Quarterly Report (10-q)

Date : 11/19/2018 @ 7:17PM
Source : Edgar (US Regulatory)
Stock : Auscrete Corp (ASCK)
Quote : 0.0005  0.0 (0.00%) @ 12:07PM

Quarterly Report (10-q)

0001492091 --12-31 ausc 271692457 Non-accelerated Filer Yes true true false false 2018 Q3 0001492091 2018-01-01 2018-09-30 0001492091 2018-09-30 0001492091 2018-10-09 0001492091 2017-12-31 0001492091 2018-07-01 2018-09-30 0001492091 2017-07-01 2017-09-30 0001492091 2017-01-01 2017-09-30 0001492091 2016-12-31 0001492091 2017-09-30 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

 

 

 

 

x

QUARTERLY REPORT PURSANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended September 30, 2018

 

Or

 

 

 

 

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from __________ to __________ 

    

Commission File Number:  001-35923

 

AUSCRETE CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

 

 

 

 

Wyoming

 

  27-1692457

 

 

(State of Incorporation)

 

(IRS Employer ID Number)

 

 

P.O. Box 230 Goldendale, WA 98920

(Address of principal executive offices and Zip Code)

 

Registrant s telephone number, including area code (509) 773-2109

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  yes  o  no

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x  yes  o  no

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

See the definitions of "large accelerated filer," "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

 

 

 

 

 


Page 1 of 19


Large accelerated filer  o

 

Accelerated filer  o

 

Non-accelerated filer  x

 

Smaller reporting company  x

 

(Do not check if a smaller reporting company)

 

 

 

 

 

 

Emerging growth company  x

 

 

 

If an emerging growth company, indicate by check mark if registrant has elected not to extended transition period for complying with any new of revise financial accounting standards provided pursuant to ‘Section 7(a)(2)(B) of the Security Act.  o  yes  no

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o  yes  no

 

 

APPLICABLE TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  o  yes  o  no

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock. The number of shares outstanding as of November 16,   2018 of the Issuer's Common Stock is  57,227,427 .


Page 2 of 19


 

 

 


 

AUSCRETE CORPORATION

 

June 30, 2018

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

Page

 

PART I - FINANCIAL STATEMENTS  

 

 

 

 

 

 

 

Item 1 - Financial Statements

 

 

 

Balance Sheets as at September 30, 2018 (unaudited) and December 31, 2017 (audited)

 

4

 

 

 

 

 

Statements of Operations (unaudited) for the three and nine Months ended September 30, 2018  

and 2017 respectively

 

5

 

 

 

 

 

Statements of Cash Flows (unaudited) for the three and nine Months ended September 30, 2018

and 2017 respectively

 

6

 

 

 

 

 

Notes to Financial Statements

 

7

 

 

 

 

 

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

 

13

 

 

 

 

 

Item 3 - Quantitive and Qualitive Disclosures about Market Risk

 

16

 

 

 

 

 

Item 4 - Controls and Procedures

 

16

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

Item 1 - Legal Proceedings

 

17

 

 

 

 

 

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

 

17

 

 

 

 

 

Item 3 - Defaults Upon Senior Securities

 

17

 

 

 

 

 

Item 4 - Mine Safety Disclosures

 

17

 

 

 

 

 

Item 5 - Other Information

 

17

 

 

 

 

 

Item 6 - Exhibits - Exhibit 31.1 and 32.1

 

Attached

 


Page 3 of 19


 

 

 

AUSCRETE CORPORATION

BALANCE SHEETS

 

 

 

 

 

 

 

 

(un-audited)

 

ASSETS

September 30, 2018   

December 31, 2017  

CURRENT ASSETS:

 

 

Cash

$ 55,411   

$ 14,975   

Prepaid Expenses

1,221   

70   

Inventory

47,000   

47,000   

TOTAL CURRENT ASSETS

103,632   

62,045   

 

 

 

Property, Plant and Equipment (net)

123,342   

21,899   

Deposits

4,125   

 

TOTAL ASSETS

$ 231,099   

$ 83,944   

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

CURRENT LIABILITIES:

 

 

Accounts Payable

$ 23,101   

$ 25,718   

Accrued Interest Payable

84,545   

66,424   

Notes Payable (net of discount)

361,509   

386,547   

Derivative Liability

701,054   

309,487   

Related Party Advances

23,706   

1,099   

TOTAL CURRENT LIABILITIES

1,193,915   

789,275   

TOTAL LIABILITIES

1,193,915   

789,275   

 

 

 

Commitments and Contingencies

 

 

 

 

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

Common Stock, 0.0001 par value, authorized 2,000,000,000 shares (increased from 500,000,000) 57,227,427 and 770,676 shares issued and outstanding as of September 30, 2018 and December 31, 2017 respectively, restated to APIC below for the 1000 for 1 reverse stock split.

5,723   

77   

Additional Paid In Capital

6,102,995   

2,467,577   

Shares to be issued

 

17,981   

Accumulated deficit

(7,071,534)  

(3,190,966)  

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)

(962,816)  

(705,331)  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$ 231,099   

$ 83,944   

 

 

 

The accompanying notes are an integral part of these financial statements


Page 4 of 19


 

 

 

AUSCRETE CORPORATION

STATEMENTS OF OPERATIONS

for the three and nine months ended September 30,

(un-audited)

 

 

 

 

Three months

Ended

September

30, 2018

Three months

Ended

September

30, 2017

Nine months

Ended

September

30, 2018

Nine months

Ended

September

30, 2017

REVENUE

$  

$  

$  

$  

 

 

 

 

 

EXPENSES

 

 

 

 

Accounting and Legal

1,600   

3,700   

19,809   

33,480   

G&A Expenses

59,030   

20,454   

147,763  

69,079   

Share based Expense

2,540,000   

 

2,540,000   

 

Depreciation expense

1,307   

1,307   

3,921   

3,921   

TOTAL EXPENSES

2,601,937   

25,461   

2,711,493   

106,480   

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

Gain / (Loss) on Derivative

(290,991)  

7,974   

(389,132)  

(51,425)  

Financing cost

(283,884)  

(115,342)  

(739,562)  

(386,312)  

Interest Expense

(14,642)  

(13,707)  

(40,282)  

(41,942)  

TOTAL OTHER INCOME (EXPENSES)

(589,517)  

(121,075)  

(1,168,976)  

(479,679)  

 

 

 

 

 

LOSS BEFORE TAXES

(3,191,454)  

(146,536)  

(3,880,469)  

(586,159)  

Provision for Income Taxes

 

 

 

 

NET LOSS

$ (3,191,454)  

$ (146,536)  

$ (3,880,469)  

$ (586,159)  

 

 

 

 

 

NET LOSS PER COMMON SHARE - BASIC & DILUTED

$ (0.11)  

$ (18.73)  

$ (0.34)  

$ (108.30)  

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC & DILUTED

28,580,415   

7,823   

11,409,689   

5,412   

 

 

 

The accompanying notes are an integral part of these financial statements


Page 5 of 19


 

 

 

AUSCRETE CORPORATION

STATEMENT OF CASH FLOWS

For the nine months ended September 30,

(un-audited)

 

 

 

 

Nine months

Ended

September

30, 2018

Nine months

Ended

September

30, 2017

OPERATING ACTIVITIES

 

 

OPERATING ACTIVITIES

Profit (Loss)

$ (3,880,496)  

$ (586,159)  

Finance Fees

695,159   

386,312   

Depreciation

3,921   

3,921   

Change in other assets

(5,276)  

 

Share Based Expense

2,540,000   

 

Change in Accounts Payable and Accrued Expenses

15,504   

10,786   

Change in Related Party Advances

22,607   

44,914   

Change in Derivative

389,132  

244,723   

Change in note discount

31,326   

(205,048)  

Change in accrued interest

38,896   

41,942   

Net Cash Used by Operating Activities

(149,200)  

(58,609)  

 

 

 

INVESTING ACTIVITIES:

 

 

Purchase of Equipment

(5,364)   

 

Purchase of Land

(100,000)  

 

Net cash used by investing activities

(105,364)  

