of additional analysis and is
not a required part of the financial statements. We have not compiled or reviewed the unaudited supplementary
information and,accordingly,do not express an opinion or provide any assurance on it.
Berry&Associates,P.A.
Dallas,Texas
July 16,2014
2 Office Park Drive*Little Rock,AR 72211 •501-227-9044 •Fax 501-227-8791•jtberrycpa@gmail.com
2911 Turtle Creek Blvd.,Suite 300 •Dallas, TX 75219 •972-437-2919
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ZAGROS CONSTRUCTION CO. Pae 2
..04060, BALANCE
URBAN CONSTRUCTION GROUP
BALANCE SHEET
June 30,2014
ASSETS
CURRENT ASSETS
Cash and equivalents $ 89,059
Contracts receivables(Note 2) 235,396
Retainage receivable 52,183
he Prepaid expenses 47,395
Deferred tax asset(Note 5) 35,900
Ili Costs and estimated earnings in excess of
billings on uncompleted contracts(Note 3) 35,698
Other current assets 2,197
Total Current Assets 497,828
FIXED ASSETS-AT COST(Note 1) 156,064
Less: accumulated depreciation (54,098)
Net Fixed Assets 101,966
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TOTAL ASSETS $ 599,794
Ps LIABILITIES AND STOCKHOLDERS'DEFICIENCY
a" CURRENT LIABILITIES
Current maturities of long-term debt(Note 6) $ 40,300
Accounts payable 75,059
Short-term debt 31,528
Billings in excess of costs and estimated earnings
on uncompleted contracts(Note 3) 273,308
Total Current Liabilities 420,195
LONG-TERM LIABILITIES
Long-term debt,net of current maturities(Note 6) 144,932
Advances from stockholders(Note 7) 156,837
Deferred income taxes(Note 5) 10,800
Total Long-Term Liabilities 312,569
TOTAL LIABILITIES 732,764
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STOCKHOLDERS'DEFICIENCY
Common stock-no par value,authorized 2,000
shares,2,000 shares issued or outstanding 2,000
Retained deficit (134,970)
TOTAL STOCKHOLDERS' DEFICIENCY (132,970)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 599,794
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SEE ACCOMPANYING NOTES AND INDEPENDENT ACCOUNTANT'S COMPILATION REPORT
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ZAGROS CONSTRUCTION CO.
dba URBAN CONSTRUCTION GROUP
STATEMENT OF INCOME
For the Six Months Ended June 30,2014
Percent
of
Revenues
CONSTRUCTION REVENUES EARNED $ 938,684 100.0 %
COST OF REVENUES EARNED 753,365 80.2
GROSS PROFIT 185,319 19.8
OPERATING EXPENSES
Office wages 76,727
Office expenses 2,129
Professional fees 4,330
Rent expense 8,359
Utilities&telephone 4,114
Taxes 16,098
Other operating expenses 1,726
Total Operating Expenses 113,483 12.1
NET OPERATING INCOME 71,836 7.7
OTHER INCOME(EXPENSE)
Interest expense (10,103) (1.1)
NET INCOME BEFORE TAX BENEFIT 61,733 6.6
INCOME TAX BENEFIT 29,000 3.1
NET INCOME $ 90,733 9.7 %
SEE ACCOMPANYING NOTES AND INDEPENDENT ACCOUNTANT'S COMPILATION REPORT
' ZAGROS CONSTRUCTION CO. Page 4
dba URBAN CONSTRUCTION GROUP
'` STATEMENT OF RETAINED DEFICIENCY
For the Six Months Ended June 30,2014
' RETAINED DEFICIENCY AT JANUARY 1,2014 $ (225,703)
Net income for the six months ended June 30,2014 90,733
RETAINED DEFICIENCY AT JUNE 30,2014 $ (134,970)
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SEE ACCOMPANYING NOTES AND INDEPENDENT ACCOUNTANT'S COMPILATION REPORT
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ZAGROS CONSTRUCTION CO.
dba URBAN CONSTRUCTION GROUP
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30,2014
INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS:
Cash flows from operating activities:
Cash received on contracts $ 1,045,130
Cash paid to suppliers and employees (978,604)
Interest expense paid in cash (10,103)
Net cash provided by operating activities 56,423
Cash flows from investing activities:
Purchase of fixed assets (17,418)
Cash flows from financing activities:
Advances from stockholders, net of repayments (36,608)
Proceeds from short-term debt 35,329
Principal payments on short-term debt (3,802)
Proceeds from long-term debt 17,418
Principal payments on long-term debt (16,528)
Net cash used by financing activities (4,191)
NET INCREASE IN CASH AND CASH EQUIVALENTS 34,814
CASH AND CASH EQUIVALENTS,at JANUARY 1,2014 54,245
CASH AND CASH EQUIVALENTS,at JUNE 30,2014 $ 89,059
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income $ 90,733
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 14,639
Provision for deferred taxes (29,000)
Changes in Assets and Liabilities:
Decrease in deficit billings 35,445
Increase in contracts and retainage receivable,and prepaid expenses (146,433)
Decrease in accounts payable (92,556)
Increase in excess billings 183,595
Total adjustments (34,310)
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 56,423
SEE ACCOMPANYING NOTES AND INDEPENDENT ACCOUNTANT'S COMPILATION REPORT
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ZAGROS CONSTRUCTION CO.
