ITEM 1. BUSINESS
BACKGROUND
We were incorporated as Colorado Ceramic Tile Inc. in the State of Colorado on March 27, 1995 primarily to sell and install stone, tile and marble products used in residential and commercial buildings. During April 2012, we were reorganized by transferring all of our assets to CCT, Inc., our wholly-owned subsidiary ("CCT"). We subsequently sold CCT to Sandy Venezia, our former officer and director, for $500.00.
Amendment to Articles of Incorporation
On April 11, 2012, we filed an amendment to our articles of incorporation with the Colorado Secretary of State changing our name from "Colorado Ceramic Tile Inc." to "Nano Labs Corp.".
CURRENT BUSINESS OPERATIONS
We are a development stage company with no manufacturing capacity or agreements and have not generated any revenue. Our plan of operation involves nanotechnology and the development of new products using nano compounds .We are also a nanotechnology research and development company. We are able to access resources that encompass nearly thirty years of research and development in nanotechnology as well as hundreds of peer-reviewed and published research papers and other scholarly material. Our research and development team of scientists, designers, and engineers is focused on creating a portfolio of advanced products that could provide benefits to a variety of industries as further discussed below including: (i) consumer products, (ii) energy, (iii) materials, and (iv) healthcare. Through the use and integration of proprietary nano compounds, our goal is to evolve common products into new, revolutionary products in order to make the world a better place.
Nanotechnology is the manipulation of matter on an atomic and molecular scale. A generalized description of nanotechnology was established by the National Nanotechnology Initiative, which defines nanotechnology as the manipulation of matter with at least one dimension sized from 1 to 100 nanometers. This definition reflects the fact that quantum mechanical effects are important at this quantum-realm scale, and so the definition pertains to a research category inclusive of all types of research and technologies that deal with the special properties of matter that occur below the given size threshold. It is therefore common to see the plural form "nanotechnologies" as well as "nanoscale technologies" to refer to the broad range of research and applications whose common trait is size. Because of the variety of potential applications (including industrial and military), governments have invested billions of dollars in nanotechnology research. Through its National Nanotechnology Initiative, the USA has invested 3.7 billion dollars. The European Union has invested 1.2 billion and Japan 750 million dollars. See "The Daily Star (Bangladesh April 17, 2012."
Nanotechnology as defined by size is naturally very broad, including fields of science as diverse as surface science, organic chemistry, molecular biology, semiconductor physics, microfabrication, etc. The associated research and applications are equally diverse ranging from extensions of conventional device physics to completely new approaches based upon molecular self-assembly, from developing new materials with dimensions on the nanoscale to direct control of matter on the atomic scale.
Nanotechnology may be able to create many new materials and devices with a vast range of applications, such as in medicine, electronics, biomaterials and energy production. On the other hand, nanotechnology raises many of the same issues as any new technology, including concerns about the toxicity and environmental impact of nanomaterials, and their potential effects on global economics.
ASSET PURCHASE AGREEMENT
On October 10, 2012, we entered into that certain asset purchase agreement (the "Asset Purchase Agreement") with Dr. Victor Castano ("Castano"). In accordance with the terms and provisions of the Asset Purchase Agreement, Castano sold, assigned and transferred to us all rights and assets related to Castano's Nano Coatings Technology (the "Nano Coating Technology") including, but not limited to: (i) all plans, specifications, drawings, concepts, designs, engineering studies and reports, test results, models, manufacturing processes and flowcharts; (ii) all raw materials, supplies, work in progress, finished product and lists of suppliers; (iii) all software programs and software codes relating thereto and all copies and tangible embodiments of the software programs and software code (in source and object code form) together with all documentation related to such programs and code; (iv) all intellectual property rights including all intellectual property, patent applications, patents, trademarks, tradenames, copyrights, and the exclusive right for us to hold ourselves out to be the successor to the Nano Coatings Technology;(v) all licenses to the Nano Coatings Technology and properties of third parties (including licenses with respect to intellectual property rights owned by third parties); (vi) claims, royalty rights, deposits, and rights and claims to refunds; (vii) all Internet domain names and registrations held by Castano that relate to the Nano Coatings Technology; (viii) all franchises, permits, licenses, agreements, waivers and authorizations from, issued or granted by any governmental authority; and (ix) copies of marketing and sales information, including pricing and customer lists. In consideration thereof and in further accordance with the terms and provisions of the Asset Purchase Agreement, we issued an aggregate 101,000,000 shares of our restricted common stock to Dr. Castano.
UNIVERSAL ASSIGNMENT
On December 13, 2012, we entered into that certain universal assignment (the "Assignment") with Castano pertaining to an invention entitled "Nanotechnological Thermal Insulating Coating and Uses Thereof" for which a patent application was filed with the United States Patent, Copyright and Trademark Office on October 31, 2012, Serial Number 61/720,716 (the "Nanotechnology Patent"). In accordance with the terms and provisions of the Assignment, Castano transferred and assigned to us his whole right, title and interest for the United States and Canada and all other countries in and to the said Nanotechnology Patent.
PATENT
On October 31, 2012, Castano filed an application for patent protection entitled "Nanotechnological Thermal Insulating Coating and Uses Thereof" with the United States Patent, Copyright and Trademark Office (the "Nanothermal Insulation Coating Patent"). The Nanothermal Insulation Coating Patent generally relates to dispersion which provides paints, namely films. More specifically, the subject matter relates to ceramic and/or carbon nanoparticle dispersions containing ceramic and/or carbon nanoparticle having chemically functionalized surface dispersed in a polymeric matrix. Polymeric resin dispersions have been widely utilized as a starting material for paints or coating of film-forming agents, i.e. a starting material for a paint or a coating agent for coating an outside and inside of an aircraft, automobile, external wall surface, a floor material, furniture, etc. The paint film obtained based on these resin dispersions has a role of not only providing an agreeable appearance but also protecting the material over which they are laid. For example, such paint compositions should provide with a measure of ultraviolet and infrared radiation resistance, acid rain resistance, resistance to fungi and bacteria, resistance to corrosion and oxidation, waterproofing, non-flammability, thermal insulation.
On November 13, 2012, the United States Patent, Copyright and Trademark Office issued to Castano a provisional patent for the Nanothermal Coating Patent, which was assigned to us pursuant to the Asset Purchase Agreement and the Assignment. We believe that the issuance of the provisional patent creates an opportunity for us to
partner with industry to commercialize an innovative nanothermal insulation coating product (the "Nanothermal Insulation Coating Product"). As an important competitive advantage, the Nanothermal Insulation Coating Product will provide fire and heat protection at temperatures of up to 1,500 degrees Celsius. The Nanothermal Insulation Coating Product outlined in the provisional patent may be directly applied to virtually any surface, from wood to metal, often without the need to remove existing coatings. The Nanothermal Insulation Coating Product is also resistant to corrosion, rust, water, and oxidization — making it particularly durable, as does its capability of reflecting up to 82% of ultraviolet rays that, over time, can contribute to deterioration involving structural materials such as PVC. Management asserts that the Nanothermal Insulation Coating Product also protects against acid rain. Further management contends that the Nanothermal Insulation Coating Product: (i) does not emit or retain odors; (ii) is particularly effective as a barrier against toxic materials, (anti-bacterial, and anti-fungal); and (iii) displays auto-wash properties in the rain while maintaining a shimmering clear or white color. By manipulating matter on a very small scale, management believes that it will be able to create a new chemical mixture in which the strengths of this mixture are exponentially greater than the sum of the parts, making it commercially and economically viable for use across all industry applications. The Nanothermal Insulation Coating Product can serve as an insulation agent to reduce energy costs, protecting against overheating, corrosion, and microbial growth, especially in a hot and humid environment. We believe this promises significant savings in air-conditioning costs when applied as an exterior coating. As a radiant barrier, it has the potential to change the rate of heat transfer by reflecting the solar radiation that would otherwise be absorbed by the material underneath the coated surface. As a result, management believes that the Nanothermal Insulation Coating Product has the potential to reduce air-conditioning related costs by as much as 40%. Management believes that the Nanothermal Insulation Coating Product is competitively positioned as a better practical and economic alternative to industrial thermal coatings and paints currently used in the marketplace.
