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 June 30, 2020

 

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)

 

 

WA 98620

(Address of principal executive offices and Zip Code)

 

Registrant’s telephone number, including area code (509) 261-2525

 

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.


1


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

 

Large accelerated filer o

 

Accelerated filer o

 

Non-accelerated filer [x]

 

Smaller reporting company [x]

 

 

 

 

 

 

 

 

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 [x] no

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o yes [x] 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 August 12, 2020 of the Issuer's Common Stock is 100,542,966

.

 


2


 

 

 


AUSCRETE CORPORATION

 

June 30, 2020

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

Page

 

PART I - FINANCIAL STATEMENTS 

 

 

 

 

 

 

 

Item 1 - Financial Statements

 

 

 

Balance Sheets as at June 30, 2020 (unaudited) and December 31, 2019 (audited)

 

 

 

 

 

 

Statements of Operations (unaudited) for the three and six months ended June 30, 2020 and 2019 respectively

 

 

 

 

 

 

Statements of Stockholders Equity (unaudited) for the six months ended June 30, 2020 and Year Ended December 31, 2019 respectively

 

 

 

 

 

 

Statements of Cash Flows (unaudited) for the six months ended June 30, 2020 and 2019 respectively

 

 

 

 

 

 

Notes to Financial Statements

 

 

 

 

 

 

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

 

15 

 

 

 

 

 

Item 3 - Quantitive and Qualitive Disclosures about Market Risk

 

19 

 

 

 

 

 

Item 4 - Controls and Procedures

 

19

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

Item 1 - Legal Proceedings

 

19 

 

 

 

 

 

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

 

19 

 

 

 

 

 

Item 3 - Defaults Upon Senior Securities

 

20 

 

 

 

 

 

Item 4 - Mine Safety Disclosures

 

20 

 

 

 

 

 

Item 5 - Other Information

 

20 

 

 

 

 

 

Item 6 - Exhibits - Exhibit 31.1 and 32.1

 

Attached

 


3


 

 

AUSCRETE CORPORATION

BALANCE SHEETS

 

 

 

 

 

(Un-audited)

 

 

June 30,

December 31,

ASSETS

2020  

2019  

CURRENT ASSETS:

 

 

Cash

$8,025  

$15,634  

Prepaid Expenses

7,744  

6,265  

Inventory

2,100  

2,100  

TOTAL CURRENT ASSETS

17,869  

23,999  

 

 

 

Property, Plant and Equipment (net)

60,137  

59,061  

Deposits

 

 

TOTAL ASSETS

$78,006  

$83,060  

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

CURRENT LIABILITIES:

 

 

Accounts Payable

$62,246  

$50,838  

Accrued Interest Payable

116,915  

96,507  

Notes Payable (net of discount)

488,095  

370,786  

Derivative Liability

345,492  

729,308  

Related Party Advances

6,490  

6,766  

TOTAL CURRENT LIABILITIES

1,019,238  

1,254,205  

TOTAL LIABILITIES

1,019,238  

1,254,205  

 

 

 

Commitments and Contingencies

 

 

 

 

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

Common Stock, 0.0001 par value, authorized 2,000,000,000 shares

 

 

92,620,953 and 15,597,928 shares issued and outstanding as of June 30, 2020 and December 31, 2019 respectively,

9,262  

1,560  

Additional Paid In Capital

8,660,462  

7,263,903  

Accumulated deficit

(9,610,956) 

(8,436,608) 

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)

(941,232) 

(1,171,145) 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$78,006  

$83,060  

 

 

The accompanying notes are an integral part of these financial statements


4


 

 

AUSCRETE CORPORATION

STATEMENTS OF OPERATIONS

for the three and six months ended June 30,

 

 

three months ended
June 30,

six months ended
June 30,

 

2020  

2019  

2020  

2019  

REVENUE

$ 

$ 

$ 

$ 

 

 

 

 

 

EXPENSES

 

 

 

 

Accounting and Legal

10,250  

11,300  

16,750  

19,700  

Salaries and wages

47,806  

 

97,161  

29,788  

Share based expense

 

 

1,150,000  

 

G&A Expenses

34,485  

29,888  

64,636  

57,882  

Depreciation expense

1,307  

1,307  

2,614  

2,614  

TOTAL EXPENSES

93,848  

42,495  

1,331,161  

109,984  

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

Gain / (Loss) on Derivative

(64,072) 

