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INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of Falcon Creek Manufacturing, Inc.

Falcon Creek Manufacturing, Inc.

Cincinnati, Ohio

Year Ended December 31, 2024

Opinion

We have audited the financial statements of Falcon Creek Manufacturing, Inc. (the "Company"), which comprise the consolidated balance sheet as of December 31, 2024 and 2023, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Falcon Creek Manufacturing, Inc. as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit.

Critical Audit Matters

Critical audit matters are those matters that were of most significance during our audit of the financial statements of the current period.

1. Revenue Growth and Margin Compression

Revenue increased from $35.2 million in 2023 to $50.0 million in 2024, a 42% increase. Gross margin compressed from 18% to 9%, primarily due to a concentration of sales to TechCorp Industries.

  • Tested a sample of 40 revenue transactions for accuracy and timeliness
  • Verified customer contracts and terms with TechCorp Industries
  • Analyzed pricing and margin trends by product and customer

2. Inventory Valuation

Finished goods inventory increased from $2.9 million to $4.1 million (41% increase). The Company records inventory at the lower of cost or net realizable value.

Paul Wan & Co

Cincinnati, Ohio

January 31, 2025

This is a sample audit report for demonstration purposes.