*' dba URBAN CONSTRUCTION GROUP
NOTES TO FINANCIAL STATEMENTS
June 30,2014
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Company's Activities
The Company,a Texas Corporation organized in 2008,is a general contractor and is engaged in the construction of
commercial buildings under primarily fixed-price contracts.
Management uses estimates and assumptions in preparing these financial statements in accordance with generally
accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and
liabilities,the disclosure of contingent assets and liabilities,and the reported revenues and expenses.Actual results
could vary from the estimates that were used.
Revenue and Cost Recognition
Revenues and Deficiency on significant construction contracts are recognized on the percentage-of-completion
method,measured by the cost-to-cost method. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Provision for bad debts is determined using the specific write-
' off method. This method is not in accordance with generally accepted accounting principles.
A contract is considered complete when all costs except insignificant items have been incurred and the installation
Pmis operating according to specifications and has been accepted by the customer.
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.
Cash Equivalents
Cash equivalents consist of investments that are readily convertible into cash and generally have original maturities
of three months or less.
Contracts Receivable
Contracts receivables are recorded when invoices are issued and are presented in the balance sheet net of the
allowance for doubtful accounts. Contract receivables are written off when they are determined to be
uncollectible.
Fixed Assets
Depreciation is primarily provided by using the straight-line method over the estimated useful lives of the assets.
Depreciation expense charged to cost of revenues earned and operations for the six months ended June 30,2014,
was$14,639.
Estimated Accumulated
Description Useful Lives Cost Depreciation
Equipment 5-7 years $ 39,386 $ 15,153
Office Equipment 5-7 years 4,540 1,438
Vehicles 5-7 years 112,138 37,507
$ 156,064 $ 54,098
Income Taxes
Construction contracts are reported for tax purposes on the cash method and for financial statement purposes
on the percentage-of-completion method. Straight-line and accelerated depreciation methods are used for tax
reporting. Straight-line depreciation is used for financial statement reporting.
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Effective January 1,2009,the Company implemented the new accounting requirements associated with uncertainty
in income taxes using the provisions of Financial Accounting Standards Board ASC 740, Income Taxes. Using
that guidance,tax positions initially need to be recognized in the financial statements when it is more likely than
not that the positions will be sustained upon examination by the tax authorities. It also provides guidance for
derecognition,classification, interest and penalties,accounting in interim periods, disclosure and transition.
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ZAGROS CONSTRUCTION CO.
dba URBAN CONSTRUCTION GROUP
NOTES TO FINANCIAL STATEMENTS
June 30,2014
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(con't):
As of June 30,2014,the Company had no uncertain tax positions that qualify for either recognition or disclosure in
the financial statements. Additionally,the Company had no interest and penalties related to income taxes.
With few exceptions,the Company is no longer subject to U.S.federal,state and local income tax examinations by
tax authorities for years before 2011.
Deferred Income Tax Accounts
Deferred tax provisions/benefits are calculated for certain transactions and events because of differing treatments
under generally accepted accounting principles and the currently enacted tax laws of the Federal and State
governments. The results of these differences on a cumulative basis,known as temporary differences,result in the
recognition and measurement of deferred tax assets and liabilities in the accompanying balance sheet. See Note 5
below for further details.
NOTE 2-CONTRACT RECEIVABLES:
A summary of contract receivables is as follows:
Total Current 30-59 Days 60+Days
Contract receivables
contracts in progress $ 211,384 $ 211,384 $ $ -
Contract receivables
completed contracts 24,012 23,401 611 -
Total $ 235,396 $ 234,785 $ 611 $ -
NOTE 3-COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
The Company maintains job cost records on significant construction contracts. Revenues and earnings are
recognized on the percentage-of-completion method, measured by the cost-to-cost method. When progress
reaches a point where experience is believed to be sufficient to establish reasonable estimates of the ultimate
economic results,profit or loss is recognized.
Costs incurred on uncompleted contracts $ 511,577
Estimated earnings 90,400
601,977
Less: Billings to date 839,587
$ (237,610)
Included in accompanying Balance Sheet under the following captions:
Costs and estimated earnings in excess of billings
on uncompleted contracts $ 35,698
we
Billings in excess of costs and estimated earnings
ow. on uncompleted contracts (273,308)
Total $ (237,610)
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ZAGROS CONSTRUCTION CO.
dba URBAN CONSTRUCTION GROUP
NOTES TO FINANCIAL STATEMENTS
June 30,2014
NOTE 4—BACKLOG:
The following schedule summarizes changes in backlog on contracts during the six months ended June 30,2014.
