ITEM 1. BUSINESS
Corporate History
The Company was incorporated in Nevada as
“
1
st
Home Buy & Sell Ltd.
”
on August 10, 2006, to operate as a real estate company. On August 31, 2008, the Company ceased all operations to become a
“
shell
”
company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and sought to identify a suitable business opportunity. On March 1, 2010, while evaluating possible business combinations, acquisitions or development opportunities, the Company changed its name from
“
1st Home Buy & Sell Ltd.
”
to
“
Infrastructure Developments Corp.
”
On April 7, 2010 the Company signed a share exchange agreement to acquire
Intelspec
International, Inc. (
“
Intelspec
”
) in exchange for 14,000,000 shares of its common stock. The acquisition of
Intelspec
was completed on April 14, 2010, whereby the shareholders of
Intelspec
acquired 70% of the Company. The closing of the transaction represented a change in control which for financial reporting purposes was characterized as a reverse acquisition or recapitalization of
Intelspec
. Following the closing, our principal business became that of
Intelspec
. On April 26, 2010, the Company disclosed the information that would have been required if it were filing a general form for registration of securities on Form 10, as required under Item 2.01(f) of Form 8-K, thereby removing its status as a
“
shell
”
company.
The Company effected a six for one forward split of its common stock on June 11, 2010 that increased the Company
’
s issued and outstanding shares from 20,000,000 to 120,000,000.
Intelspec
changed its name to
Interspec
International, Inc. ("
Interspec
") pursuant to an out-of-court legal settlement with Intel Corporation on November 21, 2011
On February 6, 2012, the Company made the determination to change its fiscal year end from June 30 to December 31.
On February 4, 2013, the Company authorized the issuance of 9,000,000 of its 10,000,000 available shares of Super Voting Preferred Stock for the settlement of nearly $256,000 in debt. The holders of Super Voting Preferred Stock are entitled to fifty votes for each share of Super Voting Preferred Stock held at each meeting of stockholders of the Company.
On March 31, 2014, stockholders consented in writing to amend the Company's Articles of Incorporation (the "Articles of Amendment") to increase the Company
’
s authorized shares of common stock from 500,000,000 common shares to 3,000,000,000 shares. The Company subsequently disseminated a Definitive Information Statement. The Articles of Amendment became effective upon filing with the Nevada Secretary of State on June 23, 2014.
During 2014, the Company determined that it had nominal assets and these assets consisted solely of cash, and therefore the Company determined that it became a
“
shell
”
company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
On June 25, 2014, the Company closed an Agreement with Sagar Joseph Choran and acquired Orbis Real Estate, a Dubai-based brokerage company, as a wholly owned subsidiary. The Company authorized the issuance of 160,000,000 shares to Joseph pursuant to the Agreement. At that time the Company ceased being a "shell
”
company.
In July 23, 2014 the Company dissolved its subsidiary
Interspec
International, Inc.
On July 24, 2014, the Company authorized the conversion of 9,000,000 shares of Preferred stock issued on February 4, 2013, to 450,000,000 shares of the Company's common stock.
In September 2014, the Company appointed a new director and corporate secretary, Cyril Means, to serve until the next annual general meeting shareholders.
In October 2014, the Company authorized the conversion of $15,000 in aged debt to 10,000,000 shares of the Company's common stock.
During 2015, the Company authorized the issuance of 43,016,667 shares of common stock for an accounts payable and for a note.
On July 1, 2015 the Company agreed to divest Orbis back to its original owners. Consideration to the Company included the return of the 160,000,000 shares issued to the owners of Orbis, and the assumption by the original owners of all Orbis liabilities as of June 30, 2015. The Company has retired the 160,000,000 shares, and no longer consolidates the Orbis financial statements after June 30, 2015.
Our common stock is quoted on the OTC Pink electronic quotation system under the symbol
“
IDVC
”
.
