UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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[x]
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QUARTERLY REPORT
PURSANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the quarterly
period ended June 30, 2020
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Or
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o
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TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition
period from __________ to __________
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Commission File
Number: 001-35923
AUSCRETE CORPORATION
(Exact
name of registrant as specified in its charter)
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Wyoming
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27-1692457
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(State
of Incorporation)
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(IRS
Employer ID Number)
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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
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Accelerated filer o
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Non-accelerated
filer [x]
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Smaller reporting company [x]
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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
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Page
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PART I - FINANCIAL
STATEMENTS
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Item 1 - Financial
Statements
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Balance Sheets as at June 30, 2020 (unaudited) and December 31,
2019 (audited)
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4
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Statements of Operations (unaudited) for the three and six months
ended June 30, 2020 and 2019 respectively
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5
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Statements of Stockholders Equity (unaudited) for the six months
ended June 30, 2020 and Year Ended December 31, 2019
respectively
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6
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Statements of Cash Flows (unaudited) for the six months ended June
30, 2020 and 2019 respectively
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7
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Notes to Financial Statements
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8
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Item 2 -
Management's Discussion and Analysis of Financial Condition and
Results of Operations
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15
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Item 3 -
Quantitive and Qualitive Disclosures about Market Risk
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19
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Item 4 - Controls
and Procedures
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19
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PART II - OTHER
INFORMATION
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Item 1 - Legal
Proceedings
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19
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Item 2 -
Unregistered Sales of Equity Securities and Use of Proceeds
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19
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Item 3 - Defaults
Upon Senior Securities
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20
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Item 4 - Mine
Safety Disclosures
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20
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Item 5 - Other
Information
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20
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Item 6 - Exhibits
- Exhibit 31.1 and 32.1
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Attached
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3
AUSCRETE
CORPORATION
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BALANCE
SHEETS
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(Un-audited)
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June 30,
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December 31,
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ASSETS
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2020
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2019
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CURRENT
ASSETS:
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Cash
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$8,025
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$15,634
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Prepaid
Expenses
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7,744
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6,265
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Inventory
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2,100
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2,100
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TOTAL
CURRENT ASSETS
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17,869
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23,999
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Property, Plant and Equipment (net)
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60,137
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59,061
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Deposits
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-
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-
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TOTAL
ASSETS
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$78,006
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$83,060
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LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
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CURRENT
LIABILITIES:
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Accounts Payable
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$62,246
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$50,838
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Accrued
Interest Payable
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116,915
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96,507
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Notes
Payable (net of discount)
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488,095
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370,786
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Derivative Liability
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345,492
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729,308
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Related
Party Advances
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6,490
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6,766
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TOTAL
CURRENT LIABILITIES
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1,019,238
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1,254,205
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TOTAL
LIABILITIES
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1,019,238
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1,254,205
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Commitments and Contingencies
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-
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-
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STOCKHOLDERS' EQUITY (DEFICIT)
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Common
Stock, 0.0001 par value, authorized 2,000,000,000 shares
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92,620,953 and 15,597,928 shares issued and outstanding as of June
30, 2020 and December 31, 2019 respectively,
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9,262
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1,560
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Additional Paid In Capital
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8,660,462
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7,263,903
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Accumulated deficit
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(9,610,956)
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(8,436,608)
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TOTAL
STOCKHOLDERS' EQUITY (DEFICIT)
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(941,232)
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(1,171,145)
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TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$78,006
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$83,060
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The accompanying
notes are an integral part of these financial statements
4
AUSCRETE
CORPORATION
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STATEMENTS OF
OPERATIONS
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for the three
and six months ended June 30,
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three months
ended
June 30,
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six months
ended
June 30,
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2020
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2019
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2020
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2019
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REVENUE
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$-
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$-
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$-
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$-
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EXPENSES
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Accounting and Legal
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10,250
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11,300
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16,750
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19,700
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Salaries and wages
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47,806
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-
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97,161
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29,788
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Share
based expense
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-
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-
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1,150,000
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G&A
Expenses
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34,485
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29,888
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64,636
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57,882
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Depreciation expense
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1,307
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1,307
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2,614
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2,614
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TOTAL
EXPENSES
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93,848
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42,495
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1,331,161
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109,984
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OTHER
INCOME (EXPENSES)
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Gain /
(Loss) on Derivative
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(64,072)
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42,751
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379,917
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151,150
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Financing cost
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(75,206)
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(37,949)
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(111,517)
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(144,674)
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Interest Expense
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(58,878)
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(58,215)
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(111,587)
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(110,658)
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TOTAL
OTHER INCOME (EXPENSES)
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(198,516)
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(53,413)
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156,813
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(104,182)
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LOSS
BEFORE TAXES
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(292,004)
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(95,908)
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(1,174,348)
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(214,166)
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Provision for Income Taxes
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-
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-
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-
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-
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NET
LOSS
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$(292,004)
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$(95,908)
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$(1,174,348)
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$(214,166)
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NET
LOSS PER COMMON SHARE - BASIC & DILUTED
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$(0.00)
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$(0.00)
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$(0.02)
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$(0.00)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC &
DILUTED
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83,122,439
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69,263,825
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71,815,632
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66,177,047
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The accompanying
