ASCK Auscrete Corporation (CE)

UNAUDITED NOTES TO FINANCIAL STATEMENTS

December 31, 2021

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”).

INCOME TAXES

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 year ended December 31, 2021, 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.

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 $(5,679) cash equivalents as of December 31, 2021, and $14,591 as of December 31, 2020.

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.

Fair value of convertible notes derivative liability – December 31, 2021

Fair value of convertible notes derivative liability – December 31, 2020

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:

For the years ended December 31, 2021, our revenue was $13,000.

COST OF SALES

Amounts that will be recorded as cost of sales relate to direct expenses incurred in order to fulfill orders of our products. Such costs are recorded as incurred. Our cost of sales will consist primarily of the cost of product; labor, selling costs and the cost of G&A expenses.

PROPERTY AND EQUIPMENT

Property and Equipment was stated at historical cost less Accumulated depreciation and amortization. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.

Depreciation is provided on a straight-line basis over the assets’ estimated useful lives. The useful lives of the assets are as follows: equipment 7-years, vehicles 7-years, and buildings 30-years. Additions and improvements are capitalized while routine repairs and maintenance are charged to expense as incurred. Upon sale or disposition, the historically recorded asset cost and Accumulated depreciation are removed from the Accounts and the net amount less proceeds from disposal is charged or credited to other income or expense.

IMPAIRMENT OF LONG-LIVED ASSETS

We evaluate long-lived assets for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate their net book value may not be recoverable. When these events occur, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. There can be no assurance, however, that market conditions will not change or demand for the Company’s products will continue. Either of these could result in the future impairment of long-lived assets. Estimates of fair value are determined through various techniques, including discounted cash flow models and market approaches, as considered necessary.

LOSS PER COMMON SHARE

Basic loss per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. It is estimated that the Company will issue approximately 22,700,000 as a result of conversion of notes. The company also has 2,000,000 in outstanding common stock warrants. Included in the year ended December 31, 2021, all calculations reflect the effects of the 40 to 1 reverse stock split done on February 22, 2020. 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

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 $13,110,006 as of December 31, 2021 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.

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This was issued in August of 2020 and will become effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We are in the process of evaluating the impact to the company.

NOTE 4 - RELATED PARTY TRANSACTIONS

Though the company has established banking credit cards to assist with the normal everyday purchases and payments of corporate needs such as utilities etc., The CEO and other involved parties often use their own cards for this purpose and, to represent this, the company has a continuous Related Party Advances section in its financial statements. This is adjusted typically at the end of each reporting period.

As of December 31, 2021, and December 31, 2020, the balance owed to John Sprovieri was $0 and $0 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. 

Raw Materials:

Raw materials consist of rebar, insulation, surfactant, powdered cement, threaded inserts and sundry items. The cost is based on the cost of purchase from a non-related supplier. As of December 31, 2021 and December 31, 2020 the inventory value was $6,197 and $6,197 respectively.

Property and Equipment at December 31, 2021 were comprised of the following at:

Depreciation expense for the years ended December 31, 2021 and 2020 was $11,940 and $11,693 respectively.

NOTE 6 - EQUITY

Common Stock:

During the Period January 1, 2020 to December 31, 2020, the Company issued 1,788,703 shares for convertible note conversions.

During the Period January 1, 2021 to December 31, 2021, the Company issued 130,409 shares for convertible note conversions.

On February 22 of 2021 the company performed a 40 for 1 reverse stock split. All share amounts have been adjusted retroactively to reflect the split and adjustments have been made to reflect the par value and adjusted to additional paid in capital.

The following table is a list of the foremost 6 shareholders of the Company as of December 31, 2021.

Warrants

On May 28, 2019 we issued 2,000,000 in cashless warrants in connection with the issuance of the convertible promissory note dated May 29, 2019 with Crown Bridge Partners, LLC in the amount of $27,500.

The warrants contained a downround feature that were triggered during 2020, and the result $12,600 of deemed dividend recognized as a result.