Backlog represents the amount of revenue the Company expects to realize from work to be performed on
uncompleted contracts in progress at six months end and from contractual agreements on which work has not yet
begun.
Backlog balance at December 31,2013 $ 667,132
Change orders and adjustments 53,686
New contracts during the six months ended June 30,2014 1,915,441
2,636,259
Less contract revenue earned during the six months 938,684
Backlog balance at June 30, 2014 $ 1,697,575
NOTE 5-INCOME TAXES:
The provision for income tax(expense)benefit consists of the following:
Current income tax benefit $Net deferred income tax benefit (29,000)
Income tax benefit $ (29,000)
The deferred tax amount included in the accompanying balance sheet includes the following amounts:
Deferred Tax Asset
Current
Income related, due to to net operating loss
carryover and differences in basis for tax and
financial reporting purposes $ 35,900
Non-current
Deferred Tax Liability
Property and equipment related,principally
due to differences in depreciation $ 10,800
As of December 31, 2013, the Company had total net operating loss carry forwards of$289,184, for federal
income tax purposes,that can be deducted against future federal taxable income.
ZAGROS CONSTRUCTION CO. Page 9
dba URBAN CONSTRUCTION GROUP
••°"�' NOTES TO FINANCIAL STATEMENTS
June 30,2014
NOTE 6—LONG-TERM DEBT:
Long-term debt consists of the following:
Total Current Long-Term
7.00% Note payable—Argent Bank
$755/mo., including interest,unsecured
SBA loan $ 28,051 $ 7,300 $ 20,751
3.99% Note payable—View Point Bank,due
$718/mo., including interest,secured
by vehicle 28,706 7,600 21,106
3.25% Note payable—View Point Bank,due
$381/mo., including interest,secured
by vehicle 21,995 3,900 18,095
5.00% Note payable—View Point Bank,due
$631/mo., including interest, secured
by blanket lien 27,893 6,300 21,593
5.64% Note payable—Fifth Third Bank, due
$596/mo., including interest,secured
by vehicle 12,567 6,600 5,967
ow 4.06% Note payable—View Point Bank,due
$757/mo., including interest, secured
by vehicle 16,020 8,600 7,420
5.00% Note payable—View Point Bank,due
interest due monthly,principal matures
August 26,2015,secured by blanket lien 50,000 - 50,000
$ 185,232 $ 40,300 $ 144,932
Maturities of long-term debt for the five years subsequent to June 30, 2014 are approximately: 2014/2015 -
$40,300,2015/2016-$89,789,2016/2017-$27,800,2017/2018-$21,057,2018/2019-$5,193 and thereafter-
$1,093.
NOTE 7-RELATED PARTY TRANSACTIONS:
The Company has an outstanding advance from the stockholders,in the amount of$156,837 at June 30,2014.
The Company paid interest to the stockholders of$3,825 during the six months ended June 30,2014.
NOTE 8—SUBSEQUENT EVENTS:
Events have been evaluated through July 16,2014,the date the financial statements were available to be issued,
and management determined that no additional disclosures were required.
NOTE 9—OPERATING LEASE:
The Company entered into a lease agreement with De Lage Landen Financial Services, Inc. on September 14,
2012 to lease a copier. The lease term is for thirty-nine months beginning November 2012 and ending February
2016. The lease expense totaled$927 for the six months ended June 30, 2014.
Future minimum lease payments at June 30,2014 are as follows: 2014/2015 -$2,316,2015/2016-$1,351.
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SUPPLEMENTARY INFORMATION
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ZAGROS CONSTRUCTION CO.
dba URBAN CONSTRUCTION GROUP
SCHEDULE 1
SCHEDULE OF REVENUES AND COST OF REVENUES EARNED
For the Six Months Ended June 30,2014
Percent
of
Revenues
CONSTRUCTION REVENUES EARNED $ 938,684 100.0 %
DIRECT COSTS OF REVENUES EARNED
Materials 253,918
Subcontractors 129,467
Labor 141,117
Equipment rent 58,392
Bonds 33,542
Other direct costs 85,528
701,964 74.8
INDIRECT COSTS OF REVENUES EARNED
Depreciation 14,639
Insurance 24,769
Auto expenses 8,982
Repairs and maintenance 3,011
51,401 5.4
Total Cost of Revenues Earned 753,365 80.2
GROSS PROFIT $ 185,319 19.8 %
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ZAGROS CONSTRUCTION CO.
dba URBAN CONSTRUCTION GROUP
SCHEDULE 2
EARNINGS FROM CONTRACTS
For the Six Months Ended June 30,2014
Cost of
Revenue Revenues Gross
Earned Earned Profit
Contracts completed during
the period $ 597,678 $ 466,959 $ 130,719
Contracts in progress at
June 30,2014 341,006 286,406 54,600
$ 938,684 $ 753,365 $ 185,319
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SEE INDEPENDENT ACCOUNTANT'S COMPILATION REPORT
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