Development Stage Company)
TO FINANCIAL STATEMENTS
NOTE 1 -
ORGANIZATION 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.
- Auscrete Corporation was incorporated in Wyoming on December 31, 2009. The
Company was organized for the purpose of establishing a system for making
insulating cellular light-weight concrete wall and roof panels. The company can
produce affordable housing that is highly energy efficient with excellent sound
suppression qualities. As of June 30, 2013, no manufacturing operations have
107(b) of the JOBS Act - Under the JOBS Act, emerging growth companies can
elect to delay adopting new or revised accounting standards until such time as
those standards apply to private companies. This election allows us to delay the
adoption of new or revised accounting standards that have different effective
dates for public and private companies until those standards apply to private
companies. We have irrevocably elected to avail ourselves of this exemption from
new or revised accounting standards and, therefore, as a result, our financial
statements may not he comparable to companies that comply with the public
company effective dates.
estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain amounts and disclosures. Accordingly, actual
results could differ from those estimates.
equipment - Property and equipment are stated at cost. Depreciation is
calculated on straight-line and accelerated methods over the estimated useful
lives of such assets, which range from five to fifteen years. Major renewals and
betterments are capitalized, while maintenance and repairs are expensed as
incurred. Depreciation expense for the year ended December 31, 2012 was
taxes - The Company accounts for income taxes in accordance with generally
accepted accounting principles, which requires the use of the liability method
of accounting for income taxes. Accordingly, deferred tax liabilities and assets
are determined based on the difference between the financial statement and tax
bases of assets and liabilities, using enacted tax rates in effect for the year
in which the differences are expected to reverse. Current income taxes are based
on the year's income taxable for Federal and state income tax reporting
For the period
ended June 30, 2013, no income has generated positive cash flow.
Therefore, no provision for income taxes has been made.
NOTE 2 -
evaluated subsequent events through June 30, 2013, the date of which the
financial statements were available to be issued.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Readers of this discussion are advised that the discussion should be read in
conjunction with the financial statements of Registrant (including related notes
thereto) appearing elsewhere in this Form 10-Q. Certain statements in this
discussion may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
reflect Registrant's current expectations regarding future results of
operations, economic performance, financial condition and achievements of
Registrant, and do not relate strictly to historical or current facts.
Registrant has tried, wherever possible, to identify these forward-looking
statements by using words such as "believe," "expect," "anticipate," "intend,"
"plan," "estimate" or words of similar meaning.
Although Registrant believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, such statements
are subject to risks and uncertainties, which may cause the actual results to
differ materially from those anticipated in the forward looking statements. Such
factors include, but are not limited to, the following: general economic and
business conditions, which will, among other things, affect demand for housing,
the availability of prospective buyers; adverse changes in Registrant's real
estate and construction market; including, among other things, competition with
other manufacturers, risks of real estate development and acquisitions;
governmental actions and initiatives; and environmental/safety requirements.
As at June 30, 2013, the Company has not yet commenced commercial operations. Therefore there
were only some minimal operational changes from the last financials of March 31, 2013. Because the company has not yet been listed on the OTCBB, it is not possible to commence any manufacturing operations and the Directors are aggressively continuing their effort to achieve a listing. Once the company is trading, there will be opportunities to complete negotiations with investment groups to achieve the necessary financing.
Should the company be unable to be listed or unable to raise funds to commence manufacturing, the company might be forced to close down. Such closure could cause the stockholders to lose all or part of their investment.
Currently the company still has the ability to obtain immediate contracts for
structures (houses) but will be unable to commence until the minimum financing
is in place. Additionally, there are available 2 letters of intent from 2
developers for the supply of minimum 100 houses and 30 houses over 3-5 years.
Both of the housing estates will be completed in late 2013 so construction can
begin in the latter part of the year.