PLANNED USAGES UNDER THE NANOTECHNOLOGY PATENT
Nanotechnology Gasoline
On September 24, 2013, we presented test results relating to a proprietary nanotechnology which replaces commercial gasoline. We have successfully tested our Nanotechnology Gasoline ("Nanotech Gasoline"). The Nanotech Gasoline combines 60% commercial grade gasoline with 40% ordinary drinking water plus our proprietary nanotechnology. The result may mean an alternative to existing additives, like Ethanol, MTBE, Benzene, Methanol, and Aromatics additives that are harmful to the environment. We replaced 40% of gasoline with water and nanotechnology which thereby dramatically reduces the need of gasoline by over a third, thereby increasing fuel efficiency and
reducing environmental emissions. We reported that five gasoline mixtures were successfully tested; the tests were repeated three times over a period of thirteen months. Management believes that the Nanotech Gasoline mixture combines our technology with normal tap water and gasoline which does not separate. In fact, it has remained intact after many months of testing. Also, the Nanotech Gasoline does not freeze at temperatures of minus 40 degrees Celsius. Management further believes that this Nanotech Gasoline could dramatically increase profits for the oil companies that they could pass on to consumers, and at the same time dramatically decrease the harmful emissions that contribute to global warming.
Testing Results
On September 27, 2013, we announced testing results on OTI Canada Group’s (OTI) laboratory reference number M13-840 according to ASTM test protocol of our Nanotech Gasoline. OTI reported the following key results for Octane Number Research (600rpm), Octane Number Motor (900rpm) and Octane Index:
ASTM TEST METHOD D2699 Octane Number Research: >100
ASTM TEST METHOD D2700 Octane Number Motor: 92.2
ASTM TEST METHOD CALC Octane Index: >96.1
Management believes that the Nanotech Gasoline as a gasoline-water emulsion represents a major breakthrough. Management is of the position that if we examine each test of the Nanotech Gasoline and compare it to ‘Super’ gasoline, it is clear and obvious that the Nanotech Gasoline compares extremely well and is much better for the Octane Index. This is an extremely important point, because each one Octane Index upwards costs more money as evidenced by the price between “Regular” and “Super.” To raise the Octane, the refineries have to perform certain petroleum cuts, add aromatics, in some places MTBE, and now even Anhydrous Ethyl Alcohol (AEA).
Exova's Testing Results
On September 30, 2013, we announced further test results of our Nanotech Gasoline. Exova performed the ASTM D-240, the Standard Test Method for Heat of Combustion, using a Parr Calorimeter. The heat of combustion, as determined by this test method, is designated as one of the chemical and physical requirements of both commercial and military turbine fuels and aviation gasoline. Exova reported BTU values of 35,659 kJ/kg for our Nanotech Gasoline compared to “Regular” gasoline at 41,134 kJ/kg. It was expected that the Nanotech Gasoline, since it contains water, would have a lower calorific value. Management believes that this is reflected by the above results: by calculations it is only about 13.3% less, As a general rule, the higher the calorific value, the better the mileage. However, our novel gasoline-water emulsion has a surprising high calorific value comparable to regular gasoline. The main advantages of using emulsified fuels, instead of the pure fuel itself, are environmental and economic. As one of the different solutions to the problem of world pollution, emulsion fuel technology has received close attention, because it may provide better combustion and would contribute to a reduction in emissions. There are also great expectations that it would lead to a reduction in fossil fuel consumption and carbon dioxide emissions on a global level, eventually contributing to providing a final solution to environmental problems, such as effluent gas. It is an established fact that water in the emulsion fuels is shown to improve combustion efficiency and contribute to emission reduction.
As of the date of this Annual Report, we continue to run tests against commercial grade gasoline in the market today. The ultimate tests will run real comparisons of both fuels side-by-side. For the refineries, management believes that the use of the Nanotech Gasoline as an Octane Index Booster, blending naphtha with the nano base by simply using standard circulation pumps, would be very economical. This is another area we will begin testing immediately starting with the basic low Octane Naphtha distillation cut and see how much we can raise the Octane Index.
We are at the development stage here and working with select partners to continue testing and discussions for commercialization.
ASTM Technical Specifications for Construction and Engineering Industry
On November 19, 2012, we announced the ASTM International specifications for our Nanothermal Insulation Coating Product application in the construction and engineering industry. We released the following technical data, gauging key product standards, and providing an overview of the unique properties of the Nanothermal Insulation Coating Product. Management believes that the Nanothermal Insulation Coating Product could replace many of the industrial paints and coatings used today for thermal insulation in commercial, industrial and domestic structures, which can easily be applied as a spray, showing remarkable heat resistance at up to 2,732 degrees Fahrenheit. From thermal conductivity, fireproofing, and density — to cohesion, solar absorption, and thermal shock — the Nanothermal Insulation Coating Product demonstrates properties signaling very promising benefits to the building construction and engineering industry and possesses characteristics that are conducive to integrated manufacturing processes, including flexibility, easy adhesion, and economical production costs and inputs.
NC2012 ASTM and Reference Standards
ASTM – E-228
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Thermal Expansion Coefficient
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ASTM – C-177
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Thermal Insulation K value
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ASTM – E-119
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Fireproofing
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ASTM – E-84
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Surface Burning
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ASTM – E-937
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Corrosion of Steel by Sprayed Fire-Resistive Material
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ASTM – E-736
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Cohesion/Adhesion of Sprayed Fire-Resistive Materials
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ASTM – E-790
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Residual Moisture
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ASTM – E-605-77
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Thickness and Density of Sprayed Fire-Resistive Material
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ASTM – E-781-86
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Absorptive Solar Receiver Materials
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ASTM – E-96
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Water Vapor Transmission of Materials
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ASTM – C-87
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Organic Impurities in Fine Aggregate (Chloride content)
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ASTM DIN-D-2240
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Rubber Property – Durometer Hardness
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IMP-GTM-B-1-1-95
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PEMEX Fireproofing material
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IMP – 16 80
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PEMEX Chemical resistance by immersion
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NFPA – 251
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Thermal shock and water pressure
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Residential House Paint
On November 23, 2012, we announced the specifications, applications and overview of the Nanothermal Insulation Coating Product for the international residential housing construction market. Management believes that the Nanothermal Insulation Coating Product is more effective, inexpensive, and environmentally friendly than standard paints and coating materials currently in the market. Management further believes that the Nanothermal Insulation Coating Product can serve as an insulation to reduce energy costs — particularly in hot and humid environments — protecting against overheating, corrosion, microbial growth, some toxic substances, acid rain, rust, water, and oxidization, as well as ultraviolet rays harmful to structural materials over time. It may be directly applied to virtually any surface, from wood to metal, often without the need to remove existing coatings. It neither emits nor retains odors. As a “radiant barrier,” it has the potential to change the rate of heat transfer by reflecting the solar radiation that would otherwise be absorbed by the material underneath the coated surface. The coating is an excellent waterproof protectant and fire retardant as well.
Nanothermal Insulation Coating Product reduces transmission of temperatures through the coated elements. It has a coefficient of thermal conductivity of K = 0,059 BTU / HR., which ensures coverage of a temperature spread of up to 18 ° Celsius, depending on the material to which the coating is applied. Even under the most extreme sunlight conditions, the coating can create a comfortable living environment.
T
hrough its design formula and white coloration, Nanothermal Insulation Coating Product reflects 82% of UV rays, which results in a significant temperature differential. This property helps to prevent expansion and contraction of coated materials, preventing cracks in cement or concrete, and structural problems on metal surfaces.
Nanothermal Insulation Coating Product is a water repellent that does not allow water infiltration, or corrosion and rusting of the body covered, giving longer life.
Morocco Letter of Intent
On February 1, 2013, we entered into that certain letter of intent (the "Morocco Letter of Intent") with AkroStar Peintures of Morocco for the commercialization of our Nanothermal Insulation Coating Product. Management believes that the benefits of the thermal insulation and UV refraction to improve residential living conditions in hot and dry countries is of particular interest resulting in a mutually beneficial commercial partnership. With the growth in housing developments, along with the demand for improvements in energy efficiencies as known issues that are very important and timely in Africa right now, management believes that its Nanothermal Insulation Coating Product can play a significant and important role. Our primary focus will be introducing the Nanothermal Insulation Coating Product to the residential sector followed by the introduction of our agricultural products to assist in the growing demand for self-sustainable agricultural development and farming practices. As of the date of this Annual Report, we have not entered into any formal agreements.
Italian Letter of Intent
On April 5, 2013, we signed that certain letter of intent (the "Italy Letter of Intent") with SIS Consulting of Rome, Italy for the manufacturing and distribution of our Nanothermal Insulation Coating Product paint and coating products under licensing arrangements to be negotiated between the parties. The Italy Letter of Intent outlines the establishment of a strategic alliance for manufacturing and distribution of our proprietary “nPaint” coatings under an industrial licensing agreement targeting certain defense applications as identified by SIS’ defense industry clients. We are collaborating with SIS to facilitate the exchange of technical information necessary for the manufacturing of the targeted products and terms of the sales and licensing agreement. As of the date of this Annual Report, we have not entered into any formal agreements.
