Concrete Leveling Systems, Inc. (CLEV)

Executive Summary / Key Takeaways

• Temporary Stabilization Masks Structural Insolvency: A one-time equipment sale generated $55,000 in Q3 2025, flipping a $24,803 loss into a $16,679 profit, but this does not address the $604,970 deficit where current liabilities exceed assets or the auditor's going concern warning.

• The Jericho Transaction Is a Hail Mary Pivot: After eight years of contingencies, the company's survival hinges on closing a gaming/hospitality acquisition that would diversify away from its failing concrete equipment business, but regulatory review and financing remain unresolved.

• Cash Runway Measured in Weeks, Not Years: With approximately $20,000 in cash as of December 2025, management estimates operations can continue only through February 28, 2026—roughly 11 weeks—making immediate financing or transaction closure imperative.

• Competitive Position Is Untenable: CLEV's basic lime-mixing equipment lacks the technological sophistication of rivals like Graco Inc. 's automated pumps or Somero Enterprises 's laser-guided systems, explaining chronic losses and negligible market share in a fragmented industry.

• Investment Is a Pure Option on Transaction Completion: Trading at 97.85x sales with negative book value, the $5.43 million market cap reflects zero fundamental value; upside requires the Jericho deal to close and the gaming division to generate material revenue, while failure means likely insolvency.

Setting the Scene: A Micro-Cap on Life Support

Concrete Leveling Systems, incorporated in Nevada on August 28, 2007, and headquartered in Canton, Ohio, has spent nearly two decades manufacturing truck-mounted equipment that mixes lime and water to lift sunken concrete slabs. The company operates under the trade name CLS Fabricating, Inc., selling primarily to end-users in the construction repair market. From its development stage through July 2009 to its emergence as an operating company in fiscal 2010, CLEV has never achieved sustainable profitability, accumulating significant losses and negative cash flow since inception.

The concrete leveling industry represents a niche within the broader construction equipment market, characterized by fragmented competition and modest growth tied to infrastructure maintenance spending. Unlike specialized manufacturers who have invested in automation and precision technology, CLEV produces basic pumping units that attach to standard trucks. This product simplicity, while keeping manufacturing costs low, has relegated the company to the bottom tier of a market where technological differentiation drives pricing power and customer retention. The company's single reportable segment reflects a monoline business that has failed to scale, with the President acting as the sole decision-maker for resource allocation and performance evaluation.

The strategic landscape shifted dramatically on March 24, 2017, when CLEV entered an agreement with Jericho Associates, Inc., a startup planning to enter gaming, hospitality, and entertainment. This transaction, involving 7.15 million shares issued contingent on Jericho identifying acquisition targets by March 1, 2018, marked the beginning of a pivot that remains incomplete eight years later. By February 2018, Jericho had identified 50% interests in two LLCs holding a term sheet to develop a casino and hotel resort, yet the deal remains subject to regulatory review, closing documentation, and financing. An August 2018 amendment adjusted share cancellation terms for the CEO, but the fundamental transaction has languished in corporate purgatory. This prolonged uncertainty defines the current investment case: CLEV is not a concrete equipment company with a side bet on gaming, but a distressed entity whose survival depends entirely on executing a strategic transformation it initiated nearly a decade ago.

Technology and Competitive Position: Outgunned in a Specialized Market

CLEV's concrete leveling division fabricates service units featuring a mixing device for lime and water paired with a pumping mechanism that injects the mixture under pressure through pre-drilled holes. This mechanical approach, while functional, represents decades-old technology that has been superseded by more advanced systems. The company's product line lacks the automation, precision control, and material innovation that characterize modern concrete leveling equipment.

Competitors have built formidable moats through technological leadership. Graco Inc. , with $13.78 billion in market capitalization, manufactures sophisticated foam slab jacking pumps and proportioners that deliver precise material control and higher throughput. Graco's Q3 2025 revenue of $543.4 million, generated at 22.72% profit margins, reflects a business built on continuous R&D investment and global distribution networks. Somero Enterprises , valued at $123.40 million, dominates laser-guided screed technology for large-scale commercial applications, achieving 13.44% profit margins through aftermarket parts sales and international expansion. HMI Company, though private, has carved out a defensible niche by bundling polyurethane injection systems with contractor training programs, creating customer loyalty that CLEV cannot match.

CLEV's equipment, by contrast, offers no proprietary technology or performance advantages. The company's gross margin of 97.82% in Q3 2025 appears impressive until one notes the absolute revenue of just $55,000—insufficient to cover operating expenses of $35,020. This cost structure reveals a business that cannot achieve scale: high margins on paper mean nothing when sales volume is measured in single units per quarter. The absence of R&D investment, combined with material weaknesses in internal controls over financial reporting, indicates a company that has neither the resources nor the operational discipline to innovate its way out of competitive irrelevance.