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 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 $90-95 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
Auscrete Corporation, currently an unlisted Wyoming public company was
incorporated on December 31, 2009 and became effective with the SEC on August
16, 2012. It was established to finance an expansion of a current pilot facility
operated by the founders in Rufus, OR. An IPO is to provide financing. The
company has engaged the services of Monarch Bay Securities, a registered
broker-dealer and market maker, who has applied with the Financial Industry
Regulatory Authority to have the common stock eligible for quotation on the OTC
Bulletin Board and to act as Market Maker. The company will execute its Initial
Public Offering as a "penny stock" at $0.30 per share to raise $3 million. These
funds will enable the company to construct a factory campus on the Rufus, Oregon
Industrial Estate to meet the commencement and ongoing financial needs of the
Use of Funds The company has secured a little over 10 acres
of land on the Rufus Industrial Estate. Initially it will cost $270,000 to
purchase and develop the land. 2 buildings will be constructed initially, 1 at
20,000 and 1 at 12,000 sq. ft. The cost of supply and erection of these
buildings will be $ 295,000. Plant & Equipment, which comprises concrete
mixers and cement and sand handling equipment, fork lifts, casting tables and
specialized equipment, will cost $ 355,000 and Shop Equipment will be $80,000.
The balance of around $2 million will be used for working capital and expenses
including wages and salaries, marketing and other working capital and reserves.
Principal marketing efforts will be initially aimed at leveraging specific
contacts and relationships that have developed over the last 5 years since the
inception of the founders pilot plant. It is intended to take an experienced
sales person on board who will have the luxury of dealing with existing
contracts and contacts.
At this point in time, the company has available contracts for the immediate
supply of houses and other structures (apartment block etc.) valued at over
$800,000 but also has available letters of intent from a developer and from a
contractor to supply some 130 plus houses to their housing estates over the next
few years. Delivery will be paced at the rate of sales but is expected to be in
excess of 30 units per year. Auscrete's product is also extremely suitable for
the construction of commercial and industrial structures. Company marketing will
explore the commercial world for applications and it is believed that such
construction will become a large part of the company's future direction.
The company is projecting first year sales of $ 4.5 million escalating from
there once the new campus is up and running. At that rate, there is already some
3+ years of sales at hand. The typical structure will be a home in the 1,100 -
2,000 sq. ft. range that will sell to the contractor or developer for around
$110-200,000. Obviously, the company will look to increase output to meet the
demand and expects to do this through internal financing. The typical margin is
around 20% and the company does not expect to incur first year losses. The
existing pilot facility can manage output (although at a considerable lesser
rate than projections for the new plant) until the new campus facility is
complete and has commenced operations.
Operations will commence at the existing leased pilot plant immediately upon
minimum level funding availability. When the new Fabrication Building and
Production Building have been completed at the industrial site, production will
be moved there. 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.
Upon commencement of Auscrete's activity, under control of the President will
be marketing, manufacturing operations, design architecture and engineering,
administration and safety compliance. Additionally, there is a construction
manager that will oversee Auscrete's own construction activities as well as
liaise with contractors and developers.
Design and Engineering will prepare new design concepts and adapt customer's
designs, either residential or commercial, to the Auscrete style of construction
as well as preparing all drawings for manufacturing on the production floor.
Manufacturing will involve the use of initially 16 hydraulically operated
casting tables with each table able to produce 5 panels per 2 weeks. This allows
for the concrete to cure adequately enabling removal from the table. It is then
taken to the finishing area where it is prepared for delivery and shipping.
The construction manager will be responsible for liaising with contractors,
developers and other customers to ensure the satisfactory completion of their
contract. As well, the company will have its own construction division that will
not conflict with other contractors but will enable the company the ability to
carry out construction operations where no alternative exists. The construction
manager will oversee these operations.
Founder's Development Activities to Date
Auscrete's CEO and founder, John Sprovieri, possessed certain proprietary
technology in cellular lightweight concrete manufacturing that has been assigned
to the corporation. He has applied his engineering and marketing expertise to
develop and promote products under the product name, Auscrete Cellular Concrete
("ACC"). ACC is the culmination of the refinements made to a technology
developed in Australia in the mid 1980's. The Australian product has been used
in many parts of the world in construction, and John has further developed it in
the US by creating a thermally efficient building system. The process enables
infusion of millions of tiny air bubbles into a special inert concrete mix
enabling the creation of a lightweight product without sacrificing strength or
structural integrity. Since commencing re-development of the basic technology
almost nine years ago, John has refined and modified the basic ACC formula
utilizing various bubble producing machines to produce the product currently
usable in Auscrete"s building construction.
