Cryomass Technologies, Inc. - Quarter Report: 2016 June (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

or

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 333-181259

AFC BUILDING TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)

(905) 430-6433
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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.
[   ] YES        [X] 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).
[   ] YES        [X]  NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
[   ] YES        [X] NO

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

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
[   ] YES        [   ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
34,760,008 common shares issued and outstanding as of May 12 , 2017.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.             Financial Statements

Our unaudited condensed consolidated financial statements for the three and six month periods ended June 30, 2016 and 2015 form part of this quarterly report. Unless otherwise specified our financial statements are expressed in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles with the instructions to Form 10-Q and Article 8 of Regulation S-X.

Operating results for the six month period ended June 30, 2016 are not necessarily indicative of the results that can be expected for the year ending December 31, 2016.

AFC Building Technologies Inc.
Balance Sheets
(Expressed in US dollars)

(The accompanying notes are an integral part of these financial statements)

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AFC Building Technologies Inc.
Statements of Operations and Comprehensive Loss
(Expressed in US dollars)
(Unaudited)

(The accompanying notes are an integral part of these financial statements)

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AFC Building Technologies Inc.
Statements of Cash Flows
(Expressed in US dollars)
(Unaudited)

(The accompanying notes are an integral part of these financial statements)

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AFC Building Technologies Inc.
Notes to Financial Statements
June 30, 2016 and 2015

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AFC Building Technologies Inc.
Notes to Financial Statements
June 30, 2016 and 2015

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AFC Building Technologies Inc.
Notes to Financial Statements
June 30, 2016 and 2015

Cash flows from discontinued operations:

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

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Unless otherwise specified our financial statements are expressed in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

As used in this quarterly report and unless otherwise indicated, the terms “we”, “us”, “our” and “our company” mean AFC Building Technologies Inc., a company incorporated under the laws of the state of Nevada, and our formerly wholly-owned subsidiary, DSL Products Limited, a company incorporated under the laws of the Province of Ontario, Canada, unless otherwise indicated.

General Overview

We were incorporated under the laws of the state of Nevada on May 10, 2011. Our fiscal year end is December 31. Our business offices are currently located at 101 Mary Street West, Whitby, Ontario, Canada, L1N 2R4. The address of agent for service in Nevada and registered corporate office is c/o National Registered Agents, Inc. of Nevada, 100 East William Street, Suite 204, Carson City, NV, 89701. Our telephone number is (905) 430-6433.

Our Current Business

On June 30, 2015, we decided that continuing the operations of our wholly-owned subsidiary, DSL Products Limited (“DSL”) would no longer be economically feasible. All of the shares of DSL held by us were returned to DSL for cancellation and as of June 30, 2015 we no longer held any interest in DSL. Concurrently with the discontinuation of the DSL operations, we entered into a license agreement for an exclusive worldwide license in regards to 15 domain names related to the automotive e-commerce business. In consideration for the granting of the license, we will pay to the licensor a royalty of 2.5% of gross sales for any revenue derived from the use of the licensed domains. Consistent with our historical operations in this area, we intend to continue to pursue automotive e-commerce opportunities.

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Cash Requirements

Based on our planned expenditures, we will require approximately $30,000 over the next 12 months. In order to provide funds, we plan to pursue additional equity financing from private investors or possibly a registered public offering. We do not currently have any definitive arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

We have not investigated the availability of commercial loans or other debt financing to supplement or meet our cash requirements. In the uncertain event that any such debt financing alternatives were available to us on acceptable terms, they would increase our liabilities and future cash commitments.

Future Financings

We will continue to rely on equity sales of our common shares and funding from directors and shareholders in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Results of Continuing Operations

The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended June 30, 2016, which are included herein.