42,751  

379,917  

151,150  

Financing cost

(75,206) 

(37,949) 

(111,517) 

(144,674) 

Interest Expense

(58,878) 

(58,215) 

(111,587) 

(110,658) 

TOTAL OTHER INCOME (EXPENSES)

(198,516) 

(53,413) 

156,813  

(104,182) 

 

 

 

 

 

LOSS BEFORE TAXES

(292,004) 

(95,908) 

(1,174,348) 

(214,166) 

Provision for Income Taxes

 

 

 

 

NET LOSS

$(292,004) 

$(95,908) 

$(1,174,348) 

$(214,166) 

 

 

 

 

 

NET LOSS PER COMMON SHARE - BASIC & DILUTED

$(0.00) 

$(0.00) 

$(0.02) 

$(0.00) 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC & DILUTED

83,122,439  

69,263,825  

71,815,632  

66,177,047  

 

 

The accompanying notes are an integral part of these financial statements


5


 

 

AUSCRETE CORPORATION

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

as of June 30, 2020

(Un-audited)

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

Shares

Amount

Additional Paid in Capital

Shares to be issued

Accumulated Deficit

TOTAL

BALANCE, December 31, 2018,

286,137 

29 

5,985,986 

- 

(6,708,159) 

(722,145) 

 

 

 

 

 

 

 

Note conversion

28,294 

3 

83,022 

- 

 

83,025  

Net Loss

 

 

 

 

(118,258) 

(118,258) 

BALANCE, March 31, 2019

314,430 

32 

6,069,008 

- 

(6,826,417) 

(757,378) 

 

 

 

 

 

 

 

Issuance Common stock for services

 

 

 

 

 

 

Note conversion

77,667 

8 

109,310 

- 

 

109,318  

Net Loss

 

 

 

 

(95,908) 

(95,908) 

BALANCE, June 30, 2019

392,098 

$40 

$6,178,318 

$- 

$(6,922,325) 

$(743,968) 

 

 

 

 

 

 

 

Issuance Common stock for services

 

 

 

 

 

 

Note conversion

4,387,625 

438 

692,873 

- 

 

693,311  

Net Loss

 

 

 

 

(647,815) 

(647,815) 

BALANCE, September 30, 2019

4,779,722 

$478 

$6,871,191 

$- 

$(7,570,140) 

$(698,472) 

 

 

 

 

 

 

 

Issuance Common stock for services

5,250,000 

525 

209,475 

 

 

210,000  

Note conversion

5,567,852 

556 

160,736 

- 

 

161,292  

Rounding shares

353 

1 

- 

 

(1) 

 

Beneficial conversion feature

 

 

22,500 

 

 

22,500  

Net Loss

 

 

 

 

(866,467) 

(866,467) 

BALANCE, December 31, 2019

15,597,928 

$1,560 

$7,263,902 

$- 

$(8,436,608) 

$(1,171,146) 

 

 

 

 

 

 

 

Issuance Common stock for services

50,000,000 

5000 

1,145,000 

 

 

1,150,000  

Note conversion

12,433,402 

1,243 

151,504 

- 

 

152,747  

Net Loss

 

 

 

 

(882,344) 

(882,344) 

 

 

 

 

 

 

 

BALANCE, March 31, 2020

78,031,330 

$7,803 

$8,560,406 

$- 

$(9,318,952) 

$(750,743) 

 

 

 

 

 

 

 

Issuance Common stock for services

 

 

 

 

 

 

Note conversion

14,589,623 

1,459 

80,806 

 

 

82,265  

Net Income (Loss)

 

 

 

 

(292,004) 

(292,004) 

 

 

 

 

 

 

 

BALANCE, June 30, 2020

92,620,953 

$9,262 

$8,641,212 

$- 

$(9,610,956) 

$(941,232) 

 

 

 The accompanying notes are an integral part of these financial statements


6


 

 

 

 

AUSCRETE CORPORATION

STATEMENT OF CASH FLOWS

for the three and six months ended June 30,

 

 

 

 

 

2020  

2019  

OPERATING ACTIVITIES

NET LOSS

$(1,174,348) 

$(214,166) 

Finance Costs

111,517  

144,674  

Depreciation

2,614  

2,614  

Change in other assets

(1,479) 