A number of specialized machines have been fabricated for the manufacturing
of ACC including machinery that can produce various sized bubbles, hydraulically
operated casting beds, concrete batching plant, materials handling equipment,
specialized finishing machines and a "Hot Box" materials thermal testing cabinet
that gives thermal "R" ratings of materials to ASTM specifications.
Additionally, many sample panels have been produced for testing and for the
construction of structures. At the outset and putting the ACC technology to
practical use, Mr. Sprovieri produced a multi user rest room facility for the
city park in Wasco, Oregon three years ago. The construction of the restroom
facility provided valuable feedback which helped Mr. Sprovieri refine the
manufacturing and construction process. Since then there have been other
development structures like the 2,500 sq. ft. home and a control building for
the Wind Turbine Power industry.
The current pilot plant facility is a previous service station leased from
the city. The outer driveway and back areas serve as the foundation for the two
major casting tables, panel storage and concrete batching plant, with its 35-ton
capacity cement silo. The office is the service station office and the
mechanical workshop serves as the fabrication area for the manufacture of rebar
cage frames. The plant is able to produce up to 6 wall panels per week from the
large casting beds, based on the capacity of the current equipment.
Future StrategyAuscrete Corporation intends to position
itself as a major supplier in the affordable housing market. Housing is
generally considered "affordable" when its cost does not exceed 30 percent of
the median family income in a given area. In many parts of the country, housing
costs have shown signs of adversely affecting corporations, workers and local
economies. Yet still the availability of affordable housing is becoming
increasingly scarce. The company is promoting a product that will not only make
housing affordable but also offers some luxuries as well, such as optional heat
pump air conditioning that would not be available in other houses at such
comparable pricing. By constructing with the Auscrete aerated concrete 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 will not be offered under the banner of
such categories as 'pre-fabricated' or 'factory built' homes. They are just
plain good value masonry homes built of a time proven product, concrete. The
company is establishing its expanded operations and manufacturing facility in
the Industrial Estate area of Rufus, Oregon. Rufus is a small city about 110
miles east of Portland. Construction of phase 1 of the plant should take 5-6
months. The advantage of Rufus is it is located on 2 main highways, I-84
east/west and I-97 north/south. The location will help considerably with the
delivery of the pre-cast panels initially to the Northwest area and will also
simplify the delivery of raw materials to the facility. It is anticipated that
in the initial year the company will be able to produce enough panel sets for
the construction of over 30 homes.
Auscrete can economically deliver whole house panel sets as far away as
Arizona or Alberta, Canada. However, with a planned future facility to be set up
in Central California, further efficiencies will be achieved by servicing a fast
emerging market in this above average (for affordable housing) growth area.
Additionally, a plant in Central California could quite easily address the
Arizona market once the market recovery in that area has taken effect. The
company plans on selling most of its output to developers, contractors and
builders who will purchase the complete set of wall, roof and interior panels
from Auscrete and use their own construction crew to complete the house.
Auscrete Corporation is beyond Research and Development. Its cellular
concrete construction products are time tested and proven to produce results.
The expansion of operations is only dependent upon financing and the company can
produce completed and chargeable goods within days of commencement with its
fully equipped and at ready pilot plant. This puts the company in an excellent
position, particularly given the fact that there are orders for goods to be
worked on immediately.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
As a smaller reporting issuer (as defined in Item 10(f)(1) of Regulation
S-K), the Company is not required to report quantitative and qualitative
disclosures about market risk specified in Item 305 of Regulation S-K.
Item 4. Controls and Procedures
(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 June 30, 2013, that our
disclosure controls and procedures were 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 three months ended June 30, 2013 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
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 did not repurchase any of its equity securities during the three
months ended June 30, 2013.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
The exhibits listed in the Exhibit Index are furnished as part of this
report. Exhibit 31.1 and 32.1
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.
|Date: August 14, 2013 || ||
/s/ A John
A. John Sprovieri
(Chief Executive and Financial