Industrial Diamonds
On December 7, 2012, we announced that we will be moving forward to patent and commercialize the process of producing industrial diamonds using our Nanotechnology Patent. Our Nanotechnology Patent and underlying technology will utilize tequila as an original precursor for the development of micro crystalline diamond thin films, a process offering an excellent alternative to producing industrial-scale diamond thin films for practical applications at a very low cost. According to the World Diamond Council, an estimated US$13 billion worth of rough diamonds are produced per year. Industrial diamonds — which comprise about 70% of diamonds — are sold for industrial applications including cutting, drilling, grinding, and polishing in industrial applications. In addition to being a very low cost alternative to current synthetic diamonds used in traditional industrial applications, diamonds can be explored for use as semiconductors suitable for building microchips and other applications in electronics. The following industry sectors are major consumers of industrial diamond: computer chip production, construction, machinery manufacturing, mining services (drilling for mineral, oil, and gas exploration), stone cutting and polishing, and transportation systems (infrastructure and vehicles). Stone cutting and highway building, milling, and repair consumed most of the industrial diamond stone. About 99% of the U.S. industrial diamond market now uses synthetic industrial diamond because its quality can be controlled and its properties can be customized to fit specific requirements. As of the date of this Annual Report, we are pursuing several key licensing agreements in different sectors of the marketplace. As of the date of this Annual Report, we have not entered into any formal agreements.
Nail Polish
On December 14, 2012, we were awarded a provisional patent number 61,735,705 for our original nano nail polish and lacquer, which is one of our advanced nanotechnology products we are creating. The nano lacquer – or nail polish – is a nanohybrid compound, which is a rather new concept. We have taken ceramics, which provide excellent hardness and high scratch and chip resistance, and mixed them with polymer and metallic nano particles. The result is a material that is flexible but strong, non-toxic, and eco-friendly. Not to mention it can hold a great range of colours and sheen. We are promoting the nail polish as twice as durable conventional products. It dries to a very hard state, and resists shock, cracking, scratching, and chipping. It offers superior ease of application, quick drying film formation, and high coverage and adhesion, with bright, vivid colours and high gloss. It also offers the flexibility of a wide spectrum of colour – introduced at the nano level – with pigments including gold, silver, titanium, and other metals and oxides with a wide range of tones. Its elasticity allows for easy and effective application to nail curves without cracking. We also have removed toxic solvents from the nail polish equation thanks to material that quickly evaporates, with no toxicity.
As of the date of this Annual Report, we are pursuing several key licensing agreements with American manufacturers and distributors. As of the date of this Annual Report, we have not entered into any formal agreements.
Advanced LED for Agricultural Greenhouses
On December 19, 2012, we announced the development through our Nanotechnology Patent an innovative “intelligent illumination system” for greenhouses, that works with commercial light-emitting diodes (LEDs) to reduce energy consumption and improve processes contributing to the growth of plant life in agricultural greenhouses. The new system reduces energy consumption while at the same time providing improved control over artificial light used to stimulate photochemical activities in plants for growth and the production of chlorophyll. By employing a “The Pulse Modulated Chlorophyll Fluorescence Monitoring Stage,” the innovative technology provides for the automatic control of light in relation to a whole range of greenhouse and plant conditions, including seasonal adjustments tailored to the type of vegetables and plants being illuminated. Management believes that the through use of the Nanotechnology Patent, there is better control in relation to light frequency (or wavelength), light quality, and pulse width of the light beams emitted by the LEDs, which hold important advantages over other existing artificial illumination sources such as fluorescent lamps, metal halide lamps, and high pressured sodium lamps. Our system offers higher efficiency in terms of energy consumption, quantum efficiency of the light produced, provides longer lifespan, controllable emission spectrum, safer handling, as well as improved disposal procedures.
In developing the technology, our goal was to help world agriculture to improve the crop yields and the quality of produce, while maintaining low energy consumption and minimizing the environmental impacts. Management believes that its technological system for greenhouses has allowed for the determination of the effect of pulsed light, as opposed to simple continuous light, in a frequency range from 0.1Hz to 100 kHz, with red and blue LEDs on the chlorophyll fluorescence emission of tomato plants, demonstrating that it is possible to control and enhance plant growth at will. Management further believes that its technology represents an answer to the greenhouse growers problem worldwide, of making as efficient as possible the crop yield in their agricultural greenhouses, while maintaining a low energy consumption, thus having a favourable impact on the environment. The technology aims to link two important industrial activities which would seem to have little relation: photonics and agriculture, opening new market opportunities for both. With our technological approach, it would be possible to increase the vegetable production in greenhouses, independently of the season, for the pulsed LEDs light replicates the crop cycles efficiently at a low energy cost.
Provisional Patent Issued
On March 27, 2013, we were issued a provisional patent number for our “intelligent illumination system” for greenhouses that works with commercial light-emitting diodes (LEDs) to reduce energy consumption and improve processes contributing to the growth of plant life in agricultural greenhouses
.
Non-Disclosure Agreement
On May 1, 2013, we executed that certain non-disclosure agreement ("Non-Disclosure Agreement") with CIVIK of Mexico ("CIVIK"). The Non-Disclosure Agreement will allow CIVIK to review and test two of our nanotechnologies, the nano insulate coatings and nano diamond applications, on CIVIK’s proprietary LED light system. The two nanotechnology applications being tested are as follows: (i) employing our Nanothermal Insulation Coating Product which may allow the LED light to dissipate heat created in the LED housing thereby increasing the efficiency and life of the LED light, projected at over 55,000 hours; and (ii) applying the nano diamond coating on the LED light glass face thereby benefiting the system by making the light brighter and protecting it against environmental damage.
As of the date of this Annual Report, we are working with CIVIK to prepare a letter of intent, which would outline the establishment of a strategic alliance and joint venture for the manufacturing and distribution of the technology. We are currently reviewing potential orders for new LED Lights
and nano coatings. The agreements require that we obtain Underwriters Laboratory Certification on our nano coatings so that the contracts and products could be insured. As of the date of this Annual Report, we are working on obtaining the Underwriters Laboratory Certification, which is for the intuemscent coating. We are underway to commence testing, which will take between approximately 18 to 24 months to complete. In order to commence testing, we need to ensure that theproduction and samples are consisten and that we will be able to keep quality standards and fulfill with the spec-sheets.
We are also pursuing several key licensing agreements with greenhouses.
Global Greenhouse Farming
On January 4, 2013, we announced yet another high-tech advance relating to greenhouse (GH) farming and agriculture, this being automated technology to control the dynamics of GH CO
2
for improved crop yields, reduced energy consumption, and decreased environmental hazards. Designed to replace conventional manual control systems, the new technology holds promise to increase efficiencies in GH CO
2
use by 20%, improve crop yields by up to 25%, and reduce energy consumption by up to 20%.
Management believes that benefits of the new automated technology depend on the type and size of the greenhouse crops, but our analysis shows significant improvements across the board for increased control efficiencies, crop yields, and energy savings for greenhouse farming and agriculture encompassing many billions of dollars of revenue in North America alone. Carbon dioxide plays a vital role in greenhouse operations and in cycles of all plant life on Earth in that it is necessary to photosynthesis, which basically is a chemical process that uses energy from light to convert CO
2
and water into plant sugars. Since CO
2
is normally obtained from the burning of carbon-based fuels such as natural gas, propane, and kerosene or directly from tanks of pure CO
2
greenhouse technologists face a dilemma because each CO
2
source has disadvantages. The burning of natural gas, propane or kerosene produces not only CO
2
, but heat that may have a localized effect on temperature and the incidence of plant disease. This is in addition to problems associated with the release of CO
2
into the outside atmosphere. Accordingly, we have developed a technology for understanding on a case-by-case basis how CO
2
behaves in greenhouses and then, how it can be controlled for better results, From a technical standpoint, we employ external CO
2
, solar radiation, exterior temperature, wind speed, and humidity as input variables, creating a unique methodology for optimizing greenhouse operations and production in practically any climate condition with the aim of increasing plant yields, decreasing energy consumption, and reducing CO
2
emissions into the outside air. An important feature of the technology is that it can be adapted to specific types of plants and geographical locations.
The international target markets our technology include big greenhouse growers, manufactures of greenhouses, and farms that use CO
2
. The advantages include computer control of the CO
2
in the greenhouses (instead of an empirical, manual control, which is the normally used), more efficient use of CO
2
(up to 20%), less energy consumption depending on size, type of crop, etc. (where preliminary tests indicated savings up to 20 and 30 %), and more efficiency of the crop yield (depending on the plant, preliminary tests indicate up to 25%).