 

 

 

 

FINANCING ACTIVITIES:

 

 

Payments on notes payable

(45,000)  

 

Proceeds from notes payable

340,000   

98,000   

Net cash provided by financing activities  

295,000   

98,000   

NET INCREASE (DECREASE) IN CASH

40,436   

39,391   

 

 

 

CASH AT BEGINNING OF PERIOD

14,975   

23   

 

 

 

CASH AT END OF PERIOD

$ 55,411   

$ 39,414   

 

 

 

Supplemental Cashflow Information

 

 

Interest Paid

$  

 

Taxes Paid

$  

$  

 

 

 

Supplemental Non-Cash Disclosure

 

 

Shares issued for note conversions

$ 325,463   

$  


Page 6 of 19


 

 

The accompanying notes are an integral part of these financial statements


Page 7 of 19


 

AUSCRETE CORPORATION

UNAUDITED NOTES TO FINANCIAL STATEMENTS

September 30, 2018

 

 

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies of Auscrete Corporation is presented to assist in the understanding of the Company's financial statements. The financial statements and notes are representations of the Company's management, who is responsible for their integrity and objectivity.

The Company follows the accounting guidance outlined in the Financial Accounting Standards Board Codification guidelines. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted principles for interim financial information and with the instruction to Form 10-Q of Regulation S-K. They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2017 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.

The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, which unless otherwise disclosed herein, consisting primarily of normal recurring adjustments, have been made. Operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018

 

History

Auscrete Corporation ("the Company") was formed as an enterprise to take advantage of technologies developed for the construction of specialty Affordable and lightweight concrete based, thermally efficient and structurally superior housing. This "GREEN" product is the culmination of design and development since the early 1980's. Auscrete Corporation had its beginnings in 2005 when a private company that was owned by this company's President and Directors re-developed the 1980's technology to comply with, and exceed,

International Building Codes. The Auscrete Corporation Public Company that now exists was started to enable financing of the operations so the company can address an ongoing problem in the world's largest marketplace, AFFORDABLE HOUSING.

 

 

Recent Accounting Pronouncements

The company is reviewing the effects of the following recent updates. We do not have an expectation that the following will have a material effect on the financial statements

In February 2016, the FASB issued ASU 2016-02,  Leases , a comprehensive new standard that amends various aspects of existing accounting guidance for leases, including the recognition of a right-of-use asset and a lease liability in the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted.

 

The new leasing standard requires modified retrospective transition, which requires application of the new guidance at the beginning of the earliest comparative period presented in the year of adoption. Management is currently evaluating the impact of this standard. Right-of-use assets and lease liabilities will be recorded in the


Page 8 of 19


Consolidated Balance Sheets upon adoption; however, an estimate of the impact of this standard is not currently determinable.

 

In June 2016, the FASB issued ASU 2016-13,  Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which introduces new guidance for the accounting for credit losses on certain financial instruments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Management does not expect the adoption of this accounting standard to have a material impact on its consolidated financial statements and notes thereto.

 

In January 2017, the FASB issued ASU 2017-04,  Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,  which eliminates Step 2 of the goodwill impairment test. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity should apply the amendments in this ASU on a prospective basis. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management expects to adopt this ASU in the fourth quarter of 2018 when the Company performs its annual impairment testing. The Company does not expect the adoption of this accounting standard to have a material impact on its consolidated financial statements and notes thereto.

 

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to Auscrete’s financial position, results of operations or cash flows.

 

The company has adopted ASU 2018-07 and the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The Company does not expect the adoption of this accounting standard to have a material impact on its consolidated financial statements and notes thereto.

 

 

 

 

 

 

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.

 

 

 

 

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 $55,411 and $14,975 in cash equivalents as of September 30, 2018 and December 31, 2017 respectively.

 


Page 9 of 19


 

 

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 September 30, 2018.

 

Reclassification 

Certain amounts in the prior period financial statements have been reclassified to conform with the current period presentation. These reclassifications had no effect on previously reported losses, total assets or stockholders’ equity.