Overview of Infrastructure Developments Corporation
The Company
’
s operations and plans have been significantly impacted by global developments in 2015. In particular, the sustained downturn in global oil and commodity prices had significant repercussions in the Gulf Cooperation Council economies, notably the United Arab Emirates (UAE). The 2015 sustained slowdown in the UAE caused IDVC to divest its interest in Orbis Realty on June 30 2015, retiring 160,000,000 shares of common stock in the process and incurring no loss. IDVC has also reduced its emphasis on energy-related markets in the Middle East and the U.S. in its marketing plans for the Wing House mobile shelters.
The Company is currently focused on its project management business, which provides services through a network of consultants and partners located in markets where the Company has active projects, is bidding on projects, or is investigating project opportunities and opportunities to market its Wing House mobile shelters. The Company has also prioritized marketing alternative energy products such as residential, commercial, and industrial solar energy systems, battery back-up systems, and magnetic transducer generators.
Orbis Real Estate Overview
During January 2015 to July 2015, Orbis Real Estate was a full-service Real Estate broker located in Dubai, United Arab Emirates, handling residential and commercial property transactions. Orbis offices are Al Shafar Tower 1, No 803, Tecom, Dubai, United Arab Emirates. Orbis Real Estate is fully licensed by Dubai
’
s Real Estate Regulatory Authority (RERA) registration number 12387.
Orbis was formed as a sole establishment on August 12, 2014 and received its license to transact real estate brokerage business, sales and rental, on August 18, 2014, by the Government of Dubai, United Arab Emirates, Department of Economic Development.
3
The Dubai Real Estate Market
Dubai was the world
’
s top performing real estate market through 2013 and early 2014, leading the Global Property Guide
’
s house price survey for five consecutive quarters. Residential prices rose 31.57 per cent during the year prior to Q1 2014. UK-based Knight Frank reports that house prices rose 27.7 per cent over the 12 months to March 2014, the fastest pace among the 54 countries tracked by the consultancy
’
s global house price index. However, the number of transactions in 2015 slowed significantly, property prices have been flat, and there was a contraction in gross revenue at many brokerage firms in 2015.
This radical increase in 2013, backed by IMF warnings of an overheating market, led the UAE Central Bank to introduce a package of new regulations, including mortgage caps and increased transaction fees, aimed at cooling the market. These measures, combined with the introduction of a substantial number of new units a widespread perception that prices had escalated too fast, led to a substantial slowing of the market beginning in mid-2014. Dubai's property prices rose by 12.98% in 2014, down from 21.52% in 2013, and 21.64% in 2012, but home prices actually dropped, though slightly, in the 3
rd
and 4
th
quarters. This trend continued in the first two quarters of 2015, with the REIDIN sales index indicating that apartment prices fell two per cent quarter-on-quarter in Q1, while villa prices dropped by one per cent compared to Q4, 2014.
In 2008, construction and real estate accounted for one-third of the economy, but that figure has now been reduced to less than 15%. Foreign trade, a key element of Dubai
’
s economy, has shown consistent growth, from 1.1 trillion dirhams in 2011 to 1.235 trillion in 2012, 1.329 trillion in 2013 and 1.331 trillion in 2014. The acceleration of foreign trade underscores Dubai
’
s role as regional trade and financial hub.
However, an overall slowdown in the UAE economy in 2015 was fueled by a sustained period of low oil prices, large number of SME business loan defaults, and general panic in the local banking industry.
The Dubai Real Estate Brokerage Industry
Dubai
’
s real estate brokerage business is highly fragmented and highly competitive: regional news provider Zawya wrote on Sept 10, 2014 that there are 2238 real estate brokers licensed by Dubai
’
s Real Estate Regulatory Authority (RERA), which regulates real estate brokers. Unlike the property development industry, which is dominated by publicly traded entities, the brokerage business is dominated by privately held entities that disclose little information about their operations. RERA lists the individual licensed brokers employed by each firm, but does not maintain public data on transactions or revenues per broker.