As of the date of this Annual Report, we are currently in discussions with a leading agriculture co-op to begin pilot facility testing in Q1 2013.
Identification of Tuberculosis
On March 4, 2012, we obtained biological diagnostics test results at macro-level on a miniaturized tuberculosis biosensor platform. We successfully developed a Point-of-Care biosensor at macro-level and presented industry with proposals for miniaturization and commercialization at large scale. The joint venture proposal is for the development of miniaturized Point-of-Care (PoC) and Lab-on-Chip (LoC) biosensors. We believe that four innovative solutions are proposed with the main objective to create a simple, low-cost, high-sensitivity, rapid diagnostic platform capable of being used in remote locations for PoC and LoC monitoring of critical infectious diseases, including tuberculosis (TB). Our intent is to establish a commercial PoC and LoC biosensors using modern techniques by either applying common Micro-Electro-Mechanical-Systems (MEMS) batch processes, or by using simpler and more modular methods such as soft lithography or laser ablation. Four possible innovative solutions combining biomarker-based diagnostics procedures with micro-technology have been identified: (i) Quantum-Dots Micr
ochannels (QDμC); (ii) Surface Plasmon Resonance (SPR) Spectroscopy & Plasmonic Enzyme-Linked Immuno Sorbent Assay (Plasmonic ELISA); (iii) Micro Electrochemical Impedance Spectroscopy (μEIS); and (iv) Surface Acoustic Wave Micro-Electro-Mechanical-System
(SAW-MEMS).
As of the date of this Annual Report, we are developing comprehensive strategies for obtaining a functional prototype in order to address all projects at any development stage, which includes packaging, interconnect with outside world, and modular integration on circuits or with some sort of display. We are in discussions with industry leaders to assess product development strategies and additional research required over the next twelve months to advance the commercialization of the product.
Self-Cleaning Paint
On May 6, 2013, we announced the development of a self-cleaning paint that degrades pollutants through a proprietary nanoparticle compound and natural light. The eco-friendly, advanced nanotechnology paint coating will keep exterior surface material performance and appearance standards for much longer periods of time. Management believes that this product is suitable for application on a wide variety of materials including metal, cement, bricks and wood, and may be used in anything from buildings, car parks and roads, to refineries and pipelines. Management further believes that the new coating can significantly reduce maintenance requirements for companies and governments and increase the lifespan of these expensive capital infrastructure investments. The novel approach used by us is based on an important and unique and proprietary nanoparticle compound, which leverages natural light and together with our proprietary nanoparticle system, allows any surface to literally keep itself clean from contaminants, dirt, dust, waste, fungus, graffiti or bird droppings.
Sponsorship in the Panam GP Series
On August 28, 2013, we announced that we are sponsoring the use of our self-cleaning and fireproof paint applications in the Panam GP Series – Supported by the Ferrari Drivers Academy (FDA). Our self-cleaning and fireproof coatings are transparent, one-step applications, that will waterproof and fire-proof vehicles up to 300 degrees Celsius (572 degrees Fahrenheit). The Ferrari Formula 3 team will be testing these products on their car glass and body structure against fire. Management believes that the key advantage of these coatings lies in the 100% water-based solution that uses no solvents. Current products on the market typically include strong solvents (such as acetone and methyl acetone), which is proven to eventually damage the substrate. Further, these competitive products are not conducive to multiple layers. We believe that our coatings can be applied an unlimited amount of times in case the surface is damaged or is in need of repair. We will be showcased on the team’s uniforms and vehicles providing us with TV exposure in all Latin America.
Biotechnology Mesh
On May 10, 2013, we announced that we had developed a hemostatic material for which we have filed for provisional patent and currently presenting to the biomedical industry. The new innovation includes a nano biotechnology hemostatic mesh, which creates a mechanical barrier stopping blood flow in wounds and integrates both physical and chemical protection, and antibacterial properties. The proprietary nano material is made with polyvinyl nanofibers, graphene oxide sheets and plate nanoparticles which combine to produce a water-soluble synthetic polymer which has excellent film forming quality, a high tensile strength and flexibility, and allows for emulsifying of additional biomedical enhancing materials that would otherwise not be able to be blended together. The result is a surgical mesh that allows blood platelets to adhere to the surface and offers physical and chemical protection to stimulate coagulation, and possess sustained release of antibacterial properties. The material is biocompatible, durable, and flexible enough to fit complex wounds, is stable and functional at extreme temperatures, has a long shelf life, and possesses antibacterial properties. Management believes that the use of nanotechnology in medicine offers many possibilities from disease targeting and drug delivery to physical therapy and cell regeneration applications.
Hydroxyapatite
On May 16, 2013, we announced the development of a new nanotechnology to convert eggshells into hydroxyapatite, which is a material employed for endodontics, restorative dentistry and other applications in orthopedics and prosthesis. Bone and teeth are formed of an organic component, collagen, and a mineral phase, hydroxyapatite, which is a ceramic material also known as a bone mineral. It is found in teeth and bones and makes up to 50% of bone by weight. Hydroxyapatite is the main mineral used in dental enamel and is also commonly used as a filler to replace amputated bone or as a coating to promote bone ingrowth into prosthetic implants. Many modern implants (i.e. dental implants and hip replacements) are coated with hydroxyapatite and it is one of the key materials for developing bone grafts with bioactive nature. Our technology consists of a method that converts eggshells into hydroxyapatite. Hydroxyapatite (HAp) is produced through a hydrothermal conversion with the agro-industry byproduct, eggshells. Commercial grade calcium dibasic phosphate (CaHPO4.2H2O) and lime (CaO) are obtained from direct calcination of the eggshells. HAp has been extensively studied and used as a conventional replacement material in different medical applications. In this particular case, management believes that the main advantage of our method is that the hydroxyapatite obtained has high crystallinity and excellent homogeneity. In our research, the use of eggshell is the source of CaCO3 for the synthesis of hydroxyapatite by hydrothermal methods, where eggshells represent a byproduct of the poultry industry which is not utilized and represents a source of waste. In a minor proportion, this material is used as fertilizer or animal foodstuff, but in a great proportion, the product gets converted into waste. In Mexico, for example, nearly 480,000 tons per year of eggshell are generated as human waste. In the USA, 550,000,000 dozen eggs were produced monthly in 2006. In our tests, eggshells from chicken farms were cleaned, filtered, dried, ground and treated to produce a source of CaO. The hydroxyapatite was then prepared by hydrothermal synthesis from commercial calcium dibasic phosphate (CaHPO4) and the CaO. The BET-measured specific surface area of this material
was 50 m2/g, with an average particle size of 0.06 μm. The latter is important for the material to be used in clinical applications, not only for chemical composition but also for microstructure, e.g., grain size, pore size, and porosity, which is properl
y tailored for performance and enhanced by using other nano phases in the composition. The resulting physico-chemical characteristics of the HAp obtained make it suitable for dental prosthesis applications, which we are currently underway testing.
Water Proof and Fire Resistant Coating
On May 13, 2013, we announced the development of the next generation of nano water proof coatings. We will also be filing a patent application on this technology. Management believes that it has developed a path through which they may partner with industry to commercialize an innovative nano water proof hydrophobic and fire resistant product. As an important competitive advantage, the coating provides also water proof and fire protection at temperatures of up to 300 degrees Celsius. Home fires damage about 400,000 homes, and cause just under 7 billion US dollars in direct damage annually in the United States, this product should be in every household in America. The nano water proof and fire proof coating may be directly applied to virtually any surface, from wood to metal, and fabric often without the need to remove existing coatings. The product is a direct competitor to the water repellent Rust-Oleum Never Wet but with added fire resistant benefits.
Saint-Gobain Mutual Confidentiality Agreement
Effective on April 7, 2013, we entered into a mutual confidentiality agreement (the “Confidentiality Agreement”) with Saint-Gobain Ceramics & Plastics Inc., a Delaware corporation ("SGCP"). In accordance with the terms and provisions of the Confidentiality Agreement: (i) SGCP will provide to us information of a technical or commercial nature and samples related to SGCP's business including, without limitation, financial information, powder, slurry and compound product related information and information related to methods and equipment for manufacturing same for a period of two years (the "Disclosure Period"); and (ii) we shall provide to SGCP details regarding its diamond powders, nano diamond slurries and compounds and related capabilities during the Disclosure Period. In further accordance with the terms and provisions, we and SGCP may engage in certain activities related to consideration of future business relationships as part of the exchange of confidential information from one party to the other. Either party may terminate the Disclosure Period on a ten (10) days written notice. The confidentiality period under the terms of the Confidentiality Agreement shall be five years.
