|
AUSCRETE CORPORATION
|
|
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
(Un-audited)
|
|
|
|
March 31,
|
December 31,
|
|
|
2019
|
2018
|
|
ASSETS
|
|
|
|
CURRENT ASSETS:
|
|
|
|
Cash
|
$
1,071
|
$
15,948
|
|
Prepaid Expenses
|
2,300
|
1,217
|
|
Inventory
|
47,000
|
47,000
|
|
TOTAL CURRENT ASSETS
|
50,371
|
64,165
|
|
|
|
|
|
Property, Plant and Equipment (net)
|
121,500
|
122,035
|
|
Deposits
|
-
|
-
|
|
TOTAL ASSETS
|
$
171,871
|
$
186,200
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
Accounts Payable
|
$
34,135
|
$
21,229
|
|
Accrued Interest Payable
|
118,733
|
102,815
|
|
Notes Payable (net of discount)
|
405,960
|
411,071
|
|
Derivative Liability
|
367,088
|
372,151
|
|
Related Party Advances
|
3,333
|
1,079
|
|
TOTAL CURRENT LIABILITIES
|
929,249
|
908,345
|
|
TOTAL LIABILITIES
|
929,249
|
908,345
|
|
|
|
|
|
Commitments and Contingencies
|
-
|
-
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
Common Stock, $0.0001 par value, authorized 20,000,000,000 shares (increased from 500,000,000) 62,886,186 and 57,227,427 shares issued and outstanding as of March 31, 2019 and December 31, 2018 respectively, restated to APIC below for the 1000 for 1 reverse stock split.
|
6,288
|
5,723
|
|
Additional Paid in Capital
|
6,062,751
|
5,980,292
|
|
Shares to be issued
|
-
|
-
|
|
Accumulated deficit
|
(6,826,417)
|
(6,708,160)
|
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
|
(757,378)
|
(722,145)
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$
171,871
|
$
186,200
|
The accompanying notes are an integral part of these financial statements
Page
4
of
2
|
AUSCRETE CORPORATION
|
|
STATEMENTS OF OPERATIONS
|
|
for the three months ended March 31,
|
|
|
|
|
(Un-audited)
|
(Un-audited)
|
|
|
2019
|
2018
|
|
REVENUE
|
$
-
|
$
-
|
|
|
|
|
|
EXPENSES
|
|
|
|
Accounting and Legal
|
8,400
|
1,912
|
|
Salaries and wages
|
29,788
|
5,070
|
|
G&A Expenses
|
27,994
|
29,998
|
|
Depreciation expense
|
1,307
|
1,307
|
|
TOTAL EXPENSES
|
67,489
|
38,287
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
Gain / (Loss) on Derivative
|
108,399
|
48,872
|
|
Financing cost
|
(106,725)
|
(435,237)
|
|
Interest Expense
|
(52,443)
|
(14,694)
|
|
TOTAL OTHER INCOME (EXPENSES)
|
(50,769)
|
(401,059)
|
|
|
|
|
|
LOSS BEFORE TAXES
|
(118,258)
|
(439,346)
|
|
Provision for Income Taxes
|
-
|
-
|
|
NET LOSS
|
$
(118,258)
|
$
(439,346)
|
|
|
|
|
|
NET LOSS PER COMMON SHARE - BASIC & DILUTED
|
$
(0.00)
|
$
(0.24)
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC & DILUTED
|
61,211,227
|
1,860,814
|
The accompanying notes are an integral part of these financial statements
Page
5
of
2
|
AUSCRETE CORPORATION
|
|
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
|
|
as of March 31, 2018, and 2017
|
|
(Un-audited)
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Shares
|
Amount
|
Additional Paid in Capital
|
Shares to be issued
|
Accumulated Deficit
|
TOTAL
|
|
BALANCE, DECEMBER 31, 2017
|
770,676
|
$
77
|
$
2,467,578
|
$
17,981
|
$
(3,190,966)
|
$
(705,331)
|
|
|
|
|
|
|
|
|
|
Note conversion
|
2,485,253
|
249
|
865,407
|
(17,981)
|
|
847,675
|
|
Fractional round up additional shares issued upon reverse split
|
|
|
|
|
(105)
|
(105)
|
|
Net Loss
|
|
|
|
|
(439,346)
|
(439,346)
|
|
BALANCE, March 31, 2018
|
3,255,929
|
326
|
3,332,985
|
-
|
(3,630,417)
|
(297,107)
|
|
|
|
|
|
|