Review of a randomly selected sample of brokers listed on RERA
’
s website suggests that roughly 25% of Dubai
’
s registered real estate brokerage firms employ only a single broker, with roughly 70% employing 3 or fewer. Many of these small brokerages focus on a single niche market focused on a single region or nationality (e.g. Russian-speaking brokers serving an almost exclusively Russian clientele). Many of these firms rely on a small network of contacts and have little online presence. Firms with 4-9 brokers account for 20% of the total. 9% have 10-30 brokers on staff, while only 1% have over 30. The recognized dominant player, Better Homes, has 12 Dubai offices and over 400 employees. International firms such as Cluttons International, Colliers International, Jones Lang LaSalle, C.B. Richard Ellis and others are active in the market, typically focusing on large scale commercial deal making.
4
Challenges
RERA CEO Marwan bin Ghalita has publicly stated in 2014 that RERA believes that there are too many brokerage firms in Dubai, and the agency is phasing in regulations aimed at reducing the number of active firms, including:
·
The pass mark for the mandatory test for renewal of broker
’
s license will increase from 75 percent to 85 percent from the start of 2015.
·
Broker cards will be phased out by June 2015, with registration to be linked to an Emirates ID.
·
New brokerage firms will be allowed to employ four agents for the first year and any increases to depend upon the firm
’
s transaction performance.
·
Agents who have not completed a transaction for anywhere between six to 12 months will receive a letter from RERA warning about their performance and if there is no improvement, RERA will cancel their registration.
Orbis Realty faced challenges common to any highly competitive urban brokerage environment, and challenges that are specific to Dubai.
The basic competitive challenges common to the industry in any highly competitive environment are, in summary, competition to generate unique sale and rental listings, competition for access to buyers, and competition for recruitment and retention of quality staff, particularly experienced licensed brokers.
Orbis also faced challenges unique to the Dubai market, including:
Generating a sufficient number and quality of sales and rental listings has emerged as the single most significant challenge for Dubai real estate brokers. Competition for listings is intense, particularly now that the previously common practice of cold calling property owners to look for potential sellers has been banned.
As discussed above, unprofessional and/or unethical behavior by some brokers has led some buyers and sellers to take a negative view of Dubai-based brokers as a whole, a prejudice that must be overcome by legitimate brokers.
While most legitimate brokers welcome the tightened regulatory environment now prevailing in Dubai, the rapid implementation of regulatory changes has occasionally created confusion and problems for brokers. Regulations may not be formally announced, and are often the subject of rumor and speculation. License renewal may take much longer than expected due to bureaucratic backlog, removing brokers from service. At times Developers have aggressively pushed projects still listed by RERA as
“
on hold
”
, generally due to delayed procedures or incomplete documentation. These factors and other similar ones add up to a compliance environment that requires vigorous and proactive effort from brokers who wish to stay fully informed of and compliant with a rapidly developing regulatory environment.
5
Additional challenges are likely to be posed by the evolution of the market as a whole. The aggressively expansionary market of 2012-2013 no longer exists, with most analysts expecting prices to show a moderate decline in 2015 - 2017, with transaction volume increasing as prices moderate. Orbis has observed price corrections in popular developments or locations driven by prices that have risen to a point that leads owners of investment properties to take profit. The resulting surge of properties on the market increases available supply and slows price growth, but it also provides new listings for brokers at manageable prices that are attractive to buyers. The reduced rate of price growth has a greater negative impact on developers, who have to gain returns on very large investments, than on brokers, who have a vested interest in seeing prices remain at relatively affordable levels.
Wing House Overview
During 2015 the Company purchased a Wing House for $85,000, which the Company is using for marketing purposes. The standard Wing House units are mobile modular prefabricated structures that fold out from standard 40-foot or 20-foot shipping containers to ready-to-use structures, with all baths, water, plumbing, air conditioning, lighting, cable, network and electrical fittings in place. This folding capacity allows a standard 40-foot unit delivered with a 320 square foot footprint to open into an 880 square foot structure in 4 to 5 hours, in a process requiring only basic hand tools and workers capable of following simple instructions. Any truck and hoisting equipment capable of handling standard shipping containers can transport and place a Wing House. Since container sizes are standard around the world, this equipment is widely available. The combination of standard ISO container dimensions and fittings and the ability to quickly unfold into a structure much larger than the original container makes the Wing House extremely economical to ship. Two or more Wing Houses can be joined end to end or side to side to form larger structures. Multiple standard floor plan configurations are available and custom plans can be ordered.