3,797  

Share Based expense

1,150,000  

 

Change in Accounts Payable and Accrued Expenses

31,816  

48,020  

Change in Related Party Advances

(276) 

2,254  

Change in Derivative and Note Discount

(290,763) 

(82,257) 

Net Cash Used by Operating Activities

(170,919) 

(95,064) 

 

 

 

INVESTING ACTIVITIES:

 

 

Purchase of Equipment

(3,690) 

775  

Net cash (used) by investing activities

(3,690) 

775  

 

 

 

FINANCING ACTIVITIES:

 

 

Proceeds from notes payable

167,000  

78,500  

Net cash provided by financing activities  

167,000  

78,500  

NET INCREASE (DECREASE) IN CASH

(7,609) 

(15,789) 

 

 

 

CASH, BEGINNING OF PERIOD

15,634  

15,948  

 

 

 

CASH, END OF PERIOD

$8,025  

$159  

 

 

 

Supplemental Cashflow Information

 

 

Interest Paid

$ 

$ 

Taxes Paid

$ 

$ 

 

 

 

Supplemental Non-Cash Disclosure

 

 

Shares issued for note conversions

$254,262  

$192,343  

 

 

The accompanying notes are an integral part of these financial statements


7


 

 

AUSCRETE CORPORATION

UNAUDITED NOTES TO FINANCIAL STATEMENTS

June 30, 2020

  

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 $100-110 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.

 

BASIS OF PRESENTATION AND 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 financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The financial statements are presented in condensed format and should be read in conjunction with the audited financial statement on the form 10K for the year ended December 31, 2019.

 

INCOME TAXES

Federal Income taxes are not currently due since we have had losses since inception.

On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted.  Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018.  The Company will compute its income tax expense for the six Months ended June 30, 2020 using a Federal Tax Rate of 21%.

 

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition.  Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end.  A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.

 

Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.


8


 

The Company has no uncertain tax positions or related interest or penalties requiring Accrual at June 30, 2020 and 2019.

 

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 $8,025 in cash equivalents as of June 30, 2020 and $15,634 as of December 31, 2019.

 

Fair Value Measurements

 

The Company adopted guidance which defines fair value, establishes a framework for using fair value to measure financial assets and liabilities on a recurring basis, and expands disclosures about fair value measurements. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent sources. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

 

Level 1 - Valuation is based upon unadjusted quoted market prices for identical assets or liabilities in accessible active markets.

 

Level 2 - Valuation is based upon quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable in the market.

 

Level 3 - Valuation is based on models where significant inputs are not observable. The unobservable inputs reflect a company’s own assumptions about the inputs that market participants would use.

 

The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances from related parties, and derivative liabilities. The estimated fair value of cash, prepaid expenses, investments, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.

 

 

The Company’s derivative liabilities have been valued as Level 3 instruments.

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of convertible notes derivative liability December 31, 2019

 

$

 

 

$

 

 

$

729,308

 

 

$

729,308

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of convertible notes derivative liability

June 30, 2020

 

$

 

 

$

 

 

$

345,492

 

 

$

345,492

 

 

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of June 30, 2020


9


 

 

 

Derivative

 

Liability

Balance, December 31, 2019

                     729,308

Additions recognized as debt discount

                       121,179

Note Conversions

                    (153,636)

Mark-to-market at June 30, 2020

                    (351,359)

Balance, June 30, 2020

                     345,492

 

 

REVENUE RECOGNITION POLICY

The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”).    The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:



·Identify the contract with the customer  

·Identify the performance obligations in the contract  

·Determine the transaction price  

·Allocate the transaction price to the performance obligations in the contract  

·Recognize revenue when the company satisfies a performance obligation  

 

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


10


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. It is estimated that approximately 400,000,000 shares of common stock could be issued as a result of conversion of notes payable. As of June 30, 2020, and 2019. Fully diluted weighted average common shares and equivalents were withheld from the calculation as they were considered anti-dilutive. All calculations reflect the effects of the 200 to 1 reverse stock split completed November 13th, 2019.

 

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.

 

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.

 

EMERGING GROWTH COMPANY

The Company qualifies as an Emerging Growth Company, thus takes advantage of the 1-year deferral period for the adoption of all new accounting standards updates.   

 

LEASES

ASB ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that


11


are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have not adopted the above ASU as of January 1, 2020, as we have no long term leases.

