AUSCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2015
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, 2015 and 2014.
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 $56,889 cash equivalents as of December 31, 2015 and $79 as of December 31, 2014.
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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, 2015 and 2014, there were no outstanding, dilutive common stock equivalents.
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 $444,104 as of December 31, 2015.
To the extent that the Company's capital resources are insufficient to meet current or planned operating requirements, the Company has explored additional funds through equity or 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 raises substantial 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.
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NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
The company is reviewing the affects of the following recent updates. We do not have an expectation that the following will have a material effect on the financial statements
In March 2016, the FASB issued Accounting Standards Update 2016-03-Intangibles-Goodwill and Other (Topic 350), Business Combinations (Topic 805), Consolidation (Topic 810), Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance (a consensus of the Private Company Council)
In January 2016, the FASB issued Accounting Standards Update Update 2016-01-Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
In March 2016, the FASB issued Accounting Standards Update 2016-07-Investments-Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.
NOTE 4 -RELATED PARTY ASSET ACQUISITION AND TERMS OF PURCHASE
The company contracted to purchase Assets from another company under common control. The company has determined that fair market value is not allowable where there are entities under common control and cost should be based on the carrying book value of the seller's assets. They were acquired on July 15, 2015. Assets consisted of Production Plant and Equipment, Mobile Equipment, Tools and Equipment and Inventory used in the production of Auscrete AAC housing and other structures. This property, with an estimated value of over $300,000 was acquired for a value $80,000 by the issue of 80 million common shares. There was no cash component in the purchase.
NOTE 5 - INVENTORY
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 AAC 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 at $6.52 per cu. ft..
Raw Materials:
Raw materials consists 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.
NOTE 6 - PROPERTY AND EQUIPMENT
During 2015, the company sold previously impaired assets, for $10,000 which is shown as a gain on disposal of assets. Most of the assets were gifted back to the company at a value of $0 in the transaction discussed in Note 3.
| Table of Equipment |
2015 |
2014 |
|
| Mobile Equipment |
- |
38,000 |
|
| Shop Equipment |
- |
12,000 |
|
| Manufacturing Equipment |
21,000 |
14,000 |
|
| Building |
- |
83,000 |
|
| Office Equipment |
1,017 |
- |
|
| TOTAL |
34,017 |
135,000 |
|
| Accumulated Depreciation - NET |
(2,162) |
(135,000) |
|
| TOTAL Property & equipment - NET |
31,855 |
- |
|
NOTE 7 - NOTES PAYABLE
During December 2015, the company issued 2 Convertible Notes. One note to ADAR Bays was for $50,000 and is convertible after June 9, 2016. It is a twelve month note at 8% interest. The second Note is with EMA Financial Inc. It is a twelve month note at 10% interest but is convertible at any time and the company determined that the EMA note has an embedded derivative that has been shown on the Balance Sheet.
| Convertible Note Table |
|
|
| Derivative |
39,818 |
|
| Discount for finance fees |
5,500 |
|
| Amortization of discount |
(3,776 |
) |
| Remaining discount on notes |
41,542 |
|
NOTE 8 - COMMON STOCK
The Company has authorized 500,000,000 common shares at no par value, of which 100,935,000 shares are issued and outstanding as of December 31, 2015. On May 26, 2014, the company adopted a forward stock split of 10 for 1 and all presentations, including weighted average and losses per share, in these Financial Statements have been stated for the split.
During the twelve months ended December 31, 2014, the Company issued 2,500,000 shares described as follows:
5/26 2,000,000 shares to Kimberley Grimm for Services ($20,000)
5/26 500,000 shares to Martin J Kelly for Cash ($5,000)
During the twelve months ended December 31, 2015, the Company issued 80,900,000 shares described as follows:
3/9 600,000 shares to Globex for DTC Registration ($12,000)
6/25 100,000 shares to Colonial Stock Transfer for Services ($1,000)
6/25 200,000 shares to Stockvest for Consulting fees ($2,000)
6/25 40,000,000 shares as half payment of an asset purchase. (see note 4)
9/1 40,000,000 shares as the balance of the payment of an asset purchase. (see note 4)
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NOTE 9 - INCOME TAXES
The Company has incurred net operating losses since inception. The Company has not reflected any benefit of such net operating loss carry forwards in the financial statements.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.
Based on the level of historical taxable losses and projections of future taxable income (losses) over the periods in which the deferred tax assets can be realized, management currently believes that it is more likely than not that the Company will not realize the benefits of these tax deductible differences. Accordingly, the Company has provided a valuation allowance against the gross deferred tax assets as follows:
As of December 31, 2015, the Company had a net operating loss carry forward of approximately $400,000, which will begin to expire in the tax year 2033. The Company may have experienced control changes under IRC 382, which has not been fully analyzed and could affect the NOL availability.