While other container-based prefabricated structures are available, they offer final available space equal to that of the original container. We are aware of no other container-based prefabricated modular structure that shares the ability of the Wing House to open into a structure much larger than the delivered unit.
Wing Houses are rated for extreme temperatures, safe in hurricanes and earthquakes, meet the highest safety and building code standards, and are very economical. The units use insulation sourced from Bradford Insulation, Australia
’
s leading insulation brand. The units carry a 5-star energy use rating and are ideal for use in extreme climates.
Wing Houses come in many building configurations and room configurations, and they retail at approximately $45,000-$85,000 ex-port in China. The Wing House is built in China by Renhe Manufacturing and has been re-branded by the Company. Renhe has an exclusive worldwide distribution agreement with MKL Asia, a company owned by the original patent holder who is also the principal of Renhe. MKL Asia has granted a sub-distribution license to the Company and its affiliates to market and sell Wing House in North America, the Middle East region and most of Southeast Asia.
Wing Houses are suitable for a wide range of applications, including:
·
living and office space
·
on site showrooms
·
restaurants
·
worker accommodation
·
forward operations bases
6
Standard configurations include:
·
3 bedrooms + 1 living room + 1 kitchen + 1 bath + 1 laundry
·
4 bedrooms + 2 kitchens + 2 baths
·
4 bedrooms + 4 baths
·
6 bedrooms + 6 baths
·
8 bedrooms + 4 baths
·
1 classroom + 1 bath + 1 office
·
1 large room
The Wing House is available in configurations specifically optimized for classroom use, wired with high speed Internet and with computer stations included.
The range of products also includes the newly developed
“
pop out
”
20 and 40 foot rapid deployment units that slide out in minutes and are also pre-fit with all baths and fixtures.
The Freedonia Group predicted in March 2016 that global demand for prefabricated housing is will increase 2.7 percent per year through 2019 to 3.4 million units, with
“
the vast majority
”
concentrated in the Asia-Pacific region. Global Industry Analysts Inc projected in May 2015 that demand in the Asia-Pacific region would reach a compound annual growth rate of 9.3% through 2020.
The Company
holds distribution rights for the Wing House in Southeast Asia, a region that the OECD expects to maintain a
“
robust
”
average of 5.5% over the next five years.
Southeast Asian nations have abundant use for rapidly deployable, easily moveable prefabricated structures: l
arge infrastructure projects, mining
and other resource-extraction industries
,
mobile classrooms,
disaster relief
, refugee housing
, and temporary offices are among the niches open for the Wing House in Southeast Asia.
Southeast Asia
’
s rapid growth and multiple product niches make the region IDVC
’
s primary target for marketing the Wing Hou
s
e.
The
North American market for modular, transportable, prefabricated structures is dominated by
workforce housing for
the energy and mining industries.
Lower oil prices and commodity prices in 2015 resulted in less demand from these industries for mobile structures, a situation that is expected to continue through the medium term future. US marketing for the Wing House will in the meantime focus on mining, logging, and other resource exploitation industries, and on disaster relief, where the mobility and rapid deployment capacity of the Wing House are significant competitive advantages.
IDVC holds distribution rights for the Wing House in the Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE). The current environment of low world oil prices has resulted in a dramatic retrenchment in spending on both energy development and major construction projects. The Company has decided to curtail marketing efforts in this region until economic conditions are more favorable.