 

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 $9,610,956 as of June 30, 2020 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. This also may be affected given the uncertainties surrounding the Covid 19 pandemic. 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.

Recent Accounting Pronouncements

In December 2018, 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.

The Company has no expectation that any of these items will have a material effect upon the financial statements.

 

Update 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This was early adopted and there were no outstanding equity awards to be re-valued.

 

NOTE 4 -RELATED PARTY TRANSACTIONS

As of, June 30, 2020 and December 31, 2019, the balance owed to Company CEO, John Sprovieri was $6,490 and $6,766 respectively. These advances were primarily for operating expenses.

 

NOTE 5 - PROPERTY, INVENTORY AND EQUIPMENT

During July 2019, the Company sold their Industrial Property they had bought from the city of Goldendale in February 2018. The original purchase price was $100,000 for the 5 acre lot. The


12


Company sold the land back to the City under the original contract for a discounted price of $90,000.

 

Notes to Inventory Type and Value:

Inventory consists of Raw Materials that are valued at the lower of cost or market.

 

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.

 

Property and Equipment at June 30, 2020 were comprised of the following at:

 

 

 

 

 

June 30, 2020

       December 31, 2019

Property Plant and Equipment (Gross)

$ 79,045

$ 75,355

Vehicles

6,344

6,344

Accumulated Depreciation

(25,252)

(22,638)

Property, Plant and Equipment (net)

$ 60,137 

$ 59,061 

 

During the six months ended June 30, 2020, the Company purchased $3,690 in manufacturing equipment so there was an increase to $79,045 in Gross equipment. The Depreciation expense was for the three and six months ended June 30, 2020 and 2019 was$1,307 and $2,614 respectively.

 

 NOTE 6 - COMMON STOCK

Common Stock:

The Company Authorized Capital to 20,000,000,000 common shares at $0.0001 par value.

 

During November 2019 the company performed a reverse split in the ratio of 1 for 200.

There were 15,597,927 shares issued and outstanding as of December 31, 2019.

 

During the Period January 1, 2019 to December 31, 2019, the Company issued 5,250,000 shares for services based on post-split numbers.

 

During the Period January 1, 2019 to December 31, 2019, the Company issued 10,061,438 shares for convertible note conversions based on post-split numbers.

 

During the Period January 1, 2020 to June 30, 2020, the Company issued 27,023,025 shares for convertible note conversions based on post-split numbers. On one of the conversions the conversion price was modified during the period to induce the share settlement, resulting in loss on the conversion of $19,250.


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During the Period January 1, 2020 to June 30, 2020 there were 50,000,000 shares issued to

these individuals to recompense post-split roll back numbers issued for service compensation to the Company.

 

 

Shareholder

Issued

Cost Basis

Michael A. Young

1,000,000

17,000

Otto B. Paulette

1,000,000

17,000

William S. Beers

1,000,000

17,000

Julie Jett-Regnell

1,000,000

17,000

Elbert L. Odom

1,000,000

17,000

Kimberly A. Grimm

3,000,000

51,000

Kathleen D. Jett

5,000,000

85,000

John & Mary Sprovieri

37,000,000

629,000

 

NOTE 7 - INCOME TAXES

 

Federal Income taxes are not currently due since we have had losses since inception.

On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted.  Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018.  The Company will compute its income tax expense for the nine months ended September 30, 2018 using a Federal Tax Rate of 21%.

 

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition.  Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end.  A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.

 

Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.

As of June 30, 2020, we had a net operating loss carry-forward of approximately $(9,610,956) and a deferred tax asset of approximately $2,018,301 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 $(2,018,301).  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 June 30, 2020, the Company had not taken any tax positions that would require disclosure under FASB ASC 740.


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June 30, 2020

December 31, 2019

Deferred Tax Asset

$2,018,301

 $ 1,771,688 

Valuation Allowance

  (2,018,301)

  (1,771,688)

Deferred Tax Asset (Net)

$                            -

$                            -

The Company is subject to tax in the U.S. federal and Washington 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 – Notes Payable and Derivative Liabilities

 

On May 8, 2018, the company issued a 12-month Convertible Note for the sum of $50,000 to RB Capital at 12%. Convertible at $.004. No beneficial conversion was recognized as the conversion price was higher than the stock price.