Dentsply International Confidential Disclosure Agreement
Effective on May 6, 2013, we entered into a confidential disclosure agreement (the “Disclosure Agreement”) with Dentsply International Inc., a Delaware corporation ("Dentsply"). Both we and Dentsply independently possess and will continue to acquire certain confidential and proprietary information concerning nano-materials for dental composites (the "Confidential Information"). In accordance with the terms and provisions of the Disclosure Agreement, both we and Dentsply desire to disclose certain of our respective Confidential Information to the other party Both parties agree to hold in confidence and not to use such Confidential Information except for evaluation, recommendations to and/or discussion with the other party and other purposes specifically requested by the owner of the Confidential Information. Lastly, both parties agree to take every reasonable precaution to safeguard the confidentiality of the other party's Confidential Information, including restriction of access to such Confidential Information to only essential employees, agents, and/or associates, and maintaining all documents, memoranda, correspondence, data, notebooks, reports, drawings, samples or records containing such Confidential Information in a secure location.
Intumescent Fire Resistant Coating
We have been testing our intumescent, fire resistant coating with Atencio and Atencio, a certified maintenance supplier for Pemex, the Mexican state-owned petroleum company. Our intumescent paint was tested at Pemex’s Francisco I. Madero Refinery. Testing of the product followed Underwriters Laboratories (UL) 1709 test protocols for the “Rapid Rise Fire Tests of Protection Materials for Structural Steel.” The test method covered full-scale fire exposure, intended to evaluate the thermal resistance of protective material applied to structural members and the ability of the protective material to withstand fire exposure at Pemex refineries and facilities. We submitted the
product for testing through Atencio and Atencio, and tests were conducted in partnership and under the supervision of Pemex engineers. The tests involved the preparation of three carbon steel plates, coated with varying thickness of our fire resistant paint. The plates were then heated with a LP gas torch and readings taken on both the hot and cold faces. Management believes that the coatings performed perfectly and the test results illustrated that a constant direct flame applied for 45 minutes with a temperature of 800 degrees Celsius showed that once removed – in 2 seconds – the plates were cold to the touch.
Purchase Order for 27,000 Liters
As of the date of this Annual Report, we have received a purchase order for twenty-seven thousand (27,000) liters of our nano coatings (the "Purchase Order"). The Purchase Order was issued to Atencio and Atencio and us by Urban del Golfo S.A. de CV, a supplier of products to Pemex. Atencio and Atencio is a certified maintenance partner of Pemex since 1991 and will be carrying out the installation of the intumescent fire resistant coatings at Pemex’s Francisco I. Madero Refinery. Our business model involves exclusive manufacturing agreements with third parties thathave manufacturing capabilities to address and fulfill our purchase orders.
The Purchase Order is valued at approximately $630,000 and is scheduled to be delivered on or by December 31, 2013. We are in further discussions with Pemex’s maintenance divisions for our other coating applications as it applies to the various challenges at refineries across Mexico.
MATERIAL AGREEMENTS
Soluciones Nanotechnologicas S.L. Collaboration Agreement
Effective on September 25, 2013, we entered into that certain collaboration agreement (the "Collaboration Agreement") with Soluciones Nanotechnologicas, S.L. ("Nanotex"), which is a company organized under the laws of Spain that has developed in-house technologies for the industrial production of superparamagnetic nanoparticles. In accordance with the terms and provisions of the Collaboration Agreement, we will work together with Nanotex to
launch an industrial applications development program ("ADP") to design and develop new industrial applications suitable for commercialization of "nano scale magnetic particles." The Collaboration Agreement further outlines the establishment of a joint work group for the purpose of creating a consistent product which addresses the growing market share worldwide in the nano tech magnetics industry. The initial project managers shall be Dr. Victor Castano, our Chief Scientific and Technological Officer and a member of our Board of Directors, and Fernando Mores Egea of Nanotex.
The terms and provisions of the Collaboration Agreement further provide that we will work with Nanotex to develop and commercialize nanomagnetic technology, patents, utility models and industrial designs for industrial and commercial applications. All technical information in the form of test and performance data from tests or samples provided under the Collaboration Agreement shall be the jointly owned property of us and Nanotex.
Lastly, in accordance with the terms and provisions of the Collaboration Agreement, any invention, whether patentable or not, provided by either party during the course of performance of obligations under the Collaboration Agreement where the inventive concept relates magnetic nano/sub micron particles functionalization, purifications, sizing or other manipulations shall be the sole property of the party responsible for the invention and only that party shall be entitled to apply for patent protection. Any invention owned solely by either party may be used by the other party for the purposes of the Collaboration Agreement; however, any commercializations of inventions made under the Collaboration Agreement shall not be included under its terms and must be negotiated separately.
Ciateq, AC, Advanced Technology Center General Agreement
On March 12, 2013, we entered into that certain general agreement (the "General Agreement") with CIATEQ, AC, Advanced Technology Center ("CIATEQ") to develop and market solutions and products based on the industrial application of nanotechnologies. The General Agreement will further our resources to develop projects, manufacture and produce our Nanotechnology Patent prototypes and products. The General Agreement outlines how both organizations will cooperatively develop specific research and commercial product programs and projects which will be subject to specific agreements outlining the purpose, activities, ownership, and the general obligations of each party. The specific agreements may include any of the following activities: advisory and consulting, scientific research, technological development, engineering projects, training, and evaluation of technologies. In developing and implementing any future specific agreement(s), both organizations may negotiate jointly or separately, with other institutions, government departments and/or agencies, national and international, to obtain the necessary business resources to carry out the specific agreement(s). Each party will retain the copyrights and their respective industrial property rights for any future partnerships, and will outline any new ownership of copyright or industrial property rights generated, produced or resulting from the activities covered in the specific agreement(s).
CIATEQ is an Advanced Technology Center offering integral, innovative, practical and timely solutions to the manufacturing, oil, aeronautic industries and to those related to the water handling and distribution, integrating mechatronics technological specialties, measurement, monitoring and automated control systems, software development and advanced manufacturing.
GMI Non-Disclosure Agreement
On August 12, 2013, we executed that certain non-disclosure agreement (the "GMI Non-Disclosure Agreement") with GMI of Mexico ("GMI"). The GMI Non-Disclosure Agreement will allow GMI access to our proprietary Nanothermal Insulation Coating Product and technologies for testing and product integration purposes by its wholly owned subsidiary Centro De Innocation E Investigationcion De Sistemas Para La Edificaciony Energias Renovables, S.A. P. I. De.V. GMI’s interest in our Nanothermal Insulation Coating Products lie in the areas of insulating fire retardant, waterproof protection, and the proprietary anti-graffiti, self-cleaning paint. GMI is a leading provider of building turnkey projects in the residential, educational and Industrial sectors” with clients such as Wal-Mart, AeroMexico and Delta. Concurrent to GMI’s review and testing of the products, we are working together to establish a joint venture agreement, which would outline the strategic commercialization of these product lines. The joint venture would be designed to drive sales for both companies allowing us to leverage GMI’s existing infrastructure, clientele, and distribution network.
Dr. Victor Castano Services Agreement
On October 10, 2012, we entered into that certain services agreement with Dr. Victor Castano, our Chief Technological and Scientific Agreement and a director (the "Castano Services Agreement"). In accordance with the terms and provisions of the Castano Services Agreement: (i) Castano shall provide consultant services to us including, but not limited to, consulting with our management regarding research and development of Nano Technology; (ii) conducing surveys, strategic business planning, due diligence meetings; (iii) attending convention and trade shows; (iv) assist in preparation and dissemination of press releases and stockholder communications and drafting of business plans; (v) consult with potential merger and/or joint venture candidates; and (vi) develop acquisition profile and structure, recommend alternatives and sources and consult on corporate and/or investment issues.
In further accordance with the terms and provisions of the Castano Services Agreement, we shall pay to Dr. Castano a one-time fee of $15,000 in either cash and/or issuance of restricted shares of common stock. The Castano Services Agreement terminated March 29, 2014, which we may renew on the same terms by providing written notice to Dr. Castano prior to its expiration.
Dr. Arnulfo Rosas-Juarez Services Agreement
On May 1, 2013, we entered into that certain one year services agreement (the "Services Agreement") with Dr. Arnulfo Rosas-Juarez ("Rosas-Juarez"), regarding assistance in strategic business research and development of nano technology planning, marketing, business development, communication and public relations designed to make the public knowledgeable about us and our Nanotechnology products. In accordance with the terms and provisions of the Service Agreement, Rosas-Juarez shall: (i) consult with our management concerning research and development of nano fuel technology gasoline; (ii) engage in strategic business planning; (iii) conduct due diligence meetings; (iv) attend conventions and trade shows; (v) assist with the preparation and dissemination of press releases and stockholder communications; (vi) consult regarding mergers and/or joint ventures with companies and/or distributors; (vii) review and assist in creating and/or updating a business plan and structures; (viii) propose patent counsel legal attorneys; (ix) assist in the development of an acquisition profit and structure; (x) recommend alternative and sources and consult on corporate and/or investment issues.