 

 

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 significant revenues from operations to date. The Company has an accumulated deficit of $(7,071,534) as of September 30, 2018.

To the extent that the Company's capital resources were insufficient to meet operating requirements, the Company has accessed loan funding arrangements to enable operations its future needs. These funds, of which the company has already received the first tranche of $200,000 in February, is being used to fund and establish the Company’s new manufacturing plant in Goldendale, WA.

A second tranche of $200,000 will be available by mid-November and the balance of $1.1 million, which completes the facility, will be received in January - March of 2019. The Company does not anticipate that existing shareholders will provide any portion of the Company's future financing requirements.

No assurance can be given that the additional financing will be available when needed by 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.

 


Page 10 of 19


This would have a material adverse effect on the Company and could raise 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.

 

 

NOTE 3 - RELATED PARTY TRANSACTIONS

During the three months ended September 30, 2018, John Sprovieri, an officer and director of the company, has advanced $2,329 to the company.  As of September 30, 2018, and December 31, 2017, the balance owed to John Sprovieri was $23,706 and $1,099 respectively.

 

 

 

NOTE 4 – 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 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.

 

 

 

NOTE 5 - PROPERTY AND EQUIPMENT

Property and Equipment is as listed below in the depreciation table. The 2018 figure includes a 5-acre Industrial property purchased in Goldendale, WA

 

 

 

 

 

September 30, 2018

December 31, 2017

Property Plant and Equipment (Gross)

$

139,361 

$

34,517 

Accumulated Depreciation

(16,019)

(12,618)

Property, Plant and Equipment (net)

$

123,342 

$

21,899 

 

 

 

NOTE 6 - NOTES PAYABLE

 

Since the Company’s most recent 10-Q filing on June 30, 2018, the company has sold two further loan notes, one at $53,000 from PowerUp on July 16, 2018 that was used for ongoing G & A. Another Note for 33,000 was received from PowerUp on September 4, 2018 which was also used for G & A expenses.

 

As a result of these convertible notes, we recognized an embedded derivative liability. We recorded an initial derivative of $217,264 and an initial debt discount of $86,000. We value our derivative liability using a binomial model, using a range of conversion prices that ranged from $.02 to $.04. we used an  expected volatility ranged from 450% to 470% and a risk free interest range of 1.8% to 2.4%

For the three and nine months ended September 30, 2018 we recognized  a net loss on derivative liability of $290,991 and (389,132) respectively and net loss of financing fees of $283,884 and $739,562 respectively.   As of December 31, 2017, and September 30, 2018, our derivative liability was $309,487 and $701,054

 


Page 11 of 19


 

 

NOTE 7 - COMMON STOCK

 

On June 7, 2018, the Company effected a Reverse Split at 1,000 to 1. During the three months ended September 30, 2018, the Company issued, post-split 3,629,000 shares to note holders during conversion representing a total value of $ 21,310. As a result we recassified $354,149 from common stock to additional paid in capital.

 

In addition, the Company issued 50 million shares to management and associated parties for services rendered that was expensed in the Company’s Financial Statements, with a valuation of $2,540,000 valued on the date of the grant.

 

 

 

NOTE 8 - 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 September 30, 2018, the Company had a net operating loss carry forward of approximately $7,071,534 and a deferred tax asset of approximately $1,485,022 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 a full valuation allowance of $1,485,022. The Company may have experienced control changes under IRC 382, which has not been fully analyzed and could affect the NOL availability.

 

 

 

 

 

 

 

 

September 30, 2018

December 31, 2017

Deferred Tax Asset

$ 1,485,022   

$ 670,103   

Valuation Allowance

(1,485,022)  

(670,103)  

Deferred Tax Asset (net)

$  

$  

 

Reconciliations between the provision for income taxes and the expected tax benefit using the federal statutory rate of 21%. and the state statutory rate of 0% for a total effective rate of 21% for 2018.

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 September 30, 2018 and December 31, 2017.

The Company files income tax returns in the U.S. 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.


Page 12 of 19


Any valuations relating to these income tax provisions will comply with U.S. generally accepted accounting principles.