7
Wing House Competition
The Wing House mobile shelter faces no direct competition as a prefabricated expandable container-based mobile shelter system though a variety of site-built shelter options provide indirect competition. Typical portable cabins used as temporary offices in some regions are much cheaper than the Wing Houses, but they (i) have a life span of much less than half that of a Wing House, (ii) cannot be moved and re-used without virtually rebuilding the units, (iii) can only be trucked as 35 square meters of cabin space per truck (as opposed to Wing House 80 square meter per truck folded in), and (iv) have inferior wiring, lighting, bath fixtures, and insulation. The Wing Houses are competitively priced in certain markets, and for certain users that are looking for more modern and efficient workforce accommodation as opposed to the more utilitarian pre-fabricated structures used in the past.
A number of US and Canadian companies compete in the high quality prefabricated structure market, notably Sunbelt Modular, Pacific Mobile Structures, Mobile Modular, Satellite Shelters, Williams Scotsman, M Space Modular Buildings, and ModSpace. These companies use a variety of systems, typically
“
panelized
”
, to install mobile structures in various configurations. Many of these structures are designed to be semi-permanent, and fill a distinctly different niche from the Wing House. They offer greater flexibility in terms of size, with larger and more open floor plans available. They are also typically more expensive and require more time to install. While these structures will continue to dominate the market for larger structures, the Company believes that the Wing House will fill an underserved niche demand for high quality structures offering a far higher degree of mobility and far faster installation than current offerings.
The Company will also compete with companies focused on the leasing of modular workforce housing and the management of workforce housing facilities. Companies engaged in this business include Black Diamond Group Limited, Target Logistics, Atco Structures and Logistics, Rapid Camp Ltd, Guerdon Modular Buildings, Williams Scotsman, Stock Modular, Wilmot Modular Structures, and many others. While some of these companies do produce their own modular housing units, their primary business lies in leasing, installation, and management of workforce camps. The rapid growth of this sector is demonstrated by the recent results of the Black Diamond Group, a publicly traded industry leader with operations focused on Western Canada, which as more than tripled it income since 2009.
The Company recognizes these companies as competitors but also sees them as potential customers. If the Company can provide these companies with a facility option that is more economical, more efficient, and more easily portable than the structures they currently use, we believe that a significant number of these companies would adopt the Wing House as part of their leasing fleet.
Solar Energy Systems
IDVC holds a marketing license agreement with First Energy Solutions Provider Inc (FESPI), a Canadian-owned provider of alternative energy solutions headquartered in the Philippines. The Company is focusing on marketing medium scale residential, commercial, and industrial solar power and battery backup systems in the Philippines and Cambodia, where conditions ore uniquely suitable for rapid growth in the solar industry. Both countries are experiencing rapid economic growth with consequent high growth in electricity demand. Both countries have a high degree of solar irradiation, combined with inadequate conventional generating capacity, high electricity costs, and inadequate and unreliable distribution grids, a situation which has made both grid-tied and off-grid solar installations extremely competitive. Both countries offer substantial government incentives for solar power installations, an additional competitive advantage.
8
The Asian Development Bank has stated that
“
Cambodia has the highest energy prices in Southeast Asia, ranging from $0.18/kWh to $1/kWh in the rural areas
…
Cambodia has substantial solar resources that could be harnessed on a competitive basis.
”
In the Philippines, widespread dissatisfaction with a primitive distribution grid, the high cost of grid power, and the difficulty of reliable distribution in an archipelagic country have driven intense interest in solar power as a decentralized, independent option for powering both rural and urban residences, businesses, and industries.
Terje Osmundsen, Senior Vice President of Norway
’
s Scatc Solar ASA, recently commented that
“
The Philippines has huge potential for generating unsubsidized solar power as the cost of producing solar power has fallen by 60% since 2009, when the current Power Development Plan was approved. This has made solar power increasingly price-competitive with fossil fuel-based power plants
”
.
IDVC is a licensed marketing agent for solar energy systems designed and sold by First Energy Systems Provider Inc in the Philippines, Cambodia, and the United Arab Emirates. These systems are fully integrated use-ready installations, and prices include installation and system design tailored to the user
’
s needs. All the system owner needs to do is turn the system on and watch energy costs shrink. Most users will find that the cost of the installation can be recovered in five years. After that, power is essentially free.
