NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
Auscrete Corporation ("the Company") was formed as an enterprise to take advantage of technologies developed for the construction of affordable, thermally efficient and structurally superior housing. This "GREEN" product is the culmination of design and development since the early 1980's. The company's Registration Statement outlines the result of the amalgamation of various material development stages, taking an idea to a product and further developing that product to address an ongoing problem in the world's largest marketplace, the quest for affordable, efficient and enduring housing. Auscrete's structures are monetarily highly competitive. A turnkey house, ready to move in sells for around $95-100 per square foot. That is very low in today's market but is brought about by Auscrete's ability to manufacture large panels in mass production format. The house is virtually "fastened" together on site to produce an attractive site-built home, a home that will stay where it is put through all kinds of adverse weather and age conditions. It will not burn, is not affected by bugs, termites or rot, it saves extensively on energy costs and has very low maintenance needs.
INCOME TAXES
The Company follows the guidance of the Financial Accounting Standards Board's Accounting Standards Codification Topic 740 related to Income Taxes. According to Topic 740, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year-end.
For federal income tax purposes, substantially all expenses incurred prior to the commencement of operations must be deferred and then they may be written off over a 180-month period. Tax deductible losses can be carried forward for 20 years until utilized for federal tax purposes. The Company will provide a valuation allowance in the full amount of the deferred tax assets since there is no assurance of future taxable income.
The Company utilizes the Financial Accounting Standards Board's Accounting Standards Codification Topic 740 related to Income Taxes to Account for the uncertainty in income taxes. Topic 740 for Income Taxes clarifies the Accounting for uncertainty in income taxes by prescribing rules for recognition, measurement and classification in financial statements of tax positions taken or expected to be in a tax return. Further, it prescribes a two-step process for the financial statement measurement and recognition of a tax position. The first step involves the determination of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination, based on the technical merits of the position. The second step requires that any tax position that meets the more likely than not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is a greater than 50 percent likelihood of being realized upon ultimate settlement. This topic also provides guidance on the Accounting for related interest and penalties, financial statement classification and disclosure. The Company's policy is that any interest or penalties related to uncertain tax positions are recognized in income tax expense when incurred. The Company has no uncertain tax positions or related interest or penalties requiring Accrual at December 31, 2017 and 2016.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of cash in banks and highly liquid investments with original maturities of 90 days or less. There were $14,975 cash equivalents as of December 31, 2017 and $23 as of December 31, 2016.
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REVENUE RECOGNITION POLICY
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and Acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Revenue from licensing our technology is recognized over the term of the license agreement. Costs and expenses are recognized during the period in which they are incurred. Revenues earned for the period is solely from maintenance services performed. The Company recognizes these sales once delivery time is confirmed to the customer.
COST OF SALES
Amounts that will be recorded as cost of sales relate to direct expenses incurred in order to fulfill orders of our products. Such costs are recorded as incurred. Our cost of sales will consist primarily of the cost of product; labor, selling costs and the cost of G&A expenses.
PROPERTY AND EQUIPMENT
Property and Equipment was stated at historical cost less Accumulated depreciation and amortization. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Depreciation is provided on a straight-line basis over the assets' estimated useful lives. The useful lives of the assets are as follows: equipment 7-years, vehicles 7-years, and buildings 30-years. Additions and improvements are capitalized while routine repairs and maintenance are charged to expense as incurred. Upon sale or disposition, the historically recorded asset cost and Accumulated depreciation are removed from the Accounts and the net amount less proceeds from disposal is charged or credited to other income or expense.
IMPAIRMENT OF LONG-LIVED ASSETS
We evaluate long-lived assets for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate their net book value may not be recoverable. When these events occur, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. There can be no assurance, however, that market conditions will not change or demand for the Company's products will continue. Either of these could result in the future impairment of long-lived assets. Estimates of fair value are determined through various techniques, including discounted cash flow models and market approaches, as considered necessary.