Reconciliations between the provision for income taxes and the expected tax benefit using the federal statutory rate of 34% and the state statutory rate of 6.9% for a total effective rate of 40.9% for 2015 and 2014.
The Company adopted the uncertain tax position disclosure in accordance with ASC 740 and has not recognized any material increase in the liability for unrecognized income tax benefits as a result of the implementation. The Company estimates that the unrecognized tax benefit will change within the next twelve months. The Company will continue to classify income tax penalties and interest, if any, as part of interest and other expenses in its statements of operations. The Company has incurred no interest or penalties as of December 31, 2015 and 2014.
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 - 10 SUBSEQUENT EVENTS
Subsequent to December 31, 2015. The company Issued a convertible note in the amount of $45,000 and signed an agreement with Dutchess Opportunity Fund, II, LP for an Equity Line of Credit (ELF) in the amount of $ 5 million.
The company also signed an agreement with PN&N Enterprise, Ltd. of Jamaica to set up a manufacturing plant in Jamaica to produce a minimum of 1,500 homes over 7 years. PN&N are Developers in Jamaica and will develop properties on the Island that will have Auscrete houses built on site. The price of the homes will vary between $85-100,000 and middle income residents will be able to use Government assistance to take out 95-100% mortgages. Currently there is a shortage of livable homes in the order of 15,000 units and increasing every year.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow timely decisions regarding required disclosure. Our President, who serves as our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2015 and he determined that our disclosure controls and procedures were not effective.
Management's Annual Report on Internal Control over Financial Reporting
Management is responsible to establish and maintain adequate internal control over financial reporting. Our principal executive officer is responsible to design or supervise a process that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The policies and procedures include:
- maintenance of records in reasonable detail to accurately and fairly reflect the transactions and dispositions of assets,
- provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors, and
- provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Our management determined that there were no changes made in our internal controls over financial reporting during the fourth quarter of 2015 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
There are no other disclosures at this time.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Our directors and executive officers and their respective ages,
positions, term of office and biographical information are set forth below. Our bylaws require at least three directors to serve
for a term of one year or until they are replaced by a qualified director. Our executive officers are chosen by our board of directors
and serve at its discretion. There are no existing family relationships between or among any of our executive officers or directors.
| Name |
Age |
Position Held |
Director Term |
| A. John Sprovieri |
67 |
Director and President/Secretary |
From January 1, 2010 until next annual meeting. |
| Clifford D. Jett |
75 |
Director |
From January 1, 2010 until next annual meeting. |
| William S. Beers |
78 |
Director |
From January 1, 2010 until next annual meeting. |
John Sprovieri – CEO/Director, Age 67
John Sprovieri's background is in Mechanical Engineering being in the manufacturing industry for many years. He is an American born in Australia and moved permanently to the US in 1994. He and his wife, Mary have been married nearly 46 years and have no children.
In 1975, Mr. Sprovieri developed an agricultural/industrial tractor line and developed both the manufacturing and marketing segments of his company, Australian Tractor Manufacturers Pty. Ltd. The corporation produced nearly 500 units over the next 14 years until he sold the company to Just Australia China Holdings Ltd. (JACH) with interests in China, Korea and Russia. The company was operating profitably at the time it was sold. JACH were setting up overseas operations and were going to manufacture in China or South Korea. He stayed on with the corporation liaising with overseas licensed manufacturers and markets. He traveled extensively into Europe, USSR, the Middle East and North America.
Following completion of his obligations to JACH in 1993, he researched the US West Coast Market for low cost housing development, and started a transport company following working with 2 transport companies in Washington and Oregon in various positions throughout the West Coast corridor for nearly 3 years. In 1997 John launched an interstate transport company and was responsible for all facets of management including finance, operations, personnel and government compliance. In 2003, John commenced development of the Auscrete technology and acquired financing to further develop the Cellucon based technology and product with a view to creating an affordable housing manufacturing operation.
During the past 12 years since 2003, Mr. Sprovieri has been principally involved with launching and managing the Auscrete of Oregon development activities. During this time, he has set up a manufacturing facility, trained personnel, redeveloped technology and started production of Auscrete products in 2007.
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Clifford Jett – Director, Age 75
Mr. Jett was the Mayor of the City of Rufus until December, 2014 and had been since 1998. He is chairman of the Lower John Day Regional Partnership and on the Board of Directors of Mid-Columbia Council of Governments. He is also a member of the Mid Columbia Economic Development District and the Lower John Day Area Commission on Transportation.