Three Months Ended June 30, 2016 and June 30, 2015

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Our operating results for the three months ended June 30, 2016 and June 30, 2015 are summarized as follows:

Our financial statements report a net loss of $878 for the three month period ended June 30, 2016 compared to a net loss of $2,243 for the three month period ended June 30, 2015. On June 30, 2015, we discontinued the operations of our wholly-owned subsidiary DSL, which has been our sole source of revenue to date. As a result of the discontinuation, all of the revenues and expenses for DSL were reclassified and shown as “Loss from discontinued operations” on the statement of operations for the period ended June 30, 2015. We have not subsequently established any revenue streams.

The 51.5% decrease in net loss from continuing operations for the three months ended June 30, 2016 ($878) compared to the three months ended June 30, 2015 ($1,724) resulted primarily from a 100% decrease in loss on foreign exchange during the most recent period.

Six Months Ended June 30, 2016 and June 30, 2015

Our operating results for the six months ended June 30, 2016 and June 30, 2015 are summarized as follows:

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Our financial statements report a net loss of $920 for the six month period ended June 30, 2016 compared to a net loss of $78,980 for the six-month period ended June 30, 2015. Our net loss for the six months ended June 30, 2016 was approximately 99% smaller than our net loss for the six months ended June 30, 2015 primarily because we disposed of revenue from our discontinued subsidiary, DSL, during the three months ended June 30, 2015, resulting in the reclassification of all of the revenues and expenses for DSL as a “Loss from discontinued operations” on the statement of operations.

Net loss from continuing operations for the six months ended June 30, 2016 increased to $920 from $664 during the six months ended June 30, 2015. The main reason for the increase in net loss from continuing operations for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 was a decrease in selling, marketing and general and administrative expenses and no offsetting gain or loss on foreign exchange during the most recent period.

Liquidity and Financial Condition

Working Capital

As of June 30, 2016 we had $79 in current and total assets, and current and total liabilities of $77,161, resulting in a working capital deficit of $77,082. This represents a nominal deficit increase from December 31, 2015, when we had had $163 in current and total assets, current and total liabilities of $76,325, and a working capital deficit of $76,162. The increase in liabilities during the period ended June 30, 2016 resulted entirely from an increase accounts payable and accrued liabilities without an increase in liabilities due to related parties.

Cash Flows

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Operating Activities

Net cash used in operating activities was $84 in the six months ended June 30, 2016 compared with net cash used in operating activities of $149,576 in the six months ended June 30, 2015. We did not have significant operations during the six months ended June 30, 2016. This significant net cash used in operating activities during the six months ended June 30, 2015 resulted from the discontinuation of our subsidiary, DSL, during that period, and the reclassification of all of the revenues and expenses for DSL as a loss from operations.

Financing Activities

Net cash provided by financing activities was $0 during the six months ended June 30, 2016 compared to $107,764 provided by financing activities in the six months ended June 30, 2015. Funds provided during the six months ended June 30, 2016 were from a bank overdraft and a line of credit. We had no bank overdraft or line of credit during the six months ended June 30, 2016

Going Concern

Our consolidated financial statements for the six month period ended June 30, 2016 have been prepared on a going concern basis and contain an additional explanatory paragraph which identifies issues that raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders and note holders, the ability of our company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations. As at June 30, 2016, our company has not generated any revenues, has a working capital deficit of $77,082, and has an accumulated deficit of $313,211. These factors raise substantial doubt regarding our company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should our company be unable to continue as a going concern.

Critical Accounting Policies

These financial statements and related notes are expressed in US dollars. The consolidated financial statements include the accounts of the Company and its formerly wholly-owned subsidiary, DSL Products Limited. All inter-company accounts and transactions have been eliminated. The Company’s fiscal year-end is December 31.

Item 3.             Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

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Item 4.             Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.

As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarterly period covered by this report 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

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

Item 1A.          Risk Factors

As a “smaller reporting company”, we are not required to provide the information required by this Item.

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

None.

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Item 3.             Defaults Upon Senior Securities

None.

Item 4.             Mine Safety Disclosures

Not applicable.

Item 5.             Other Information

Not applicable.

Item 6.             Exhibits

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

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