The planned gaming and hospitality division, if the Jericho transaction ever closes, would target tribal and commercial casino markets in California and Nevada while exploring gaming technology that merges traditional casino games with video game challenges. This strategic direction acknowledges that CLEV's core business cannot compete, but the pivot requires capabilities—regulatory expertise, capital intensity, entertainment industry relationships—that a micro-cap equipment manufacturer does not possess. The technology gap between concrete pumping and casino operations is vast, and management has provided no credible plan for bridging it.

Financial Performance: A Dead Cat Bounce

The three months ended October 31, 2025, show a dramatic improvement on the surface: revenue surged from $183 to $55,000, cost of sales rose from $59 to $1,050, and net income flipped from a $24,803 loss to a $16,679 profit. Management attributes this entirely to "the sale of a complete leveling unit." While this demonstrates the equipment's high gross margin potential, it also reveals the business's fundamental fragility—profitability depends on sporadic one-off sales rather than recurring revenue or scalable operations.

Operating expenses increased to $35,020 from $22,331, driven by higher professional fees and sales commissions associated with the unit sale. While gross profit was $53,950, these increased operating expenses consumed a significant portion, limiting the bottom-line impact. More critically, the company has maintained a full valuation allowance against deferred tax assets, indicating management sees no sustainable path to profitability that would allow utilization of net operating loss carryforwards.

The balance sheet tells a more dire story. As of October 31, 2025, cash stood at $29,414, up from $824 on July 31, thanks to $28,590 in net cash from operations. However, current liabilities exceed current assets by $604,970, triggering the auditor's going concern warning. By December 12, 2025, cash had dwindled to approximately $20,000, which management estimates will fund operations only through February 28, 2026. This 11-week runway means the company must either close the Jericho transaction, secure external financing, or face insolvency.

Jericho Associates has provided $384,879 in non-interest-bearing advances to cover operating expenses during the merger approval process, effectively subsidizing CLEV's survival. While this demonstrates Jericho's commitment, it also highlights CLEV's inability to self-fund. These advances are not permanent capital; they are contingent on deal completion. If the transaction collapses, this funding disappears, accelerating the liquidity crisis.

Outlook and Execution Risk: A Binary Outcome

Management's guidance is explicit and stark: "Based upon the current cash position and the Company's planned expense run rate, management believes the Company has funds currently to finance its operations through February 28, 2026." This is not a forecast of growth or strategic progress; it is a countdown to zero. The statement acknowledges that existing cash resources will not sustain operations for the next twelve months, and the company must generate more revenue, reduce expenses, or secure additional financing through debt or equity.

The only path to revenue growth mentioned is "the addition of our gaming and hospitality business," which remains contingent on the Jericho transaction closing. Management anticipates this will "begin to generate increased revenue over the 2025 fiscal year," but provides no quantitative targets, timeline, or probability assessment. The transaction's contingencies—regulatory review, closing documentation, and financing for the casino resort project—have persisted since 2018, suggesting fundamental obstacles that may be insurmountable.

The gaming and hospitality division's strategy involves pursuing tribal and commercial casino opportunities in California and Nevada while seeking partnerships in casino gaming technology that blends traditional games with video game challenges. This is a plausible growth area given industry trends toward interactive entertainment, but CLEV has no demonstrated expertise, no management team with gaming experience, and no capital to invest. The company's entire gaming strategy is a concept contingent on acquiring Jericho's LLC interests, which themselves are only term sheet agreements, not completed deals.

The amendment to the Jericho agreement on August 13, 2018, adjusted share cancellation terms for the CEO, suggesting ongoing negotiations but no substantive progress. Eight years of amendments and contingencies indicate either extreme complexity or fundamental unviability. For investors, this means the outlook is not a range of scenarios but a binary outcome: transaction closure and potential survival, or failure and near-certain bankruptcy.

Risks: The Thesis Can Break in Multiple Ways

Liquidity Risk is immediate and existential. With $20,000 in cash and an 11-week runway, any delay in the Jericho transaction or any unexpected expense will force emergency financing. Given the negative book value and going concern warning, debt financing is unlikely, leaving highly dilutive equity issuance as the only option. At a $5.43 million market cap, even a modest capital raise would massively dilute existing shareholders.

Transaction Risk permeates the entire investment case. The Jericho agreement has been pending since 2017, with shares issued contingent on milestones that have been repeatedly delayed. Regulatory review for a casino resort development in California or Nevada is inherently complex and time-consuming. Financing for a casino project requires hundreds of millions in capital that CLEV cannot provide and Jericho may not secure. The term sheet agreements with the two LLCs are non-binding expressions of intent, not definitive purchase agreements. If any contingency fails, the transaction collapses, and CLEV's gaming division never materializes.

