ITEM 1. DESCRIPTION OF BUSINESS
History
We were incorporated in the State of Nevada on November 18, 2010. Since inception, we have been engaged in organizational efforts and obtaining initial financing. We were initially formed as a vehicle to pursue a business combination.
We have not been involved in any bankruptcy, receivership or similar proceeding.
Effective October 3, 2011, we entered into a Licensing Agreement (the “Agreement”) with Omega Research Corporation (“Omega”) for exclusive licensing rights for technology relating to the processing of organic waste to marketable byproducts via the Advanced Pyrolysis System 200 (“APS200”). We will have exclusive rights to sub-license, establish joint ventures to commercialize, use and process organic waste, and sell related byproducts in the territory of Jamaica, WI for 20 years. We acquired the licensing rights for $ 50,000 which was paid on April 13, 2012. We have the right to purchase from Omega, the APS200 system at a fixed price of $ 500,000 until June 30, 2013. Subsequent to June 30, 2013, Omega may increase the purchase price at its sole discretion to reflect raising costs of raw materials and labor. We are required to purchase one APS200 by June 30, 2013. Upon purchasing the APS200 system, we are subject to a royalty of 3% on licensee fees received as well as on gross sales from byproduct sales generated from the APS200 system. The Agreement was an arms-length transaction.
On March 25, 2013, we entered into an agreement with Omega to extend the deadline to purchase the APS200. The deadline to purchase the APS200 is June 30, 2013 however we have the option to extend the deadline to September 30, 2013 for a fee of $ 5,000. We also have the option to extend the deadline further to December 31, 2013 for an addition fee of $ 5,000.
Effective November 26, 2012, we entered into a 2
nd
Licensing Agreement (the “2
nd
Agreement”) with Omega Research Corporation (“Omega”) for exclusive licensing rights to sub-license, establish joint ventures to commercialize, use and process organic waste, and sell related byproducts in the territory of the Bahamas, Dominican Republic, St., Thomas, St. Maarten, and Grenada (“Additional Territories”) for 20 years. We acquired the licensing rights for $ 50,000. We have the right to purchase from Omega, the APS200 system at a fixed price of $ 500,000 until December 31, 2014. Subsequent to December 31, 2014, Omega may increase the purchase price at its sole discretion to reflect raising costs of raw materials and labor. We subject to a royalty of 3% on any sub-licensee fees received as well as on gross sales from byproduct sales generated from the APS200 system. The Agreement was an arms-length transaction
.
The APS200 system is designed to handle commonly generated waste stream, whether liquid, solid, mixed or unmixed (including whole tires, all types of plastics, e-waste, shredder residues, sewage sludge, animal wastes, biomass, ligneous and infectious biohazard medical waste) and represent an environmentally friendly and commercially viable alternative to traditional methods of processing waste.
The
solutions are commercially viable ecological recycling models based on zero-waste philosophy. We will initially be focused on using the application for processing waste tires for conversion to biochar and fuel oil.
Current Business
Upon entering into the Agreement to acquire exclusive licensing rights in Jamaica, our business objective is to
market the APS200 system through qualified interests in establishing joint ventures and establishing waste conversion operations.
Effective October 28, 2011, we entered into a joint venture agreement with Alpha International Marketing Corp (“Alpha”) to establish the APS200 system in Jamaica for converting used tires to biochar and fuel oil. Alpha, as a sub licensee will be subject to a sub-license fee of $ 75,000 payable in monthly installments of $ 5,000 per month commencing November 1, 2011 ending, January 1, 2013. As per our Agreement with Omega, 3% of the sub license fee is payable to Omega on a quarterly basis. As additional consideration, the joint venture will remit to Omega a 3% royalty fee on all gross sales generated. Alpha is to raise $ 250,000, half of the purchase price of the APS200 system and we are to raise the remaining balance. Alpha is to raise such funds by June 30, 2013.
On March 25, 2013, we entered into an addendum to its joint venture agreement dated October 28, 2013 with Alpha. Alpha has defaulted on their license fee payments and we have granted Alpha until June 30, 2013 to settle all amounts owed pursuant to the joint venture agreement, consisting of $ 20,000 in license fees owed and the $ 250,000 (50% of the purchase price of the APS200). The joint venture agreement previously specified that in the event that we do not raise the $250,000 for the purchase of the APS200 by June 30, 2013, we would be liable to return license fees received from Alpha. Alpha has waived our potential liability to return any license fees received under the joint venture agreement.
Principal Products, Services and Their Markets
The APS200 system has the capability for four applications for treatment of waste tires, plastics, MSW and hospital waste. The APS200 system will have one treatment application for waste tires. We may add other applications at a later date should we wish to expand operations.