 

 

NOTE 9 – SUBSEQUENT EVENTS

 

There have been no further conversions by Noteholders since September 30, 2018.

The Company’s Equipment Assets, which were earlier transported to Auscrete’s temporary facility are being worked on by the Company’s Engineering Department where refurbishing nears completion and management and staff are working out of the Site Office currently located at the Company’s temporary facility.

The re-designed 25,000 sq. ft. Production Building has completed final design and engineering and the supplier is preparing the necessary drawings for approval by the Building Codes. Delivery supply times of building sets have been extended in the last year or so and it might be December before we can receive ours.

Auscrete designed specialized manufacturing equipment, which is being manufactured for the Company in China, includes the homogenizer, silo supply unit and spiral conveyer units. These units been pre-ordered for manufacture and the supplier expects delivery some weeks before the building will be ready for installation.

The SEPA Environmental Study has been completed for the State of Washington Department of Ecology and contains no definable exigencies from planning for the completion of Auscrete’s Campus on the Industrial Estate.

Funding for the project in the order of $1.5 million commenced last February with the acquisition of initial loan funds in the order of $200,000. This was used for land purchases and G&A. A further $200,000 was due in May for the down payment on the building and deposits on other equipment. The funder suffered some setbacks due to changes in other corporate matters and his cash flow was severely affected.

Auscrete has been waiting on that second funding tranche and has not received it as yet. Management had a meeting with the funder on October 18 and it was understood that the funds would start being received before November 29. The balance of the total package will be received at intervals between then and March, Next year.

It is comforting to know that the problems have been overcome and things will start moving again. Just the first tranche will get the building delivered to the site and the initial production equipment can be received. That is adequate for Auscrete to be ready to start manufacture of building product within 4 months.


Page 13 of 19


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

Readers of this discussion are advised that the discussion should be read in conjunction with the financial statements of Registrant (including related notes thereto) appearing elsewhere in this Form 10-Q. Certain statements in this discussion may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Registrant's current expectations regarding future results of operations, economic performance, financial condition and achievements of Registrant, and do not relate strictly to historical or current facts. Registrant has tried, wherever possible, to identify these forward-looking statements by using words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning.

Although Registrant believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties, which may cause the actual results to differ materially from those anticipated in the forward-looking statements. Such factors include, but are not limited to, the following: general economic and business conditions, which will, among other things, affect demand for housing, the availability of prospective buyers; adverse changes in Registrant's real estate and construction market; including, among other things, competition with other manufacturers, risks of real estate development and acquisitions; governmental actions and initiatives; and environmental/safety requirements.

Results of Operations

As at September 30, 2018, the Company had not commenced manufacturing operations. Therefore, there were no material operational changes from the last audited financials of December 31, 2017.

The company has established its operating base in Goldendale, WA and is currently preparing for the construction of two manufacturing buildings. Management has assembled a complete specification set for the manufacturing process and have alerted machinery suppliers of the company's needs and probable dates required.

During the nine months ended September 30, 2018, the company was not operating as a revenue producing manufacturer and, with allowances for Derivative allowances, sustained losses of $2,587,769. These include regular expenses plus additional expenses and sub contract labor that were necessary as the company went ahead with Design Engineering and Fundraising activities.

Liquidity

During the nine months ending September 30, 2018, the company did receive payments of $340,000 from the sale of convertible notes. Even though there were considerable costs during the period in financing fees and interest, the company was able to end the period with cash on hand of $55,411.

Overview

Auscrete Corporation 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 current technology is the amalgamation of various material stages of Company development, 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 very competitive. A turnkey house, ready to move in sells for around $105 per square foot. That is very competitive in today's market but is brought about by Auscrete's ability to manufacture large panels in mass production format. The house is very quickly constructed on site to produce an attractive and functional site-built home, a home that will stay where it is put through all kinds of adverse


Page 14 of 19


weather and age conditions. It will not burn, is not affected by insect infestation or rot, it saves extensively on energy costs and has very low maintenance needs.

Financing

Auscrete Corporation, a Wyoming public company was incorporated on December 31, 2009 and initially became effective with the SEC for an IPO on August 16, 2012. The IPO was never exercised and expired.