In consideration therefor, we have agreed to pay Rosas-Juarez a fee of $1,550 either in cash or by issuance of shares of common stock.
Asset Purchase Agreement
On June 1, 2012 we entered into an asset purchase agreement (the "Respect Asset Purchase Agreement") with Respect Innovations, Inc. ("Respect") relating to the acquisition from Respect of technology which uses microscopic particles to form solid laminates and chemical coatings. We intended to use this technology, known as "nanotechnology" to develop and manufacture various laminates and coatings for use on windows and surfaces. We believed that the nanotechnology had benefits such as heat retention, wind resistance, blast mitigation, ballistic resistance and smash resistance. We further believed that the nanotechnology would allow for the imprint of radio frequency bands and other information into the laminate or coating for identification and tracking purposes. In consideration therefore and in accordance with the terms of the Respect Asset Purchase Agreement, we issued an aggregate of 100,000,000 shares of our restricted common stock to Respect.
We subsequently incorporated Respect American Glass, a Florida corporation and our prior wholly-owned subsidiary ("RAG"), to operate certain of our business operations regarding the assets acquired from Respect pursuant to the Respect Asset Purchase Agreement. Subsequently, we engaged Benoit & Cote, P.C., a patent law firm, to conduct a patent search regarding the assets and identified and determined that there were six patent infringements that would require a right of use. In order to confirm the potential infringements, we would need examination from the United States Patent, Copyright and Trademark Office, which would take approximately 18 to 24 months. We determined that this was not economically feasible nor in the best interests of our shareholders.
Rescission Agreement
On October 1, 2012, we entered in that certain rescission agreement (the "Rescission Agreement") with Respect regarding Respect Asset Purchase Agreement. In accordance with the terms and provisions of the Rescission Agreement, we: (i) assigned all of the assets as defined in the Respect Asset Purchase Agreement to Respect; (ii) we assigned all of the issued and outstanding shares of RAG to Respect; and (iii) Respect was to return to us the certificate issued to Respect evidencing the 100,000,000 shares of our common stock. Therefore, RAG is no longer our wholly-owned subsidiary.
SOURCES OF SUPPLY AND RAW MATERIALS
An important consideration, as we begin to develop and grow our products under the Nanotechnology Patent is to ensure that we have access to the various components and raw materials we need to manufacture and assemble our various products. As we anticipate larger orders, establishing multiple sources for key components could become very important to us. Moreover, a key focus of our business plan is when we are at the point of distributing and marketing our products, to aggregate our supply chain so as not only to reduce cost but also to accelerate our ability to deliver products on a timely basis to our customers. As of the date of this Annual Report, we have not executed any definitive agreements or contracts with suppliers for raw materials.
GOVERNMENT REGULATION
Most of our current and proposed activities will be subject to numerous federal, state, local and international laws and regulations concerning machine and chemical safety and environmental protection. Such laws include, without limitation, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response Compensation Liability Act. We will also be subject to laws governing the packaging and shipment of some of our products. Such laws require that we take steps to, among other things, maintain air and water quality standards, protect threatened, endangered and other species of wildlife and vegetation, preserve certain cultural resources, reclaim processing sites and package potentially flammable materials in appropriate ways and pass stringent government mandated testing standards before shipping our battery products.
Compliance with federal, state, local or international laws or regulations will represent a portion of our budget. If we fail to comply with any such laws or regulations, however, a government entity may levy a fine on us or require us to take costly measures to ensure compliance. Any such fine or expenditure may adversely affect our development.
ENIVIRONMENTAL REGULATION AND LIABILITY
Any proposed processing and manufacturing operations will be subject to federal, state, local and international environmental laws. Under such laws, we may be jointly and severally liable with prior property owners for the treatment, cleanup, remediation, and/or removal of substances discovered at any other property used by us; to the extent the substances are deemed by the federal and/or state government to be toxic or hazardous. Courts or government agencies may impose liability for, among other things, the improper release, discharge, storage, use, disposal, or transportation of hazardous substances. We may use hazardous substances in our testing and operations and, although we will employ reasonable practicable safeguards to prevent any liability under applicable laws relating to hazardous substances, companies engaged in materials production are inherently subject to substantial risk that environmental remediation will be required.
COMPETITION
Although there is substantial competition in the nanotechnology industry, including nano compounds, we do not believe that we currently face significant competition for products we intend to sell. However, many of our competitors who are in the nanotechnology industry could likely develop similar products, which would place us in substantial competition with them. Since many of these nanotechnology companies may have substantially greater financial, technical, managerial, marketing and other resources than we do, they may develop similar competing products that could threaten us and they may compete more effectively than we can and they could also have better access to marketing their products to our potential clients.
RESEARCH AND DEVELOPMENT
Prior to consummation of the Asset Purchase Agreement, we did not conduct any research or development activities. Subsequent to consummation of the Asset Purchase Agreement, we anticipate incurring approximately $500,000 relating to research and development of our nanotechnology products. Certain of the research and development costs incurred pertained to the commercial viability of Dr. Castano's Nano delivery system relating to application of the nano particles to be used in paint coating, nail polish, LED lighting, dental coatings and semi-conductors. We anticipate conducting further additional research or development activities in the near future. Such costs are not borne directly by any customers.
EMPLOYEES
O
ur business is currently managed by Mr. Bernardo Camacho Chavarria, chief executive officer, chief financial officer and accounting officer and Dr. Victor Castano, chief technological and scientific officer. We also employ 3 persons on a fully-time basis and 3 persons on a part-time basis. We anticipate hiring additional employees primarily in operations, engineering and sales when we bring our products to market. Such additional hiring, if it occurs, will be dependent upon business volume growth.
WEBSITE
We currently have a website for our company and own the web domain
www.nanolabs.com.
INTELLECTUAL PROPERTY
On November 13, 2012, the United States Patent, Copyright and Trademark Office issued to Castano a provisional patent for the Nanothermal Coating Patent, which was assigned to us pursuant to the Asset Purchase Agreement and the Assignment. We anticipate further patent applications pertaining to a variety of inventions related to aspects of our nanotechnology. We presently do not own any copyrights, trademarks, licenses, concessions or royalties, and we may rely on certain proprietary technologies, trade secrets, and know-how that are not patentable.
We also currently own the web domains
www.nanolabs.com.
Under current domain name registration practices, no one else can obtain an identical domain name, but someone might obtain a similar name, or the identical name with a different suffix, such as “.org,” or with a country designation. The regulation of domain names in the United States and in foreign countries is subject to change, and we could be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our domain names.
INSURANCE
We currently do not maintain any insurance.
FACTILITES
Our executive, administrative and operating offices are located at The Ford Building, 615 Griswold Street, Seventeenth Floor, Suite 1715, Detroit, Michigan 48226. The lease calls for monthly payments of approximately $400. We believe that our facilities are adequate for our needs and that additional suitable space will be available on acceptable terms as required.
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. If any of the following risks actually occurs, our business, financial condition, and/or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should only purchase our securities if you can afford to suffer the loss of your entire investment.
RISKS RELATED TO OUR BUSINESS
We have a limited operating history upon which an evaluation of our prospects can be made.
Although we were incorporated March 27, 1995, we only recently began conducting the current business operations in June 2012. Thus, our lack of operating history makes an evaluation of our business and prospects very difficult. Our prospects must be considered speculative, considering the risks, expenses, and difficulties frequently encountered in the establishment of a new business. We cannot be certain that our business will be successful or that we will generate significant revenues. As of the date of this Annual Report, we have not commenced business operations involving the marketing and sale and distribution of any of our products developed under the Nanotechnology Patent. We may never be successful in developing a market for any of the products under the Nanotechnology Patent and thus may never become profitable. Therefore, our ability to operate our business successfully remains untested. If we are successful in marketing the products developed under the Nanotechnology Patent, we anticipate that we will retain future earnings, if any, and other cash resources for the future operation and development of our business as appropriate. We do not currently anticipate declaring or paying any cash dividends in the foreseeable future. Payment of any future dividends is solely at the discretion of our board of directors, which will take into account many factors including our operating results, financial conditions and anticipated cash needs. For these reasons, we may never achieve profitability or pay dividends.
We anticipate that our ability to generate revenues in the foreseeable future will depend on the successful development and commercialization of products developed under the Nanotechnology Patent. If we are not successful in commercializing our products or are significantly delayed or limited in doing so, our business will be materially adversely affected and we may need to curtail or cease operations.