NOTE 7 - INCOME TAXES

We currently have no current tax liability, as we have had limited revenue and incurred 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, 2019. The Company will compute its income tax expense for the year ended December 31, 2021 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.

During the Period January 1, 2020 to December 31, 2020 there were 1,250,000 shares issued to these individuals to recompense post-split roll back numbers issued for service compensation to the Company. As a result the company recognized a share based expense of $1,150,000. This amount was eliminated from the net operating loss carry forward as of December 31, 2020.

In addition during the Period January 1, 2021 to December 31, 2021 there were 53,238,652 shares issued to these individuals to recompense post-split roll back numbers issued for service compensation to the Company. As a result the company recognized a share based expense of $2,683,227. This amount was eliminated from the net operating loss carry forward as of December 31, 2021.

As of December 31, 2021, we had a net operating loss carry-forward of approximately $13,110,006 and a deferred tax asset of approximately $1,948,124 using the statutory rate of 21%. The deferred tax asset may be recognized in future periods, not to exceed 20 years for 2020 and prior and post 2018 are indefinite. 

However, due to the uncertainty of future events, we have booked valuation allowance of $(1,948,124). 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 December 31, 2021, the Company had not taken any tax positions that would require disclosure under FASB ASC 740.

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 February 2, 2018, the company issued a 12-month Convertible Note for the sum of $200,000 to RB Capital at 12%. Convertible at $.004. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On 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 January 13, 2020, the company issued a 12-month Convertible Note for the sum of $20,000 to RB Capital at 10%. Convertible at $.10. 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 10%. Convertible at $.15. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On April 7, 2020, the company issued a 12-month Convertible Note for the sum of $15,000 to RB Capital at 10%. 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 10%. Convertible at $.10. 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 Shmeul Rotbard at 8%. Convertible at $.008. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On July 23, 2020, the company issued a 12-month Convertible Note for the sum of $15,000 to RB Capital at 10%. Convertible at $.05. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On August 17, 2020, the company issued a 12-month Convertible Note for the sum of $50,000 to RB Capital at 10%. Convertible at $.05. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On November 10, 2020, the company issued a 12-month Convertible Note for the sum of $25,000 to RB Capital at 10%. Convertible at $.01. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On December 14, 2020, the company issued a 12-month Convertible Note for the sum of $45,000 to RB Capital at 10%. Convertible at $.01. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On January 29, 2021, the company issued a 12-month Convertible Note for the sum of $35,000 to RB Capital at 10%. Convertible at $.01. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On March 16, 2021, the company issued a 12-month Convertible Note for the sum of $50,000 to RB Capital at 10%. Convertible at $.20. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On May 10, 2021, the company issued a 12-month Convertible Note for the sum of $50,000 to RB Capital at 10%. Convertible at $.20. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On July 6, 2021, the company issued a 12-month Convertible Note for the sum of $50,000 to RB Capital at 10%. Convertible at $.10. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On August 16, 2021, the company issued a 12-month Convertible Note for the sum of $50,000 to RB Capital at 10%. Convertible at $.10. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On August 16, 2021, the company issued a 12-month Convertible Note for the sum of $50,000 to RB Capital at 10%. Convertible at $.10. No beneficial conversion was recognized as the conversion price was higher than the stock price.

On November 5, 2021, the company issued a 12-month Convertible Note for the sum of $55,000 to Sixth Street Lending at 10%. Convertible at 65% of the averaged 3 lowest trading prices during the prior 15 day trading period. We recognized a derivative liability in the amount of $117,851 as a result.

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 260% to 277% and a risk-free discount rate of .05% to .09%.

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 65% discount to the market. As of December 31, 2021, there were twenty-three convertible notes outstanding.

The remaining derivative liabilities valued using the level 3 inputs in the fair value hierarchy were:

NOTE 9 - COMMITMENTS

The company maintains a month-to-month lease agreement on an 8,000 sq. ft. facility located in outer Goldendale and monthly lease cost is $2,000. The total lease payments for the twelve months ended December 31, 2021 were $24,000.

As of December 31, 2021 the company has not remitted all of the backup withholdings, which could result in material trust-fund penalties from the internal revenue service.