Competitive Risk in the core concrete business is insurmountable. Graco Inc. 's scale allows it to invest in R&D and maintain global distribution, while Somero Enterprises 's precision technology commands premium pricing in commercial markets. HMI Company's integrated training and equipment bundles create customer stickiness that CLEV cannot replicate. CLEV's regional customization advantage in Ohio is meaningless when competitors offer superior technology at competitive prices. The company's 97.82% gross margin is a mirage—it reflects cost structure, not pricing power, because the revenue base is too small to matter.

Control Risk is severe. Management concluded that disclosure controls and procedures were not effective as of October 31, 2025, due to material weaknesses in internal control over financial reporting. Remediation efforts require additional time and resources the company does not have. Ineffective controls increase the risk of financial misstatement and erode investor confidence, making financing even more difficult.

Regulatory Risk in the gaming sector is substantial. Tribal gaming involves complex sovereign nation relationships, while commercial casino development in California faces political and community opposition. Nevada, though more established, still requires extensive licensing and regulatory approval. CLEV has no experience navigating these processes, and any misstep could derail the entire pivot strategy.

Valuation Context: Option Value on a Distant Possibility

At $0.39 per share, CLEV trades at a $5.43 million market capitalization and $5.98 million enterprise value. The valuation metrics are nonsensical for a going concern: price-to-book is negative (-9.00) because book value is -$0.04 per share, the P/E ratio is infinite due to losses, and the 97.85x price-to-sales multiple is meaningless on $55,000 in quarterly revenue. These ratios do not indicate overvaluation; they indicate the market assigns zero fundamental value to the operating business.

The 34.42% operating margin and 97.82% gross margin are artifacts of minimal revenue, not operational efficiency. When revenue is $55,000, a single sale can generate eye-popping percentages while the company still cannot cover fixed costs. Return on assets of -19.56% reflects a business destroying capital, not creating it. The current ratio of 0.07 and quick ratio of 0.04 confirm insolvency, not temporary illiquidity.

Comparing CLEV to legitimate competitors highlights the valuation absurdity. Graco Inc. trades at 6.29x sales with 22.72% profit margins, $13.78 billion market cap, and investment-grade financials. Somero Enterprises trades at a similar revenue multiple but generates positive returns and pays a 5.56% dividend. HMI Company, though private, is estimated to earn mid-teens millions with 20-30% margins. CLEV's $703,000 in annual revenue (extrapolating the Q3 spike) is a tiny fraction of Graco Inc. 's scale (Graco's Q3 revenue alone was $543.4 million) and significantly less than HMI Company's estimated revenue (mid-tens of millions), yet it trades at a multiple that implies comparable growth prospects. The only rational explanation is that the market prices CLEV as a call option on the Jericho transaction.

The enterprise value of $5.98 million suggests investors assign approximately $5.5 million in option value to the gaming pivot. This is not a valuation based on discounted cash flows or comparable company analysis; it is a wager that Jericho will close, the casino resort will be financed, and CLEV will somehow parlay a 50% LLC interest into a viable business. There is no precedent for a micro-cap equipment manufacturer successfully executing such a transformation, and the probability-weighted expected value is likely far below the current price.

Conclusion: A Lottery Ticket Disguised as an Equity Investment

Concrete Leveling Systems is not a turnaround story; it is a company that has failed to build a sustainable business in its core market and is now wagering its existence on a transaction that has been pending for eight years. The Q3 2025 profit is a dead cat bounce—an accounting artifact of a single equipment sale that does not address the $604,970 negative working capital, the auditor's going concern warning, or the 11-week cash runway. The concrete leveling division cannot compete with Graco Inc. (GGG)'s technology, Somero Enterprises (SOM)'s precision, or HMI Company's integrated solutions, and its 97.82% gross margin is irrelevant when annual revenue is measured in thousands, not millions.

The investment thesis reduces to a single question: will the Jericho transaction close before CLEV runs out of cash? Management has provided no credible timeline, no financing commitments, and no evidence that they can execute in the gaming sector. The $384,879 in Jericho advances keeps the lights on but also creates perverse incentives—Jericho may feel compelled to close the deal to recover its investment, even if the underlying casino project is uneconomical. This dynamic increases the risk of a value-destroying transaction completed out of desperation rather than strategic merit.

For investors, CLEV is a binary outcome with highly skewed risk-reward. Upside requires the Jericho deal to close, the casino resort to secure financing, and the gaming division to generate revenue quickly enough to offset the concrete business's collapse. Downside is near-certain insolvency if the transaction fails or is delayed beyond February 2026. The $0.39 share price reflects not a discounted stream of future earnings but a wager on corporate alchemy—transforming a failing equipment manufacturer into a gaming company through sheer force of will. This is a lottery ticket, not an investment, and the odds are heavily stacked against shareholders.