Subsequently the company had an S-1 become Effective on December 30, 2014. This was not an Offering and not used for fundraising.

The company has been quoted on the OTCPink Bulletin Board under the symbol "ASCK" since February 2015 and is DTC registered.

During February, 2018, Management was able to secure commitment of a loan facility with RB Partners Inc. in California. Through Auscrete’s CEO, the company received $200,000 in loan funds in early February and another $140,00 by September 30. The balance of the total package will be received at intervals between November 7 and March next year.

These funds will enable completion of the construction of the factory facility on Auscrete’s Industrial Land in Goldendale, WA and meet the ongoing financial needs of the company.

Financial Statements in this document represent the full results of the company during the nine-month period to September 30. There are no "off balance sheet" arrangements.

Use of Funds

As at September 30, 2018 the company’s acquisition of land on the Goldendale, WA Industrial Estate was completed. The first $340,000 of the anticipated $1.5 million has enabled commencement of work to set up the company’s Flagship Manufacturing Plant on Auscrete’s property on the Industrial Estate.

The company will invest up to $1.5 million overall that it will have received in the funding expected between November 7 and March 2018. The completed Stage 1 costs were $100,000 to purchase the 5 acres of Industrial Land and the preparation of planning and design for the property.

Stage 2 will be the construction of a Production Building of 25,000 sq. ft. followed by a Manufacturing Support Building of 16,000 sq. ft. The cost of supply and erection of these buildings will be around $550,000.

Plant & Production Line Equipment, which comprises Specialty Materials Blenders and Raw Materials Handling Equipment, Fork Lifts, Casting Tables and Specialized Equipment, will cost approximately $160,000 and Shop Equipment will be $90,000. The balance of the funding will be used for working capital and expenses including wages and salaries, marketing, IR services, contingencies and other working capital and reserves to commence production and revenues.

Marketing

Principal marketing efforts will be initially aimed at leveraging specific contacts and relationships that have developed over the last 12 years since the inception of the founders’ pilot plant. The company has interviewed and chosen an experienced sales person who will have the luxury of dealing with existing contracts and contacts as well as the multitude of inquiries received every week.

At this point in time, the company has available contracts for the immediate supply of houses and other structures (apartment block etc.) valued at over $3 million but also has letters of intent from a developer and from a contractor to supply some 130 plus houses to their housing estates over the next few years.

Delivery for this project alone will be paced at the rate of sales but is expected to initially be in excess of 40 units per year. Auscrete's product is also extremely suitable for the construction of commercial and industrial structures. Company marketing will also explore the commercial world for applications and it is believed that such construction will become a large part of the company's future direction.


Page 15 of 19


Financial Projections

Using a conservative estimate at an average 1,500 sq. ft. home with a value per sale of $150,000, the company is projecting first year sales revenues in the $6-8 million range escalating to $15 million per year there on, as the new campus is up and running. At that rate, there are already approximately 3+ years of sales available at hand.

The typical structure will be a home in the 1,100 - 3,000 sq. ft. range that will sell to the contractor or developer for around $80,000 to $200,000 with the average being $150,000. Obviously, the company will look to increase output to meet the demand and expects to do this through minimal internal financing. The typical net margin is in excess of 20% and, once in production, the company does not expect to incur first year losses.

Operations Management

When the new Fabrication Building and Production Building have been completed at the industrial site, production will be commenced. The Auscrete Team will comprise of a minimal tiered management structure that enables control and knowledge to be firmly at the hands of senior management ensuring rapid and simplified direct reporting to action.

Upon commencement of Auscrete's activity, under control of the CEO will be marketing, manufacturing operations, design architecture and engineering, administration and safety compliance. Additionally, the

Construction Manager will oversee Auscrete's own construction activities as well as liaise with contractors and developers.

Operations

Design and Engineering will prepare new design concepts and adapt customer's designs, either residential or commercial, to the Auscrete style of construction as well as preparing all drawings for manufacturing on the production floor.

