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PROSHOT CONCRETE, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2019 AND 2018 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Proshot Concrete, Inc. was incorporated on July 25, 2006, in the State of Alabama, and is engaged in the business of renovation and restoration of concrete structures such as bridges, sewers, culverts, and ditch linings. The Company works primarily with local and state governments throughout the United States. Basis of Consolidation The accompanying consolidated financial statements are those of Proshot Concrete, Inc. ("Proshot") and its three variable interest entities, RE, LLC, PC, LLC, and Proshot Property Investments, LLC (collectively, the "Company"). RE, LLC and PC, LLC and Proshot Property Investments, LLC have been identified as variable interest entities that are consolidated with Proshot in accordance with generally accepted accounting principles. RE, LLC, has common ownership with Proshot. Proshot leases its operating facilities and equipment from RE, LLC. PC, LLC, has common ownership with Proshot. Proshot leases equipment from PC, LLC. Proshot Property Investments, LLC was formed during 2017 and has common ownership with Proshot. Proshot has a note payable due from a financial institution on behalf of Proshot Property Investments, LLC. Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Use of Estimates The preparation of the Company's consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenues from contracts on the percentage -of -completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. This method is used because management considers total cost to be the best available measure of progress on the contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term. E