The solar power systems marketed by IDVC may be generally divided into three types: grid-tied, hybrid, and off-grid. A grid-tied solar system retains a connection to the electrical grid, allowing the user to fall back on grid power when the solar system is unable to generate the needed power. This is by far the most popular form of installation, and offers a high degree of flexibility to users.
The simplest form of grid-tied system uses solar power to supplement grid power. Essentially this system relies on solar power when generation from the solar panels is sufficient to meet the demand from the installation, and automatically switches back to main power when solar power is insufficient. These systems are relatively inexpensive to install and can significantly reduce electricity costs, especially for users that have significant daytime consumption. These systems consist simply of solar panels, an inverted to convert the solar power from DC to AC and synchronize the phase and frequency with the electrical grid, and the switching hardware needed to move between solar and main power.
The hybrid system retains the connection to main power, but introduces a charge controller and battery bank, allowing reliance on solar power to extend into periods of low or absent sunshine. Since many solar systems provide surplus power during periods of peak sunshine, these systems provide a way to capture that surplus for later use. Some hybrid systems use sufficient battery power to run an installation for 24 hours, and rely on grid power only for backup. Others use smaller battery banks that are designed to provide more limited coverage, relying on grid power during off-peak hours, usually late at night, when electricity is typically cheaper. Hybrid systems represent a higher up-front cost, but can also generate more significant savings. For example, a power user with high demand in the evening would be well served by a hybrid system with sufficient battery power to provide 4-6 hours of backup power and reverting to grid power only during the night and early morning hours.
9
An off-grid solar system is designed for users who have no access to an electrical grid or prefer to be completely independent of grid power. Typically the off-grid system is identical to the hybrid system, but with a larger battery bank and a generator for backup power. These systems represent a considerable investment, but for many users, for example an island resort or remote business site that is fully dependent on a generator for power, they remain cost-effective and economical.
IDVC, in cooperation with FESPI, provides all of these system types in a complete, fully integrated package including professional installation, allowing the client to take over a fully operable system with a single complete, reliable price quotation for a system tailored to their specific needs.
IDVC will be aggressively marketing its integrated solar power systems in these markets, both for existing structures and in conjunction with the Wing House, which is ideally suited to solar power.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements and Labor Contracts
The Company neither own nor have applied for any patents or trademarks. We do not license any of our technology from other
companiesWe
have an exclusive distribution agreement with MKL Asia /
Renhe
Mobile Shelters of China for the Wing Houses. The agreement between MKL and the Company is written as a sub-distributor appointment by MKL, has no specific commission or compensation terms, and can be canceled by MKL with 60 day notice. We are not party to any franchise agreements, royalty agreements, concessions, or labor contracts.
Dependence on Major Customers or Suppliers
The Company is not dependent on one or a few customers, as we have products targeted to a wide range of buyers.
Governmental Regulation
The Company is subject to local, state and national taxation in the jurisdictions where it operates.
Local municipal building code issues in the United States have proven to be a significant hurdle for sales of Wing Houses to retail buyers. Most municipalities in the U.S. have fairly strict requirements for
“
temporary
”
structures, thus limiting the potential for sales of individual units to buyers inside city limits.
Health and Safety
We are subject to numerous health and safety laws and regulations imposed by the governments controlling the jurisdictions in which we operate and by or clients and project financiers. These regulations are frequently changing, and it is impossible to predict the effect of such laws and regulations on us in the future. We actively seek to maintain a safe, healthy and environmentally friendly work place for all of our employees and those who work with us. However, we provide some of our services in high-risk locations and as a result we may incur substantial costs to maintain the safety of our personnel. All of our operations and personnel are covered by comprehensive
“
all risk
”
insurance, the costs of which are included in our contracts.