|
|
|
Note conversion
|
289,123
|
24
|
57,798
|
-
|
|
57,822
|
|
Fractional round up additional shares issued upon reverse split
|
5,690
|
5
|
(5)
|
|
6
|
6
|
|
Net Loss
|
|
|
|
|
(249,669)
|
(249,669)
|
|
BALANCE, June 30, 2018
|
3,550,741
|
355
|
3,390,778
|
-
|
(3,880,080)
|
(488,948)
|
|
|
|
|
|
|
|
|
|
Note conversion
|
3,629,000
|
363
|
177,220
|
|
|
177,583
|
|
Rounding
|
47,686
|
5
|
(5)
|
|
1
|
1
|
|
Shares issued for services
|
50,000,000
|
5,000
|
2,412,299
|
|
|
2,417,299
|
|
Net Loss
|
|
|
|
|
(3,191,454)
|
(3,191,454)
|
|
BALANCE, September 30, 2018
|
57,227,427
|
5,723
|
5,980,292
|
-
|
(7,071,533)
|
(1,085,519)
|
|
|
|
|
|
|
|
|
|
Fractional round up additional shares issued upon reverse split
|
-
|
|
|
|
(6)
|
(6)
|
|
Net Loss
|
|
|
|
|
363,380
|
363,380
|
|
BALANCE, December 31, 2018
|
57,227,427
|
5,723
|
5,980,292
|
-
|
(6,708,159)
|
(722,145)
|
|
|
|
|
|
|
|
|
|
Issuance Common stock for services
|
|
|
|
|
|
-
|
|
Note conversion
|
5,658,759
|
566
|
82,459
|
-
|
-
|
83,024
|
|
Net Loss
|
|
|
|
|
(118,258)
|
(118,258)
|
|
|
|
|
|
|
|
-
|
|
BALANCE, March 31, 2019
|
62,886,186
|
$
6,288
|
$
6,062,751
|
$
-
|
$
(6,826,417)
|
$
(757,378)
|
The accompanying notes are an integral part of these financial statements
Page
6
of
2
|
AUSCRETE CORPORATION
|
|
STATEMENT OF CASH FLOWS
|
|
for the three months ended March 31,
|
|
|
|
|
(Un-audited)
|
(Un-audited)
|
|
|
2019
|
2018
|
|
OPERATING ACTIVITIES
|
|
Net Income (Loss)
|
$
(118,257)
|
$
(439,346)
|
|
Finance Costs
|
106,725
|
435,237
|
|
Depreciation expense
|
1,307
|
1,307
|
|
Change in other assets
|
(1,083)
|
(4,540)
|
|
Change in Accounts Payable and Accrued Expenses
|
26,778
|
1,373
|
|
Change in Related Party Advances
|
2,254
|
1,579
|
|
Change in Derivative and Note Discount
|
(71,875)
|
(44,003)
|
|
Net Cash Used by Operating Activities
|
(54,152)
|
(48,393)
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
Purchase of Equipment
|
775
|
(4,844)
|
|
Purchase of Land
|
-
|
(100,000)
|
|
Net cash used by investing activities
|
775
|
(104,844)
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
Proceeds from notes payable
|
38,500
|
200,000
|
|
Net cash provided by financing activities
|
38,500
|
200,000
|
|
NET INCREASE (DECREASE) IN CASH
|
(14,877)
|
46,763
|
|
|
|
|
|
Cash and Cash Equivalents at Beginning of Period
|
15,948
|
14,975
|
|
|
|
|
|
CASH AT END OF PERIOD
|
$
1,071
|
$
61,738
|
|
|
|
|
|
Supplemental Cashflow Information
|
|
|
|
Interest Paid
|
$
-
|
$
-
|
|
Taxes Paid
|
$
-
|
$
-
|
|
|
|
|
|
Supplemental Non-Cash Disclosure
|
|
|
|
Supplemental Non-Cash Disclosure
|
$
83,024
|
$
298,191
|
The accompanying notes are an integral part of these financial statements
Page
7
of
2
AUSCRETE CORPORATION
UNAUDITED NOTES TO FINANCIAL STATEMENTS
March 31, 2019
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.
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, 2018 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 three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019
Page
8
of
2
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.
The Company has no uncertain tax positions or related interest or penalties requiring Accrual at December 31, 2018 and 2017.
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 $1,071 cash equivalents as of March 31, 2019 and $15,948 as of December 31, 2018.