 

On June 28, 2018, the company issued a 12-month Convertible Note for the sum of $10,000 to RB Capital at 12%. Convertible at $.004. No beneficial conversion was recognized as the conversion price was higher than the stock price.

 

On December 7, 2018, the company issued a 12-month Convertible Note for the sum of $25,000 to RB Capital at 12%. Convertible at $.004. No beneficial conversion was recognized as the conversion price was higher than the stock price.

 

On October 25, 2019, the company issued a 12-month Convertible Note for the sum of $15,000 to RB Capital at 12%. Convertible at $.01. As a result we recognized a beneficial conversion cost of $45,000.

 

On November 15, 2019, the company issued a 12-month Convertible Note for the sum of $25,000 to RB Capital at 12%. Convertible at $.01. As a result, we recognized a beneficial conversion cost of $7,500.

 

On December 13, 2019, the company issued a 12-month Convertible Note for the sum of $20,000 to RB Capital at 12%. Convertible at $.03. No beneficial conversion was recognized as the conversion price was higher than the stock price.

 

On May 28, 2019 we entered into a one-year convertible promissory note in the amount of $27,500 with and interest rate of 12% and a conversion rate of 55% of the lowest prior 25 days trading period.

 

On August 20, 2019, the company issued a 12-month Convertible Note for the sum of $40,000 to LG Capital at 8%. Convertible at 60% of lowest of the prior 20 days trading period.

 

On December 16, 2019, the company issued a 12-month Convertible Note for the sum of $32,000 to LG Capital at 8%. Convertible at 60% of lowest of the prior 20 days trading period.


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On January 13, 2020, the company issued a 12-month Convertible Note for the sum of $20,000 to RB Capital at 12%. Convertible at $.1. No beneficial conversion was recognized as the conversion price was higher than the stock price.

 

On February 10, 2020, the company issued a 12-month Convertible Note for the sum of $25,000 to RB Capital at 12%. Convertible at $.15. No beneficial conversion was recognized as the conversion price was higher than the stock price.

 

On March 6, 2020, the company issued a 12-month Convertible Note for the sum of $35,000 to LG Capital at 8%. Convertible at 60% of lowest of the prior 20 days trading period.  We recognized a derivative liability of $66,811, an original debt discount of $35,000 and a loss on issuance of $31,811

 

On April 7, 2020, the company issued a 12-month Convertible Note for the sum of $15,000 to RB Capital at 12%. Convertible at $.05. No beneficial conversion was recognized as the conversion price was higher than the stock price.

 

On June 5, 2020, the company issued a 12-month Convertible Note for the sum of $20,000 to RB Capital at 12%. Convertible at $.1. No beneficial conversion was recognized as the conversion price was higher than the stock price.

 

On June 25, 2020, the company issued a 12-month Convertible Note for the sum of $30,000 to Samuel Rotbard at 8%. Convertible at 60% of lowest of the prior 20 days trading period.  We recognized a derivative liability of $66,811, an original debt discount of $35,000 and a loss on issuance of $31,811

 

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 inputs used were a weighted volatility of 204% to 262% and a risk free discount rate of .15% to .42 The remaining derivative liabilities valued using the level 3 inputs in the fair value hierarchy were:

 

The convertible notes have interest rates that range from 8% to 12% per annum and default rates that range from 12% to 24% per annum. The maturity dates range from six months to one year. The conversion rates range from 55% discount to the market to 62% discount to the market.

 

For the six months ended June 30, 2020 the convertible notes had converted into 27,023,025 shares of common stock and we recognized $500 in finance fees on the conversions.

 

Outstanding Derivative Liabilities: 

 

 

 

 

June 30, 2020

December 31, 2019

Derivative Liabilities on Convertible Loans:

 

 

Outstanding Balance

$345,492 

$729,308 

 

NOTE - 9 COMMITMENTS

 


16


On June 14, 2019 the company signed a 6 month lease on a 8,000 sq. ft. facility located in outer Goldendale and monthly lease cost is $2,000. The lease converted to a month to month on December 14, 2019 at $2,000 per month. The total lease payments for 2019 were $12,000.

ASB ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are not materially impacted by this, as we have no long-term leases.

NOTE 10 – SUBSEQUENT EVENTS

 

On July 23rd, 2020, the company issued a 12-month Convertible Note for the sum of $15,000 to RB Capital at 10% interest. The note is Convertible at $0.05. 