How the System Works
Pyrolysis technologies:
Pyrolysis is most commonly used for organic materials. It does not involve reactions with oxygen or any other reagents but can take place in their presence. Extreme pyrolysis, which leaves only carbon as the residue, is called carbonization and is also related to the chemical process of charring.
Pyrolysis is heavily used in the chemical industry, for example, to produce charcoal, activated carbon, methyl alcohol and other chemicals from wood to convert ethylene dichloride into vinyl chloride to make PVC, to produce coke fuel from coal, to convert biomass into synthetic gas, to turn waste into safely disposable substances, and for the cracking of medium-weight hydrocarbons from petroleum into smaller molecules to produce lighter forms like gasoline.
There are two kinds of pyrolysis technologies classified by heat source.
Direct-Heat Pyrolysis
This method allows the heat source to make direct contact with the feedstock material. It has the advantage of being the most efficient method of thermal conductivity. Examples of Direct-Heat Pyrolysis systems are; steam pyrolysis systems, nitrogen or argon gas pyrolysis systems. Both steam and gas pyrolysis heat the feedstock material completely thereby decomposing the hydrocarbons. The disadvantage of the Direct-Heat Pyrolysis method is that it requires the consumption of a large amount of energy.
Indirect-Heat Pyrolysis
In the Indirect-Heat Pyrolysis method the feedstock material does not make direct contact with the heat source. The material is loaded in a vacuum chamber isolated from air. Then a heat source is applied to heat the chamber. The heat source can be a burner or heat wire.
Indirect-Heat Pyrolysis has a low thermal conductive efficiency because no contact is made with the surface of the feedstock material. To improve efficiency, Catalyst Pyrolysis has been developed. It uses a catalyst to bring the heat in contact with the feedstock material. If more than one catalyst is used the greater the heat contact is made with the surface of the feedstock material and the efficiency is thereby increased. Another method is break down the feedstock material into the small pieces or to grind the feedstock into powder where the feedstock material will react instantly. This technology is called Fast Pyrolysis. No matter how the contact surface of the feedstock material is increased, the heat will always be applied from the surface to the interior of the feedstock material. When heat makes contact with the surface of the feedstock material, it will form a hard shell preventing the heat from penetrating to the interior of the feedstock material resulting in incomplete de-composition of the organic compounds.
The APS200 system combines the steam Direct-Heat Pyrolysis and Indirect-Heat Pyrolysis technologies.
Traditional pyrolysis technology is a one stage
process. It is designed and engineered to handle only one kind of uniform
organic material during the same process. Also, the thermal conditions will
vary based on what type of feedstock material is used; otherwise the feedstock
material cannot be decomposed properly. The carbon residue will contain an
organic composition. These by-products are not marketable. As a result, most
pyrolysis systems can only process one type of feed stock material. Mixed or
varied feedstock materials cannot be processed. For application in the waste
management field where there are a variety of waste materials in an
unpredictable composition, a one stage process cannot be accommodated. The
APS200 system can process mixed feedstock material based on its two stage
pyrolysis technology.
The first stage acts as a pyrolysis mode. It converts
most of the organic composition to fuel oil at the critical cracking stage. To
obtain the greatest amount of fuel oil is the most important function in this
stage. The second stage simulates gasification, deep pyrolysis, carbon
activated, and fuel gas synthesis system. The purpose of the second stage is to
decompose the residue of organic compounds remaining after completion of the
pyrolysis mode and convert it to fuel gas.
Energy efficiency by Steam with indirect thermal
pyrolysis technologies:
As mentioned above, traditional pyrolysis technology
uses the application of indirect heat to a thermal reaction chamber. Because
the thermal conductive surface is small, significantly more time and energy is
required to decompose the organic compounds resulting in low efficiency.
Another problem is created when heat is applied to the surface of the feedstock
material. When heat contacts the surface of the feedstock material, it forms a
crust which restricts penetration of the heat to the interior of the feedstock
material, resulting in an incomplete decomposition of the organic compounds.
The carbon residue will also contain remnants of the organic compounds and
becomes a secondary waste.
To solve this problem, the APS200 system uses steam as
the main heat source to directly heat the material. Steam is used to penetrate
the feedstock material into the interior in order to decompose the organic
compounds. To generate the steam heat source requires more energy however the
APS200 system uses an energy recovery technology to generate the steam required
by using the fuel gas generated from the pyrolysis process which creates an
indirect heating chamber by the use of the same waste heat source. The reaction
chamber is supported by steam and indirect heat at the same time. This process
increases the efficiency of energy use. When the pyrolysis system commences to
generate fuel gas, enough fuel gas is produced to support the heat source for
the system without the need for any external energy source. This creates energy
cost savings.