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.
Page
9
of
2
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, 2018
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
372,151
|
|
|
$
|
372,151
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of convertible notes derivative liability – March 31, 2019
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
367,088
|
|
|
$
|
367,088
|
|
Page
10
of
2
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of March 31, 2019 and December 31, 2018:
|
|
Derivative
|
|
|
Liability
|
|
Balance, December 31, 2018
|
$
372,151
|
|
Additions recognized as debt discount
|
103,336
|
|
Mark-to-market at March 31, 2019
|
(108,339)
|
|
Balance, December 31, 2019
|
$
367,088
|
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.
Page
11
of
2
IMPAIRMENT OF LONG-LIVED ASSETS
We evaluate long-lived assets for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate their net book value may not be recoverable. When these events occur, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. There can be no assurance, however, that market conditions will not change or demand for the Company's products will continue. Either of these could result in the future impairment of long-lived assets. Estimates of fair value are determined through various techniques, including discounted cash flow models and market approaches, as considered necessary.
LOSS PER COMMON SHARE
Basic loss per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. It is estimated that the Company will issue 15,500,000 as a result of conversion of notes As of March 31, 2019 and December 31, 2018. Fully diluted weighted average common shares and equivalents were withheld from the calculation as they were considered anti-dilutive.
RECLASSIFICATION
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, or stockholders’ equity as previously reported.
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.
NOTE 2 - GOING CONCERN AND PLAN OF OPERATION
Page
12
of
2
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 $6,826,417
as of March 31, 2019 which raises substantial doubt about the Company’s ability to continue as a going concern.
The Company will use additional funds through equity and debt financing, collaborative or other arrangements with corporate partners, licensees or others, and from other sources, which may have the effect of diluting the holdings of existing shareholders. The Company has subsequent current arrangements with respect to, or sources of, such additional financing and the Company does not anticipate that existing shareholders will be required to provide any portion of the Company's future financing requirements.
No assurance can be given that additional financing will be available when needed or that such financing will be available on terms Acceptable to the Company. If adequate funds are not available, the Company may be required to delay or terminate expenditures for certain of its programs that it would otherwise seek to develop and commercialize. This would have a material adverse effect on the Company and raise doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty.
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:
Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.
Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).
Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.
Effective - Effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The company is in the process in determining effect it with have on the financial statements.
The new guidance permits early adoption of the own credit provision.
Page
13
of
2
Update 2018-07
—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
NOTE 4 -RELATED PARTY TRANSACTIONS
The Company, since quarter 3 of 2018, has had approved and has started using corporate business cards for Company related purchases instead of using personal cards of the related parties.
As of March 31, 2019, and December 31, 2018, the balance owed to Company CEO, John Sprovieri was $3,333 and $1,079 respectively.
NOTE 5 - PROPERTY, INVENTORY AND EQUIPMENT
Notes to Inventory Type and Value:
Inventory consists of Finished Product and Raw Materials that are valued at the lower of cost or market.
Finished product of $44,900 is a full set of insulated ACH cast panels for wall and roof of an approx. 1,600 sq. ft house. Panel cost is actual size of all panels in sq. ft. of just under 7,000 sq. ft. calculated as follows.
|
|
|
|
|
Material
|
Cost per sq. ft.
|
|
|
Cement
|
2.42
|
|
|
XPS Insulation
|
0.98
|
|
|
Surfactant
|
0.32
|
|
|
Rebar @ Steel
|
1.02
|
|
|
Labor
|
1.78
|
|
|
TOTAL COST PER SQ. FT. $
|
6.52
|
|
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 March 31, 2019 were comprised of the following at:
|
|
|
|
|
|
March 31, 2019
|
December 31, 2018
|
|
Property Plant and Equipment (Gross)
|
$
140,653
|
$
139,881
|
|
Accumulated Depreciation
|
(19,153)
|
(17,846)
|
|
Property, Plant and Equipment (net)
|
$
121,500
|
$
122,035
|
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During the quarter, the Company purchased manufacturing equipment that increased the Gross equipment to $140,216. The Depreciation expense was $1,307 for the three months ended March 31, 2019 and 2018
NOTE 6 - COMMON STOCK
Common Stock:
On July 6, 2017 the Company increased its Authorized Capital to 20,000,000,000 common shares at $0.0001 par value.
During July 2018 the company performed a reverse split in the ratio of 1 for 1,000.