Manufacturing will involve the use of, initially, 16 hydraulically operated multi process casting tables with each table able to produce 5 panels per 2 weeks. This allows for the materials to cure adequately enabling safe removal from the table. The panels are then taken to the finishing area where they are prepared for delivery and shipping.

The construction manager will be responsible for liaising with contractors, developers and other customers to ensure the satisfactory completion of their contract. As well, the company will have its own construction division that will not conflict with other contractors but will enable the company the ability to carry out construction operations where no alternative exists. The construction manager will also oversee these operations.

Future Strategy

Auscrete Corporation intends to position itself as a major supplier in the affordable housing market. Housing is generally considered "affordable" when its cost does not exceed 30 percent of the median family income in a given area. In many parts of the country, housing costs have shown signs of adversely affecting corporations, workers and local economies. Yet, still the availability of affordable housing is becoming increasingly scarce.

The company is promoting a product that will not only make housing affordable but also offers some luxuries as well, such as incorporated heat pump/air conditioning units that would not be available in other houses at such comparable pricing. By constructing with the Auscrete Building System, those luxuries will result in lower cost utilities and a comfortable 'feel' to the living environment, as can be achieved with a product offering excellent thermal and soundproofing qualities as well as superb fire resistance.

Developers and contractors will offer the homes as complete ready constructed site-built units on suitable land. They are NOT and will not be offered under the banner of such categories as 'pre-fabricated', ‘modular” or 'factory built' homes. They are  just plain good value masonry homes  built of a time proven product, concrete.


Page 16 of 19


The company is establishing its expanded operations and manufacturing facility in the Industrial Estate area of Goldendale, WA. Goldendale is a city of around 4,500 people about 110 miles east of Vancouver, WA.

Construction of the plant should take 5-6 months. The advantage of Goldendale is it is located very close to 2 main highways, I-84 east/west and I-97 north/south. The location will help considerably with the delivery of Auscrete’s building materials initially to the Northwest area and will also simplify the delivery of raw materials to the facility. It is anticipated that in the initial year the company will be able to produce enough panel sets for the construction of over 40 homes.

Although Auscrete can economically deliver whole house panel sets as far away as New Mexico or Alberta, Canada, there is a planned future facility to be set up in either Texas or New Mexico. Further efficiencies will be achieved by servicing a fast-emerging market in this above average (for affordable housing) growth area. Additionally, a plant in Texas could quite easily address the Arizona and New Mexico market, now that the market recovery in those areas has heated up. The company plans on selling most of its output to developers, contractors and builders who will purchase the complete set of wall, roof and interior panels from Auscrete and use their own construction crew to construct the house.

Additionally, the company recently reported it had entered agreement with Spiro Sapounas representing a Canadian development consortium to set up a manufacturing plant in Canada. Auscrete will own 75% of this Canadian venture, with the other 25% in the hands of the Canadian Partners. Financing for this project does not form part of the Goldendale, WA initiative described herein. The agreement calls for financing to be acquired from other sources, specifically Federal and Proventil Governments and the Canadian Partners, for the venture.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, our Chief Executive and Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive and Financial Officer concluded as of September 30 th , that our disclosure controls and procedures were not effective such that the information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal controls

There were no changes in our internal control over financial reporting during the nine months ended September 30 th , 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

At present, the Company is not engaged in or the subject of any material pending legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


Page 17 of 19


The Company has sold shares for the purpose of Note Conversion but has not received proceeds from any of these sales during the nine months ended September 30, 2018.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

 

Number

 

Description

 

 

 

31.1*

 

Certification of Chief Executive Officer Pursuant to Sarbanes-Oxley Section 302

 

 

 

32.1

 

Certification Pursuant To 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS*

 

XBRL Instance Document

 

101.SCH*

 

XBRL Taxonomy Extension Schema Document

 

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

101.DEF*

 

XBRL Taxonomy Extension Definition Linkbase Document

 

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE*

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

* Filed herewith.


Page 18 of 19


 

 

SIGNATURES

Pursuant to the requirements 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

Date: November 14, 2018  

By:

/s/ A John Sprovieri

A. John Sprovieri
(Chief Executive and Financial Officer)


Page 19 of 19

 

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