System Safety
There are two conditions necessary in a pyrolysis
system. The first is a vacuum condition. During this phase, the organic
compounds will decompose to fuel oil and fuel gas. This fuel gas is rich in
hydrogen. It is dangerous if contact is made with air and is the major reason
why explosions can occur at most pyrolysis plants. The second condition is a
high pressure phase. The higher the pressure, the higher the conversion rate, however,
the high pressure creates instability in the system and can be explosive.
In an Indirect Heat pyrolysis system, carbon dust is mixed
with oil (called “tar”) vapors. These tar vapors while passing through the pipe
to the condenser, stick to the pipe as tar. The tar may eventually plug the
pipe and since tar contains sulfur it can corrode the pipe creating leaks causing
the explosive fuel gas to leak. This is the most common reason for explosions
in traditional pyrolysis systems plants. To prevent such events, the APS200
System uses steam as protection. The steam reacts with the carbon dust to
generate more fuel gas and reduces the tar produced. Also, the steam cleans the
pipes to prevent corrosion and forms a protective shell to protect the fuel gas
from making contact with the air even if it is leaking. The steam provides
protection by preventing the fuel from igniting.
APS200 System
application for waste tire treatment:
Waste tires are a dominant market for the pyrolysis
system. The APS200 System can produce marketable high quality by-products from
waste tire treatment. These included a high quality carbon black as well as
fuel oil.
The expected percentage
rate of the by-products generated is as follows:
n
Steel wire :
8~12% depend on the type of tires
n
Fuel Oil: 40% ~
50%, depending on the flash point
n
Low quality
Carbon black: 5% ~10%
n
High quality
carbon black: 20% ~ 35%
Markets
Joint Ventures
It is our intention to market the APS200 system
through joint ventures with qualified interests in establishing joint ventures
and establishing waste conversion operations.
Effective October 28, 2011, we entered into a joint
venture agreement with Alpha to establish the APS200 system in Jamaica. Alpha,
as a sub licensee will be subject to a sub-license fee of $ 75,000 payable in
monthly installments of $ 5,000 per month commencing November 1, 2011 ending,
January 1, 2013. As per our Agreement with Omega, 3% of the sub license fee is
payable to Omega on a quarterly basis. As additional consideration, the joint
venture will remit a 5% royalty fee of which 2% will be retained by us and 3%
will be remitted to Omega on all gross sales generated. Alpha is to raise $
250,000, half of the purchase price of the APS200 system and we are to raise
the remaining balance. Alpha is to raise such funds by June 30, 2013. We are
subject to raising the additional $ 250,000 by June 30, 2013.
Markets – By Products
Management is unaware of any plan for recycling of
used tires in Jamaica, resulting in used tires being discarded as garbage where
they ultimately end up in landfills. We believe that these discarded tires
would provide a source of raw materials for us at little cost.
Sustainable biochar is a powerfully simple tool that
can produce a soil enhancer that holds carbon and makes soil more fertile;
reduce agricultural waste; and produce clean, renewable energy.
Biochar is a highly porous charcoal that enables soil
to retain nutrients and water and carbon content and yields improved plant and
crop. The carbon content in the biochar can be stored in soil indefinitely.
Biochar as a soil enhancer is mostly used in areas that have depleted soils
with inadequate water and fertilizer use.
Biochar can improve soil fertility for the long term
using locally available materials. Used alone, compost, manure or agrochemicals
must be added at the same rate every year in order to realize benefits.
Application rates can be reduced when nutrients are combined with biochar.
Biochar can play a role in expanding options for sustainable soil management,
not only to improve soil productivity but also to decrease nutrient loss
through leaching by percolating water. We intend to market biochar produced to
landscapers for softscape use in horticulture design.
Marketing Strategy
By-products generated would be initially marketed
throughout the Caribbean. Our target market will be that of landscape
horticulturalists. We may expand our target market at a later time and such
efforts to expand our marketing scope will be dependent on the success of our
initial operations.
Distribution Methods and Installation
We currently do not have distribution methods to
deliver by-products generated by the System. We will explore methods of
distribution subject to the market response upon initiation of operations.
New Products
We are not developing nor do we intend to distribute any
other products in the foreseeable future.
Competition
Management is not aware of competition in Jamaica,
WI. However emerging competitors may have significantly greater financial,
marketing and other resources than we have. Competitors have and may adopt
aggressive pricing or inventory availability policies and devote substantially
more resources to website and systems development than we do. Increased
competition may result in reduced operating margins and loss of market share.
Availability of Raw Materials
We have entered into discussions with several vehicle
service stations which has access to the amount of input of used tire material
we require. We have not entered into any definitive agreements with these
suppliers as the cost of the tires per ton will vary. The cost will vary from
$ 50 to $ 100 per ton. Management is confident that these sources are
sufficient for supplying operations with the necessary feedstock material.