Because we are a development stage company, we have no revenues to sustain our operations.
We are a development stage company that is currently developing our business. To date, we have not generated revenues. The success of our business operations will depend upon our ability to obtain successfully develop and market our Nanotechnology products and provide quality products. We are not able to predict whether we will be able to develop our business and generate revenues. If we are not able to complete the successful development of our business plan, generate revenues and attain sustainable operations, then our business will fail.
We have incurred a net loss since inception and expect to incur net losses for the foreseeable future.
As of June 30, 2013, our accumulated deficit was $10,779,491. The Company recognized a net loss for the year ended June 30, 2013 of $10,194,010. We expect to incur operating and capital expenditures for the next year and, as a result, we expect significant net losses in the future. We will need to generate significant revenues to develop our business and expand our operations. We may not be able to generate sufficient revenues to achieve profitable operations.
We will need to raise additional capital to research, develop and market our products under the Nanotechnology Patent and expand our operations. Our failure to raise additional capital will significantly affect our ability to fund our proposed activities.
We are currently not engaged in any sophisticated marketing program to market our products under the Nanotechnology Patent because we lack capital and revenues to justify the expenditure. In addition, our available funds will not fund our activities for the next twelve months. If we fail to raise additional funds, investors may lose their entire cash investment.
If the use of any of our Nanotechnology products as developed harm people or the environment, we could be subject to costly and damaging product liability claims.
We may be exposed to potential product liability risks that are inherent in the testing, manufacturing and marketing of our Nanotechnology products products. Side and/or environmental effects and other liability risks could give rise to viable product and environmental liability claims against us. We have not yet obtained insurance coverage and, if we do so, we may not be able to maintain this insurance on acceptable terms. Moreover, insurance may not provide adequate coverage against potential liabilities. As a result, product liability claims, even if successfully defended, could have a material adverse effect on our business, financial condition and results of operations.
The commercial success of our products developed under the Nanotechnology Patent will depend upon the degree of market acceptance of the respective product by consumers.
If our various products developed under the Nanotechnology Patent do not gain market acceptance by consumers, we may not generate sufficient product revenue and we may not ever become profitable. The degree of market acceptance of our products developed under the Nanotechnology Patent will depend on a number of factors, including:
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the prevalence of adverse side effects to use of the Nanotechnology product;
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any limitations or warnings in the Nanotechnology product’s approved labeling;
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the efficacy and potential advantages over alternative products;
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pricing;
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the willingness of the target population to try new products developed under the Nanotechnology;
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the strength of marketing and distribution support and timing of market introduction.
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Adverse changes or interruptions in our relationships with third parties could affect our business operations and reduce our revenues.
Our business is substantially dependent on our relationship with third parties with regards to contractual relations, which terms could affect our access to the basis of certain of our products and inventory and reduce our potential revenues. In the event our relations with these crucial third parties should fail, we do not have a third-party back-up sources which will provide the necessary products to us. The relationship we have with these third parties is generally freely terminable upon notice. The arrangements generally are not exclusive. We cannot assure you that our arrangements with current or future third parties will remain in effect or that any of these third parties will continue to join in developmental efforts and supply us with the same level of support and access to inventory in the future. If support or access to inventory is affected, or our ability to obtain support or inventory on favorable economic terms is diminished, it may reduce our revenues. Our failure to establish and maintain representative relationships for any reason could negatively impact our websites and reduce our revenues.
We may become subject to international economic and political risks over which we have little or no control and may be unable to alter our business practice in time to avoid the possibility of reduced revenues.
We conduct a substantial portion of our business outside the United States and plan to significantly increase our presence in other foreign countries. Doing business outside the United States, subjects us to various risks, including changing economic and political and environmental conditions, major work stoppages, exchange controls, currency fluctuations, armed conflicts and unexpected changes in United States and foreign laws relating to tariffs, trade restrictions, transportation regulations, foreign investments and taxation. We have no control over most of these risks and may be unable to anticipate or adapt to changes in international economic and political and environmental conditions. This may lead to sudden and unexpected revenue reductions or expense increases.
We may have difficulty establishing adequate management, legal and financial controls internationally
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As a result of difference in management, accounting, legal, language and cultural norms in certain foreign countries, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting standard business practices for our international projects as well as in our United States based operations. In addition, our international efforts may divert management attention and consume a significant amount of capital without anticipated results.
Certain foreign countries could change its policies toward private enterprise or even nationalize or expropriate private enterprises
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Our business is expected to be subject to significant political and economic uncertainties and may be affected by political, economic and social developments in Mexico. The Mexican government may pursue economic reform policies including the encouragement of private economic activity and greater economic decentralization. The Mexican government may not pursue current policies or may significantly alter them to our detriment from time to time with little, if any, prior notice.
Changes in policies, laws and regulations or in their interpretation or the imposition of confiscatory taxation, restrictions on currency conversion, restrictions or prohibitions on dividend payments to shareholders, or devaluations of currency could cause a decline in the price of our common stock.
The nature and application of many laws of certain foreign countries create an uncertain environment for business operations and they could have a negative effect on us
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The legal system in foreign countries generally may be a civil law system. Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value as precedents. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could cause a decline in the price of our common stock. In addition, as these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty. Furthermore, the political, governmental and judicial systems in foreign countries are sometimes impacted by corruption. There is no assurance that we will be able to obtain recourse in any legal disputes with suppliers, customers or other parties with whom we conduct business.
If we are unable to establish sales, marketing and distribution capabilities, or to enter into agreements with third parties to do so, we will be unable to successfully market and sell our future Nanotechnology products.
We have no experience with marketing, sales and distribution of certain of our proposed Nanotechnology products and may establish pre-commercial capability in those areas. If we are unable to establish capabilities to sell, market and distribute our products, either by developing our own capabilities or entering into agreements with others, we will not be able to successfully sell our future Nanotechnology products. In that event, we will not be able to generate significant revenues. We cannot guarantee that we will be able to hire the qualified sales and marketing personnel we need. We may not be able to enter into any marketing or distribution agreements with third-party providers on acceptable terms, if at all.
Our Nanotechnology Patent and other protective measures may not adequately protect our proprietary intellectual property
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We regard our intellectual property, particularly our proprietary rights in our nano technology, as critical to our success. We have received one patent, and intend to file further patent applications, for various applications and aspects of our nano technology and other intellectual property. Such patents and agreements and various other measures we take to protect our intellectual property from use by others may not be effective for various reasons, including the following:
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Pending patent applications may not be granted for various reasons, including the existence of conflicting patents or defects in our applications, if there was in existence relevant prior art or the invention was deemed by the examiner to be obvious to a person skilled in the art whether or not there were other existing patents. Risks associated with patent applications are enhanced because patent applications of others remain confidential for a period of approximately 18 months after filing; as a result, our belief that we are the first creator of an invention or the first to patent it may prove incorrect, as information related to conflicting patents is first published or first brought to our attention;
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The patent we have been granted may be challenged, invalidated, narrowed or circumvented because of the pre-existence of similar patented or unpatented intellectual property rights or for other reasons;
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The costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make aggressive enforcement cost prohibitive;
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We have not filed for patent protection in many countries in which we are currently selling product or seek to sell product; as a result, we may be unable to prevent competitors in such markets from selling infringing products;
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Even if we enforce our rights aggressively, injunctions, fines and other penalties may be insufficient to deter violations of our intellectual property rights; and
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Other persons may independently develop proprietary information and techniques that, although functionally equivalent or superior to our intellectual proprietary information and techniques, do not breach proprietary rights.
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Our inability to protect our proprietary intellectual property rights or gain a competitive advantage from such rights could harm our ability to generate revenues and, as a result, our business and operations.
We may be involved in lawsuits to protect or enforce our patent, which could be expensive, time consuming and involve adverse publicity and adverse results.
Competitors or others may infringe our patent. To counter infringement or unauthorized use, we may be required to file patent infringement claims, which can be expensive and time-consuming. Interference proceedings brought by the United States Patent and Trademark Office may be necessary to determine the priority of inventions with respect to our patent applications. Litigation or interference proceedings may result in substantial costs and be a distraction to our management
Because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure. In addition, during the course of this litigation (even if ultimately successful), there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our shares of common stock.
In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover that technology. An adverse determination of any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.
We may not prevail in any litigation or interference proceeding in which we are involved. Even if we do prevail, these proceedings can be expensive, result in adverse publicity and distract our management.
Other parties may bring intellectual property infringement claims against us, which would be time-consuming and expensive to defend, and if any of our products or processes is found to be infringing, we may not be able to procure licenses to use patents necessary to our business at reasonable terms, if at all.