There were 57,227,427 shares issued and outstanding as of December 31, 2018.
During the Period January 1, 2018 to December 31, 2018, the Company issued 56,456,751 shares based on post-split numbers Including, for services rendered, the following were issued on 8/17/2018:
35,000,000 shares to our Company CEO, John Sprovieri for Management Services.
5,500,000 shares to Kathleen Jett, wife of (deceased) Director, Clifford Jett for Director services
2,000,000 to Director (retired), William Beers. for Director Services.
2,500,000 to IR director, Lee Odom for IR services.
5,000,000 to Kimberly Grimm for Management Services.
The above shares were issued for previous services to the Company and were valued at the share price on the day of issue.
During the Period January 1, 2019 to March 31, 2019, the Company issued 5,658,759 for note conversions.
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.
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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 March 31, 2019, we had a net operating loss carry-forward of approximately $(6,826,417) and a deferred tax asset of approximately $1,433,548 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 $(1,433,548). 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 September 30, 2018, the Company had not taken any tax positions that would require disclosure under FASB ASC 740.
|
|
|
|
|
|
March 31, 2019
|
December 31, 2018
|
|
Deferred Tax Asset
|
$ 1,433,548
|
$ 1,408,714
|
|
Valuation Allowance
|
(1,433,548)
|
(1,408,714)
|
|
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 – Derivative Liabilities
As a result of the convertible notes we recognized the embedded derivative liability on the date that the note was convertible. We also revalued the remaining derivative liability on the outstanding note balance on the date of the balance sheet. The inputs used were a weighted volatility of 290% and a risk free discount rate of 2.44% The remaining derivative liabilities valued using the level 3 inputs in the fair value hierarchy were:
|
|
|
|
|
|
March 31, 2019, 2018
|
December 31, 2018
|
|
Derivative Liabilities on Convertible Loans:
|
|
|
|
Outstanding Balance
|
$
367,088
|
$
372,151
|
NOTE 9 – SUBSEQUENT EVENTS
There have been a further 8,307,835 share conversions by Noteholders since March 31, 2019.
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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 March 31, 2019, the Company had not commenced manufacturing operations. Therefore, there were no material operational changes from the last audited financials of December 31, 2018.
The company has established its operating base in Goldendale, WA and is currently preparing to move to a leased facility to begin production of the Companies products.
Management has assembled a complete specification set for the manufacturing equipment and have received price bids. Raw materials suppliers have been secured and alerted to the company's needs and probable timelines required.
During the three months ended March 31, 2019, the company was not operating as a revenue producing manufacturer and, with allowances for Derivative allowances, sustained losses of $118,257. 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 three months ending March 31, 2019, the company did receive a payment of $38,000 from the sale of convertible notes. Even though there were considerable costs during the period in financing fees, interest and G&A operating costs, the company was able to end the period with cash on hand of $1,071.
Overview
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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, 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, Auscrete’s CEO was able to secure commitment of a $200,000 loan facility with RB Partners Inc. in California.. Further disbursements will be received in increments in the coming months.
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 three-month period to March 31. There are no "off balance sheet" arrangements.
Use of Funds
As of March 31, 2019, the first $340,000 of the anticipated $1.5 million has enabled the company to
achieve goals set for phase one. These included the attainment and purchase of 5 acres of land on the Goldendale, WA Industrial Estate. Build a mobile site office supporting Management operations and provide funds for refurbishment of company owned equipment.
Stage 2 will be the movement into and startup of the temporary manufacturing facility to get the building process of homes started.
Stage 3 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
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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.
Proposed Alternate Strategy
There has been a major change in the strategy to initially get some housing produced. The company has decided to lease a factory in the Goldendale area to get the production started ASAP instead of waiting for the new construction.
The Leased factory has adequate size to produce 30 houses per year with the addition of 2 extra casting tables that are being manufactured at our temporary refurbishment facility.
The Company’s Equipment Assets, which were earlier transported to Auscrete’s temporary facility have been worked on by the Company’s Engineering Department where refurbishment is completed and management and staff are working out of the Site Office currently located at the Company’s temporary facility. The site office will be transported and used at the Company’s leased building.
Once the Company has commenced production, management will update the plan with the goal of commencing construction of the headquarters on their Industrial Property in Goldendale in the near future.
It is comforting to know that the problems can be overcome by this modified plan and things will start moving again. The company can start producing product within 5 weeks of moving into the leased property.
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.
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
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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.
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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.
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.