10
Office of Foreign Assets Control
The Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. OFAC acts under presidential national emergency powers as well as authority granted by specific legislation to impose controls on transactions and freeze assets under U.S. jurisdiction. Since the Company is a U.S. corporation, it is bound to the regulations of OFAC. Although we have never contracted nor made any effort to contract with countries which OFAC has identified as state sponsors of terrorism, the possibility exists that certain OFAC sanctioning methods could be employed against certain of our operations.
Environmental Regulation
The countries where we do business often have numerous environmental regulatory requirements by which we must abide in the normal course of our operations. We do not expect costs related to environmental matters will have a material adverse effect on our consolidated financial position or our results of operations.
Climate Change Legislation and Greenhouse Gas Regulation
Many studies over the past couple decades have indicated that emissions of certain gases contribute to warming of the Earth
’
s atmosphere. In response to these studies, many nations have agreed to limit emissions of
“
greenhouse gases
”
or
“
GHGs
”
pursuant to the United Nations Framework Convention on Climate Change, and the
“
Kyoto Protocol.
”
Although the United States did not adopt the Kyoto Protocol, several states have adopted legislation and regulations to reduce emissions of greenhouse gases. Additionally, the United States Supreme Court has ruled, in
Massachusetts, et al. v.
EPA,
that the EPA abused its discretion under the Clean Air Act by refusing to regulate carbon dioxide emissions from mobile sources. As a result of the Supreme Court decision the EPA issued a finding that serves as the foundation under the Clean Air Act to issue other rules that would result in federal greenhouse gas regulations and emissions limits under the Clean Air Act, even without Congressional action. Finally, acts of Congress, particularly those such as the
“
American Clean Energy and Security Act of 2009
”
approved by the United States House of Representatives, as well as the decisions of lower courts, large numbers of states, and foreign governments could widely affect climate change regulation. Greenhouse gas legislation and regulation could have a material adverse effect on our business, financial condition, and results of operations.
Employees
We have no employees other than our
officer/director who devote
s
a portion of his time to the operations of the Company
. We also have part-time consultants and sales agents in
the Middle East, Southeast Asia, and
Texas. We believe we have a good working relationship with our agents and consultants, which are not represented by a collective bargaining organization. We also use third party consultants to assist in the completion of various projects; third parties are instrumental to keep the development of projects on time and on budget. Our management expects to continue to use consultants, attorneys, and accountants as necessary, to complement services rendered by our employees.
11
Reports to Security Holders
The Company
’
s annual report contains audited financial statements. We are not required to deliver an annual report to security holders and will not automatically deliver a copy of the annual report to our security holders unless a request is made for such delivery. We file all of our required reports and other information with the Securities and Exchange Commission (the
“
Commission
”
). The public may read and copy any materials that are filed by the Company with the Commission at the Commission
’
s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The statements and forms filed by us with the Commission have also been filed electronically and are available for viewing or copy on the Commission maintained Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission. The Internet address for this site can be found at
www.sec.gov
.
ITEM 1A. RISK FACTORS
Our operations and securities are subject to a number of risks. Below we have identified and discussed the material risks that we are likely to face. Should any of the following risks occur, they will adversely affect our operations, business, financial condition and/or operating results as well as the future trading price and/or the value of our securities.
Risk Factors Relating To Our Business
The Company
’
s ability to continue as a going concern is in question
Our auditors included an explanatory statement in their report on our consolidated financial statements for t
he years ended December 31, 201
5
and 201
4
, stating that there are certain factors which raise substantial doubt about the Company
’
s ability to continue as a going concern. These factors include a working capital deficit, negative cash flows, and accumulated losses.
We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could seriously harm our business.
Due to the specialized nature of our businesses, our future performance is highly dependent upon the continued services of our key personnel and executive officers, the development of additional management personnel, and the recruitment and retention of new qualified engineering, manufacturing, marketing, sales, and management personnel for our operations. Competition for personnel is intense, and we may not be successful in attracting or retaining qualified personnel. In addition, key personnel may be required to receive security clearances and substantial training in order to work on government sponsored programs or perform related tasks. The loss of key employees, our inability to attract new qualified employees or adequately train employees, or the delay in hiring key personnel could impair our ability to prepare bids for new projects, fill orders, or develop new products.