 

Auscrete entered into a sales agreement on July 30 with Real Estate Developer, Michael Nillson for supply of housing and structures throughout the Columbia Gorge Region of Washington and Oregon States. The renewable agreement is open ended and gives Mr. Nillson access to an array of housing structures to be constructed over each one year period.

 

The first home is a 360 sq. ft. small display home in Lyle, WA and materials production commenced on August 10th with construction due to commence on August 25. The agreement gives Mr. Nillson preferential supply dates and covers him for a 6% incentive on sales.

 

From July 1, 2020 thru August 11, 2020 we had two note conversions for a total of $15,686 into 7,922,013 shares of our common stock. 

 

In accordance with ASC 855, the Company has analyzed its operations subsequent to June 30, 2020 through the date these financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these financial statements.

 

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,


17


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 June 30, 2020, the Company had not commenced manufacturing operations. Therefore, there were no material operational changes from the last audited financials of December 31, 2019.

During the three and six months ended June 30, 2020, the company was not operating as a revenue producing manufacturer and, with allowances for Derivative and share based expens, sustained losses of $292,004 and $1,174,348 respectively. These include regular expenses plus additional expenses and subcontract labor that were necessary as the company went ahead with Design Engineering and Fundraising activities.

 

Liquidity

We have had minimal operating activity since inception of the company in 2010. Our 2020 short-term obligations are being covered by funding received from convertible notes with a total value of $143,000 issued in 2020.

Net cash used in operating activities was $170,919 for the six months ended June 30, 2020 compared to net cash used in operating activity of 95,064 for the same period in 2019.

Net cash used in investing activities was ($3,690) in the six months ended June 30, 2020, compared to $775 for the same period in 2019.

Net cash provided by financing activities was $167,000 in the six months ended June 30, 2020, compared to $78,500 for same period in 2019.

As of June 30, 2020, the Company had inadequate cash to operate its business at the current level for the next six months and to achieve its business goals. The success of our business plan during and beyond the next 6 months will be provided by additional loan financing of a minimum of $300,000.

 

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 weather and age conditions. It will not burn,


18


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 OTCQB Bulletin Board under the symbol "ASCK" since February 2019 and is DWAC registered.

Financial Statements in this document represent the full results of the company during the three-month period to June 30, 2020. There are no "off balance sheet" arrangements.

 

 

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 contacts as well as the multitude of inquiries received every week.

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.

 

Operations Management

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.

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.

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


19


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.

Although Auscrete can economically deliver whole house panel sets as far away as New Mexico or Alberta, Canada, the Company will concentrate mostly on its home markets here in the Northwest where future growth will be achieved by servicing this fast-emerging market in this above average (for affordable housing) evolving area.

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 crews to construct the houses. 

The Plant’s specialized line equipment installation has been completed with end line product fabrication meeting the Company’s expectations in high construction standards.

 

Housing construction planning is currently in a number of project stages. The Company’s Marketing efforts have recently diversified to also include designs of small dwellings sometimes referred to as “Tiny Homes.” These structures are 80 – 500 square feet housing units built to fill the gap in urban multi-unit homeless transitional housing. This additional new venture in fabrication fits well with Auscrete’s overall model in concrete panel construction for housing and commercial structures.

 

Auscrete has recently had considerable interest and meaningful conversations with associates of the Veterans Administration in Washington State discussing opportunities with the Company involving the “VA’s Homeless Providers Grant” program. This Governmental funding will finance the building of transitional housing to homeless Veterans of the State.

 

Over the next few weeks, the Company will be manufacturing two current designs of “Tiny Homes” which will include a 324 sq. ft. and 420 sq. ft. home which will be used for a time as display units at two separate locations prior to delivery to their customers.

 

The Company has also entered into recent discussions between its Marketing division and a builder to furnish panels for another traditional medium size home to be built 32 miles from Auscrete’s plant in Washington State.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures


20


(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 30th, that our disclosure controls and procedures are 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 six months ended June 30, 2020 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

 

The Company has sold shares for the purpose of Note Conversion but has not received proceeds from any of these sales during the six months ended June 30, 2020.

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

 


21


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.

 

 

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: August 17, 2020  

By:

/s/ A John Sprovieri

A. John Sprovieri
(Chief Executive and Financial Officer)

 

 

 


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