LOSS PER COMMON SHARE
Basic loss per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. As of December 31, 2017, and 2016. Fully diluted weighted average common shares and equivalents were withheld from the calculation as they were considered anti-dilutive.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, or stockholders
’
equity as previously reported.
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USE OF ESTIMATES
The preparation of the financial statements in conformity with generally Accepted Accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.
NOTE 2 - GOING CONCERN AND PLAN OF OPERATION
The Company's financial statements have been presented on the basis that it will continue as a going concern. The Company has not generated revenues from construction related operations to date. The Company has an Accumulated deficit of $3,190,966 as of December 31, 2017 which raises substantial doubt about the Company
’
s ability to continue as a going concern.
The Company will use additional funds through equity and debt financing, collaborative or other arrangements with corporate partners, licensees or others, and from other sources, which may have the effect of diluting the holdings of existing shareholders. The Company has subsequent current arrangements with respect to, or sources of, such additional financing and the Company does not anticipate that existing shareholders will be required to provide any portion of the Company's future financing requirements.
No assurance can be given that additional financing will be available when needed or that such financing will be available on terms Acceptable to the Company. If adequate funds are not available, the Company may be required to delay or terminate expenditures for certain of its programs that it would otherwise seek to develop and commercialize. This would have a material adverse effect on the Company and raise doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements
In December 2017, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities - FASB ASU 2016-01
Summary
- The amendments in ASU 2016-01, among other things:
Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.
§
Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
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Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).
§
Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.
Effective
- Effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
The company is in the process in determining effect it with have on the financial state
ments
.
The new guidance permits early adoption of the own credit provision.
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In April 2017 the FASB Update 2017-04
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Intangibles
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Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. A public business entity that is an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.
In January 2017 the FASB Update 2017-01
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Business Combinations (Topic 805): Clarifying the Definition of a Business. Public business entities should apply the amendments in this Update to annual periods beginning after December 15, 2017, including interim periods within those periods.
In 2016 the FASB UPDATE 2016-15
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STATEMENT OF CASH FLOWS (TOPIC 230): CLASSIFICATION OF CERTAIN CASH RECEIPTS AND CASH PAYMENTS (A CONSENSUS OF THE EMERGING ISSUES TASK FORCE. Stakeholders indicated that there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of
cash flows under Topic 230, Statement of Cash Flows, and other Topics. This
Update addresses eight specific cash flow issues with the objective of reducing
the existing diversity in practice.
The company is in the process in determining effect it with have on the financial statements
.
NOTE 4 -RELATED PARTY TRANSACTIONS
The company does not have banking credit cards to assist with the normal everyday purchases and payments of corporate needs such as utilities etc. The CEO and other involved parties often use their own cards for this purpose and, to represent this, the company has a continuous Related Party Advances section in its financial statements. This is adjusted normally at the end of each reporting period and, at times, requires some funds to be held in the accounts of the parties to ensure availability of funds as required.
NOTE 5 - PROPERTY, INVENTORY AND EQUIPMENT
Notes to Inventory Type and Value:
Inventory consists of Finished Product and Raw Materials that are valued at the lower of cost or market.
Finished product of $44,900 is a full set of insulated ACH cast panels for wall and roof of an approx. 1,600 sq. ft house. Panel cost is actual size of all panels in sq. ft. of just under 7,000 sq. ft. calculated as follows.
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Material
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Cost per sq. ft.
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Cement
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2.42
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XPS Insulation
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0.98
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Surfactant
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0.32
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Rebar @ Steel
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1.02
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Labor
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1.78
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TOTAL COST PER SQ. FT. $
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6.52
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Raw Materials:
Raw materials consist of rebar, insulation, surfactant, powdered cement, threaded inserts and sundry items. The cost of $2,100 is based on the cost of purchase from a non-related supplier.