Mr. Jett comes from the Columbia Gorge and has an intimate knowledge of the area. He and his wife, Kay live in Rufus on their small agricultural holding. In his earlier career he became heavily involved in Law Enforcement and, since 1967, spent many years in Nevada commencing as a Conservation Fieldman II for the Nevada Dept. of Fish and Game. Until 1991, he worked through the ranks to achieve Region III L.E. Supervisor status as Fish and Game Agent III at the Nevada Dept. of Wildlife. This diverse career gave him much experience in management, public relations, budgeting, law enforcement knowledge, personnel evaluations and preparation of quarterly and annual reports.
In 1996, Mr. Jett became a city councilman for the City of Rufus and was elected Mayor in 1998. In addition to having been a deputy of the Sheriff’s Department in the marine division, he is also a vineyard farmer and a partner in a small museum in the area. Mr. Jett's 23 years in Law Enforcement gave him the ability to display professionalism and integrity as part of his life's philosophy. His leadership and problem solving ability make him well qualified to serve on the Board of Directors of this corporation.
William Beers – Director, Age 78
Mr. Beers has lived in Sherman County since 1956 and lives with his wife, Linda in the City of Rufus. He recently became semi-retired and retired from his position as a councilman for the City of Rufus where he served for a number of years. Bill is directly involved in the presentation of the city to possible development of local businesses and commercial and industrial enterprises by encouraging potential business people to move to the city's business park.
Mr. Beers' experience in business management stretches back decades. He has owned and managed a number of business including a truck stop service station and restaurant, all of which he sold when they were operating profitably and are still operating today. Around 12 years ago and at retirement age, he and his wife Linda purchased the Hi-Way Market general store and deli in Rufus and shared the business and personnel management responsibilities. Seeking retirement, they leased the business to their employees two years ago.
Code of Ethics
Since we have only three persons serving as executive officers and directors and because we have minimal operations, we have not adopted a code of ethics for our principal executive and financial officers. Our board of directors will revisit this issue in the future to determine if adoption of a code of ethics is appropriate. In the meantime, our management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and comply with applicable governmental laws and regulations.
Corporate Governance
We are a smaller reporting company with minimal operations and only three directors and officers. As a result, we do not have a standing nominating committee for directors, nor do we have an audit committee with an audit committee financial expert serving on that committee. Our entire board of directors acts as our nominating and audit committee.
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ITEM 11. EXECUTIVE COMPENSATION.
No Officers or Directors received any form of compensation during the year ending December 31, 2015.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information regarding beneficial ownership of our common stock as of December 31, 2015. We did not have any equity compensation plans as of December 31, 2015.
| Name & Address |
# Class A Common Stock owned |
Percentage |
|
| A. John Sprovieri - PO Box 813, Rufus OR 97050 |
52,465,000 |
52 |
|
| Clifford & Kay Jett - PO Box 846, Rufus OR 97050 |
25,010,000 |
25 |
|
| William S. Beers - PO Box 825, Rufus OR 97050 |
8,260,000 |
8 |
|
| Kimberly A. Grimm - PO Box 801, Rufus OR 97050 |
5,000,000 |
5 |
|
| VAWT Earth, Wind and Power - Unit 2393 Sidney, B.C. V8L 3Y3 |
970,000 |
1 |
|
We have determined beneficial ownership in accordance with the rules of the SEC. We believe, based on the information furnished to us, that the persons and entities named in the table above have sole voting and investment power with respect to all shares of common stock that they beneficially own.
ITEM 13. CERTAIN RELATIONSHIPS, AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
There are no notable outside director and officer related transactions or relationships to report other than minimal advances made by directors to finance interim operations.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fee
The aggregate fees billed for each of the last two fiscal years for professional services rendered by Fruci & Associates II, PLLC (formerly MartinelliMick PLLC) for the audit of Auscrete Corporation annual financial statements and review of financial statements included in Auscrete Corporation's 10-Q reports and services normally provided by the accountant in connection with statutory and regulatory filings or engagements were $14,800 for fiscal year ended 2015 and $11,500 for professional services for fiscal year 2014.
Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of Auscrete Corporation financial statements that are not reported above were $0 for fiscal year ended 2015 and $0 for fiscal year ended 2014.
Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 for fiscal years ended 2015 and 2014.
All Other Fees
The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above were $0 for fiscal years ended 2015 and 2014.
We do not have an audit committee currently serving and as a result our board of directors performs the duties of an audit committee. Our board of directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures.
PART IV
ITEM 15. EXHIBITS.
Exhibit 23.1 - Consent of Fruci & Associates II, PLLC.
Exhibit 31.1 - Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 - Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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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.
AUSCRETE CORPORATION
| |
By: /s/ A John Sprovieri
A. John Sprovieri
(Chief Executive and Financial Officer) |
Date: April 14, 2016 |
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