notes are an integral part of these financial statements
5
AUSCRETE
CORPORATION
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STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY
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as of June 30,
2020
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(Un-audited)
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Common Stock
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Shares
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Amount
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Additional Paid
in Capital
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Shares to be
issued
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Accumulated
Deficit
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TOTAL
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BALANCE,
December 31, 2018,
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286,137
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29
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5,985,986
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-
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(6,708,159)
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(722,145)
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Note
conversion
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28,294
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3
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83,022
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-
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-
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83,025
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Net
Loss
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(118,258)
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(118,258)
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BALANCE,
March 31, 2019
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314,430
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32
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6,069,008
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-
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(6,826,417)
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(757,378)
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Issuance
Common stock for services
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-
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Note
conversion
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77,667
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8
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109,310
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-
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-
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109,318
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Net
Loss
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(95,908)
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(95,908)
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BALANCE,
June 30, 2019
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392,098
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$40
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$6,178,318
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$-
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$(6,922,325)
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$(743,968)
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Issuance
Common stock for services
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-
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Note
conversion
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4,387,625
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438
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692,873
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-
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-
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693,311
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Net
Loss
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(647,815)
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(647,815)
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BALANCE,
September 30, 2019
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4,779,722
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$478
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$6,871,191
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$-
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$(7,570,140)
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$(698,472)
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Issuance
Common stock for services
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5,250,000
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525
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209,475
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210,000
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Note
conversion
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5,567,852
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556
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160,736
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-
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-
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161,292
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Rounding
shares
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353
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1
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-
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(1)
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Beneficial conversion feature
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22,500
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22,500
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Net
Loss
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(866,467)
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(866,467)
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BALANCE,
December 31, 2019
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15,597,928
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$1,560
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$7,263,902
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$-
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$(8,436,608)
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$(1,171,146)
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Issuance
Common stock for services
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50,000,000
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5000
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1,145,000
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1,150,000
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Note
conversion
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12,433,402
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1,243
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151,504
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-
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-
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152,747
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Net
Loss
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(882,344)
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(882,344)
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-
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BALANCE,
March 31, 2020
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78,031,330
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$7,803
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$8,560,406
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$-
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$(9,318,952)
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$(750,743)
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Issuance
Common stock for services
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-
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Note
conversion
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14,589,623
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1,459
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80,806
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82,265
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Net Income (Loss)
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(292,004)
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(292,004)
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-
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BALANCE,
June 30, 2020
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92,620,953
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$9,262
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$8,641,212
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$-
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$(9,610,956)
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$(941,232)
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The
accompanying notes are an integral part of these financial
statements
6
AUSCRETE
CORPORATION
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STATEMENT OF
CASH FLOWS
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for the three
and six months ended June 30,
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2020
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2019
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OPERATING ACTIVITIES
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NET LOSS
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$(1,174,348)
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$(214,166)
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Finance
Costs
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111,517
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144,674
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Depreciation
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2,614
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2,614
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Change
in other assets
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(1,479)
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3,797
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Share
Based expense
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1,150,000
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-
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Change
in Accounts Payable and Accrued Expenses
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31,816
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48,020
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Change
in Related Party Advances
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(276)
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2,254
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Change
in Derivative and Note Discount
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(290,763)
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(82,257)
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Net
Cash Used by Operating Activities
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(170,919)
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(95,064)
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INVESTING ACTIVITIES:
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Purchase of Equipment
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(3,690)
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775
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Net
cash (used) by investing activities
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(3,690)
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775
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FINANCING ACTIVITIES:
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Proceeds from notes payable
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167,000
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78,500
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Net
cash provided by financing activities
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167,000
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78,500
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NET
INCREASE (DECREASE) IN CASH
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(7,609)
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(15,789)
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CASH, BEGINNING OF PERIOD
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15,634
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15,948
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CASH,
END OF PERIOD
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$8,025
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$159
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Supplemental Cashflow Information
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Interest Paid
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$-
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$-
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Taxes
Paid
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$-
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$-
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Supplemental Non-Cash Disclosure
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Shares
issued for note conversions
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$254,262
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$192,343
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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.
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Level
1
|
|
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Level
2
|
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Level
3
|
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Total
|
|
|
|
|
|
|
|
|
|
|
|
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|
Fair value of
convertible notes derivative liability December 31, 2019
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
729,308
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|
|
$
|
729,308
|
|
|
|
Level
1
|
|
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Level
2
|
|
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Level
3
|
|
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Total
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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.
13
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.
14
|
|
|
|
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.
15
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)
22