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Property and equipment were comprised of the following at:
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December 31, 2017
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December 31, 2016
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Capital Equipment
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$ 34,517
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$ 34,517
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Accumulated Depreciation
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(12,618)
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(7,390)
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Net Fixed Assets
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$ 21,899
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$ 27,127
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Depreciation expense was $5,228 for the years ended December 31, 2017 and 2016
NOTE 6 - COMMON STOCK
Common Stock:
On July 6, 2017 The Company increased its Authorized Capital to 20,000,000,000 common shares at $0.0001 par value. There are 770,676,304
shares issued and outstanding as of December 31, 2017.
During the Period January 1, 2017 to December 31, 2017, the Company issued 766,973,939 shares.
During the period January 1, 2017 to December 31, 2017 a total of 556,397,896 shares were issued to Note holders for conversions.
Additionally, for services rendered, the following were issued.
168,809,850 shares to our Company CEO, John Sprovieri for Management Services for a value of $168,810.
24,561,900 shares to our Director, Clifford Jett for Management/Director services for a value of $24,562.
3,500,000 to Director (retired), William Beers. for Director Services for a value of $3,500.
2,500,000 to IR director, Lee Odom for IR services for a value of $2,500.
11,168,767 to Kodiak Capital for preparation of unused S-1. $5,864
The following table is a list of the foremost 6 shareholders of the Company as of December 31, 2017.
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NAME
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ADDRESS
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Number of Shares
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1
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CEDE & Company
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570 Washington Blvd. 5th. Floor, Jersey City, NJ 07310
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473,708,076
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2
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John Sprovieri
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PO Box 813, Rufus OR 97050
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170,515,000
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3
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Fourth Man LLC
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2522 Chambers Road, Suite 100, Tustin, CA 92780
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50,000,000
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4
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ADAR BAYS LLC
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3411 Indian Creek Dr. Ste 403, Miami, FL 33140
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34,252,381
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5
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CD & KD Jett
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PO Box 846, Rufus, OR 97050
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24,810,000
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6
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Kodiak Capital Group
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260 Newport Ctr. Drive, Newport Beach, CA 92660
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11,168,767
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NOTE 7 - INCOME TAXES
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The Company accounts for income taxes under SFAS No. 109 (now contained in FASB Codification Topic 740-10-25, Accounting for Uncertainty in Income Taxes), which requires the asset and liability approach to accounting for income taxes. Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse. As of December 31, 2017, we had a net operating loss carry-forward of approximately $(2,420,000) and a deferred tax asset of $670,103 using the statutory rate of 21%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty of future events we have booked valuation allowance of $(675,180). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2017 the Company had not taken any tax positions that would require disclosure under FASB ASC 740.
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December 31, 2017
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December 31, 2016
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Deferred Tax Asset
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$ 675,180
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$ 242,176
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Valuation Allowance
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(675,180)
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(242,176)
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Deferred Tax Asset (Net)
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$ -
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$ -
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The Company files income tax returns in the U.S. and Oregon federal jurisdictions. These filings are subject to a three year statute of limitations unless the returns have not been filed at which point the statute of limitations becomes indefinite. No filings are currently under examination. No adjustments have been made to reduce the estimated income tax benefit at year end. Any valuations relating to these income tax provisions will comply with U.S. generally Accepted Accounting principles.
Note 8
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Derivative Liabilities
As a result of the convertible notes we recognized the embedded derivative liability on the date that the note was convertible. We also revalued the remaining derivative liability on the outstanding note balance on the date of the balance sheet. The remaining derivative liabilities were:
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December 31, 2017
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December 31, 2016
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Derivative Liabilities on Convertible Loans:
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Outstanding Balance
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$ 309,487
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$ 117,759
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NOTE - 9 SUBSEQUENT EVENTS
On February 27, 2018 the company purchased a 5 acre industrial lot for $100,000 from the City of Goldendale, WA to establish a production facility. Funds were made available for this purpose via a bridging loan from the CEO. The company also issued a convertible note to Power Up Lending Group Ltd in the amount of $38,000. The company also recognized Loan fund availability for $1.5 million that will be available starting August, 2018