International and political events may adversely affect our operations.
To date our revenue is derived entirely from non-United States operations, which exposes us to risks inherent in doing business in each of the countries in which we transact business. The occurrence of any of the risks described below could have a material adverse effect on our results of operations and financial condition. Operations in countries other than the United States are subject to various risks peculiar to each country. With respect to any particular country, these risks may include:
·
12
expropriation and nationalization of our assets in that country;
·
political and economic instability;
·
civil unrest, acts of terrorism, force majeure, war, or other armed conflict;
·
natural disasters, including those related to earthquakes and flooding;
·
inflation;
·
currency fluctuations, devaluations, and conversion restrictions;
·
confiscatory taxation or other adverse tax policies;
·
governmental activities that limit or disrupt markets, restrict payments, or limit the movement of funds;
·
governmental activities that may result in the deprivation of contract rights; and
·
governmental activities that may result in the inability to obtain or retain licenses required for operation.
Risks Relating to Our Common Stock
Our stock price is volatile.
The market price of our common stock is highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
·
services offered by us or our competitors;
·
additions or departures of key personnel;
·
our ability to execute its business plan;
·
operating results that fall below expectations;
·
loss of any strategic relationship;
·
industry developments;
·
economic and other external factors; and
·
period-to-period fluctuations in our financial results.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
We incur significant expenses as a result of the Sarbanes-Oxley Act of 2002, which expenses may continue to negatively impact our financial performance.
We incur significant legal, accounting and other expenses as a result of the Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission, which control the corporate governance practices of public companies. Compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, as discussed in the following risk factor, has increased our expenses, including legal and accounting costs, and made some activities more time-consuming and costly.
13
FINRA sales practice requirements may limit a stockholder
’
s ability to buy and sell our stock.
The Financial Industry Regulatory Authority (
“
FINRA
”
) has adopted rules that relate to the application of the Commission
’
s penny stock rules in trading our securities and require that a broker/dealer have reasonable grounds for believing that the investment is suitable for that customer, prior to recommending the investment. Prior to recommending speculative, low priced securities to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer
’
s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative, low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker/dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing a stockholder
’
s ability to resell shares of our common stock.
Our internal controls over financial reporting are not considered effective, which conclusion could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 we are required to furnish a report by our management on our internal controls over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. For the period ending
December 31, 2015
, we were unable to assert that our internal controls were effective. Accordingly, our shareholders could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.
Our past capital funding needs have resulted in dilution to existing shareholders.
We have realized funding from A
sher Enterprises, Inc.
, in the form of convertible notes, which has been converted into shares of our common stock. Additionally, we will need to realize capital funding over the next year to further our business plan. We intend to raise this capital through equity offerings, debt placements or joint ventures. Should we secure a commitment to provide us with capital, such commitment may obligate us to issue shares of our common stock, warrants or create other rights to acquire our common stock. Any new issuances of our common stock result in a dilution of our existing shareholders interests.
14
Our common stock is currently deemed to be
“
penny stock
”
, which makes it more difficult for investors to sell their shares.
Our common stock is and will be subject to the
“
penny stock
”
rules adopted under section 15(g) of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than
“
established customers
”
complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company remains subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of the Company
’
s securities.
The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights for our directors, officers and employees may result in substantial expenditures by the Company and may discourage lawsuits against our directors, officers and employees.
Our certificate of incorporation contains a specific provision that eliminates the liability of directors for monetary damages to the Company and the Company
’
s stockholders; further, the Company is prepared to give such indemnification to its directors and officers to the extent provided by Nevada law. The Company may also have contractual indemnification obligations under its employment agreements with its executive officers. The foregoing indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which the Company may be unable to recoup. These provisions and resultant costs may also discourage the Company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by the Company
’
s stockholders against the Company
’
s directors and officers even though such actions, if successful, might otherwise benefit the Company and its stockholders.