Our success depends in part on avoiding the infringement of other parties’ patents and proprietary rights. We may inadvertently infringe existing third-party patents or third-party patents issued on existing patent applications. Third party holders of such patents or patent applications could bring claims against us that, even if resolved in our favor, could cause us to incur substantial expenses and, if resolved against us, could cause us to pay substantial damages. Under some circumstances in the United States, these damages could be triple the actual damages the patent holder incurs.
If we have supplied infringing products to third parties for marketing or licensed third parties to manufacture, use or market infringing products, we may be obligated to indemnify these third parties for any damages they may be required to pay to the patent holder and for any losses the third parties may sustain themselves as the result of lost sales or damages paid to the patent holder. In addition, we have, and may be required to, make representations as to our right to supply and/or license intellectual property and to our compliance with laws. Such representations are usually supported by indemnification provisions requiring us to defend our customers and otherwise make them whole if we license or supply products that infringe on third party technologies or violate government regulations. Further, if a patent infringement suit were brought against us, we and our customers, development partners and licensees could be forced to stop or delay research, development, manufacturing or sales of products based on our technologies in the country or countries covered by the patent we infringe, unless we can obtain a license from the patent holder. Such a license may not be available on acceptable terms, or at all, particularly if the third party is developing or marketing a product competitive with products based on our technologies. Even if we were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property.
Any successful infringement action brought against us may also adversely affect marketing of products based on our technologies in other markets not covered by the infringement action. Furthermore, we may suffer adverse consequences from a successful infringement action against us even if the action is subsequently reversed on appeal, nullified through another action or resolved by settlement with the patent holder. As a result, any infringement action against us would likely harm our competitive position, be costly and require significant time and attention of our key management and technical personnel.
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. Trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, contractors, consultants, outside scientific collaborators and other advisors to protect our trade secrets and other proprietary information. Parties to the confidentiality agreements may have such agreements declared unenforceable or, even if the agreements are enforceable, may breach such agreements. Remedies available in connection with the breach of such agreements may not be adequate, or enforcing such agreement may be cost prohibitive. Courts outside the United States may be less willing to protect trade secrets. In addition, others may independently discover our trade secrets or independently develop processes or products that are similar or identical to our trade secrets. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection would harm our competitive business position.
If we are sued on a product liability claim, our insurance policies may not be sufficient.
Although we intend to maintain general liability insurance and product liability insurance, our insurance when acquired may not cover all potential types of product liability claims to which manufacturers are exposed or may not be adequate to indemnify us for all liability that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of our insurance coverage could harm our business, including our relationships with current customers and our ability to attract and retain new customers. In addition, if the liability were substantial relative to the size of our business, any uncovered liability could harm our liquidity and ability to continue as a going concern.
We depend on the efforts and abilities of our officers.
We currently have only two officers, Bernardo Camacho Chavarria and Dr. Victor Castano. Outside demands on our officers’ time may prevent each of them from devoting sufficient time to our operations. In addition, the demands on each of these individuals’ time will increase because of our status as a public company. Mr. Chavarria and Dr. Castano both have limited experience in managing a public company, which may impact our ability to meet our financial and business objectives as potential investors may not want to invest in a company whose management has limited public company experience. The interruption of the services of our management could significantly hinder our operations, profits and future development, if suitable replacements are not promptly obtained. We currently have One executive compensation agreement. We cannot guaranty that our management will remain with us.
Our management ranks are thin, and losing or failing to add key personnel could affect our ability to successfully grow our business.
Our future performance depends substantially on the continued service of our management. In particular, our success and depends upon the continued efforts of our management personnel, including our president and chief executive officer, chief financial officer and accounting officer, Mr. Chavarria, and our chief technological and scientific officer, Dr. Castano. We cannot guarantee that either Mr. Chavarria or Dr. Castano will remain with us.
Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in Mexico based upon U.S. laws, including the federal securities laws or other foreign laws, against us or our management
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Certain of our current operations are conducted in Mexico. Moreover, all of our directors and officers are nationals and residents of Mexico. All or substantially all of the assets of these persons are located outside the United States. As a result, it may not be possible to effect service of process within the United States or elsewhere outside Mexico upon these persons. In addition, uncertainty exists as to whether the courts of Mexico would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in Mexico against us or such persons predicated upon the securities laws of the United States or any state thereof.
The costs to meet our reporting requirements as a public company subject to the Securities Exchange Act of 1934 will be substantial and may result in us having insufficient funds to operate our business.
We will incur ongoing expenses associated with professional fees for accounting and legal expenses associated with being a public company. We estimate that these costs will range up to $50,000 per year for the next few years. Those fees will be higher if our business volume and activity increases. Those obligations will reduce and possibly eliminate our ability and resources to fund our operations and may prevent us from meeting our normal business obligations.
Our auditors have questioned our ability to continue operations as a “going concern.” Investors may lose all of their investment if we are unable to continue operations and generate revenues.
We hope to obtain significant revenues from future product sales. In the absence of significant sales and profits, we may seek to raise additional funds to meet our working capital needs, principally through the additional sales of our securities. However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us. As a result, substantial doubt exists about our ability to continue as a going concern.
We are subject to the Section 15(d) reporting requirements under the Securities Exchange Act of 1934 which does not require a company to file all the same reports and information as a fully reporting company pursuant to Section 12.
We are subject to the Section 15(d) reporting requirements according to the Securities Exchange Act of 1934, or Exchange Act. As a filer subject to Section 15(d) of the Exchange Act:
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we are not required to prepare proxy or information statements;
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we will be subject to only limited portions of the tender offer rules;
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our officers, directors, and more than ten (10%) percent shareholders are not required to file beneficial ownership reports about their holdings in our company;
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our officers, directors, and more than ten (10%) percent shareholders are not subject to the short-swing profit recovery provisions of the Exchange Act; and
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more than five percent (5%) holders of classes of your equity securities will not be required to report information about their ownership positions in the securities.
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RISKS RELATED TO OUR COMMON STOCK.
Our officers and directors own approximately 49.5% of our outstanding shares of common stock as of the filing date, allowing these shareholders to control matters requiring approval of our shareholders.
Our officers and directors beneficially own, in the aggregate, approximately 49.5% of our outstanding shares of common stock. Such concentrated control of the company may negatively affect the price of our common stock. In addition, our officers and directors can control matters requiring approval by our security holders, including the election of directors.
Investors should not look to dividends as a source of income.
In the interest of reinvesting initial profits back into our business, we do not intend to pay cash dividends in the foreseeable future. Consequently, any economic return will initially be derived, if at all, from appreciation in the fair market value of our stock, and not as a result of dividend payments.
The trading price of our common stock on the OTC Bulletin Board will fluctuate significantly and stockholders may have difficulty reselling their shares.
Our common stock commenced trading on the OTC Bulletin Board approximately January 1, 2013. As of the date of this Annual Report, our common stock trades on the Over-the-Counter Bulletin Board. There is a volatility associated with Bulletin Board securities in general and the value of your investment could decline due to the impact of any of the following factors upon the market price of our common stock: (i) disappointing results from our exploration or development efforts; (ii) failure to meet our revenue or profit goals or operating budget; (iii) decline in demand for our common stock; (iv) downward revisions in securities analysts' estimates or changes in general market conditions; (v) technological innovations by competitors or in competing technologies; (vi) lack of funding generated for operations; (vii) investor perception of our industry or our prospects; (viii) general economic trends; and ix) Commodity price fluctuation.
In addition, stock markets have experienced price and volume fluctuations and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of our common stock. As a result, investors may be unable to sell their shares at a fair price and you may lose all or part of your investment.
Additional Issuance of Equity Securities May Result in Dilution to Our Existing Stockholders.
Our Articles of Incorporation, as amended, authorize the issuance of 500,000,000 shares of common stock. The Board of Directors has the authority to issue additional shares of our capital stock to provide additional financing in the future, including issuances to Social Geek in accordance with contractual terms, and the issuance of any such shares may result in a reduction of the book value or market price of the then outstanding shares of our common stock. If we do issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, your proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuance could result in a change of control.
Because we may be subject to the “penny stock” rules, the level of trading activity in our stock may be reduced - which may make it difficult for investors to sell their shares.
Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks, like shares of our common stock, generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on NASDAQ. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.
All of Our Directors and Officers are Outside the United States With the Result That it May Be Difficult for Investors to Enforce Within the United States Any Judgments Obtained Against Us or Any of Our Directors or Officers.
All of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on our directors or officers, or enforce within the United States or Mexico any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them. In addition, investors may not be able to commence an action in a Canadian court predicated upon the civil liability provisions of the securities laws of the United States.