We cannot estimate at this time the frequency of our
placement of orders as we have not established trends or possible seasonal
aspects which may affect our sub distributor’s business and the resultant
increase or lag in number of orders placed with us.
Orders and Payment
Payment terms will vary and payments are made by wire transfer,
bank draft, or money order.
Delivery
Delivery terms are subject to negotiations and are
unique in each transaction.
Returns and Refunds
Our warranty policy states that the APS200 system will
be free from material defects in materials and workmanship. The foregoing
warranty is subject to the proper installation, operation and maintenance of
the APS200 system in accordance to the APS200 system operating manual. Warranty
claims must be made by the customer in writing within 15 days of the
manifestation of a problem. The warranty period begins on the date the APS200
system is delivered and continues for Twelve (12) months.
Excluded from the warranty are problems due to
accidents, misuse, misapplication, storage damage, negligence, or modification
to the APS200 system or its components.
Patents, Trademarks and Labor Contracts
Patents
We do not directly hold any patents for the
APS200 System. The APS200 System is proprietary technology.
Trademarks
We do not have any trademarks on our trade name or logo.
Labor Contracts
We have one labor contract with a consulting firm for
all our administration needs. Once the APS200 System is fully operational, we
will require additional employees to operate the system and also sales staff
for marketing and sale of by-products generated.
Government Regulation
We are subject to regulations from various federal, state and municipal authorities, each having different environment regulations to deal with waste and emissions. The following are some of the regulatory authorities throughout the world.
In the USA hazard wastes are regulated by the Environmental Protection Agency (“
EPA
”) through the
Resource Conservation and Recovery Act
(“
RCRA
”) which requires that hazard wastes be tracked from the time that they are generated until their final disposition. Further with the enactment of the
Comprehensive Environmental Response, Compensation and Liability Act
in 1980, a super fund was created for the clean-up and remediation of closed and abandoned hazardous waste sites. A facility that treats, stores or disposes of hazardous waste must obtain a permit under the RCRA. Individual states may regulate particular wastes more stringently than that mandated by the EPA because the EPA is authorized to delegate primary rulemaking to individual States and most states have implemented such regulations.
The federal government also mandates the requirements for hazardous waste landfill sites together with state and local governmental agencies which may have criteria of their own and which in some cases may be more stringent than the federal regulations.
Worldwide the United Nations Environmental Program (“
UNEP
”) estimated that more than 400 million tons of hazardous waste is produced annually.
In the United Kingdom the Department for Environment Food and Rural Affairs is the agency responsible for policy and regulations on the environment which includes air quality, waste operations and local authority environmental regulation. In Europe the European Commission is the regulator authority responsible issuing directives for the regulation of hazardous waste.
The EPA is also the regulatory authority governing vehicle emissions and emissions from large Municipal Waste Combustors (“
MWC
”) (greater than 250 tons per day), small MSWs (less than 150 Tons per day) (MWCs are incinerators which burn household, commercial/retail and or institutional waste), Hazardous Waste Combusters (‘
HWC
”) and Medical Waste Incinerators. State or federal MWC plans also include source and emission inventories, emission limits, testing, monitoring and reporting requirements or site specific compliance schedules including increments of progress.
The Asian countries also have their own emission and waste treatment regulatory bodies, most of which conform either to the EU or EPA standards.
As worldwide emissions levels have increased dramatically, a greater understanding of the impacts of these emissions have resulted in increased regulation and new development practices have been implemented to reduce emissions in countries worldwide. All of the above are the regulatory environment in which our technology and the proposed applications of the technology are applicable.
Research and Development
We intend to establish a research and development facility in each assembly plant with the intention of maintaining the technological lead in terms of product quality and development of new product applications.
Compliance with Environmental Laws
To our knowledge, we are not subject to any environmental laws which are cause of concern among management.
Handling and Storage of Biochar
To the best of management’s knowledge, there are no guidelines or precautions relating to the handling and storage of biochar. We intend on handling and storing biochar based on standards applicable to carbon black as we may expand our operations in the future to accommodate the production of carbon black derived from waste tires.
In general, pure carbon black is difficult
to ignite, does not undergo spontaneous combustion, and is not a dust explosion
hazard. Red hot metal and electric sparks will not cause carbon black dust to
ignite explosively. However, carbon black can be ignited by an open flame,
glowing metal, sparks or lighted cigarettes. Once ignited it burns slowly with
the production of toxic carbon monoxide. Storage fires may go undetected for
some time, unless stirred or if sparks are present. If impurities are present
on the carbon black (e.g. oil), then there is a risk of dust explosions. The
risk of dust explosions is increased by the presence of unconsumed oil that
adheres to the carbon.
Carbon black is a toxic solid. It may also
be a dust explosion hazard depending on the impurities present. It is necessary
that engineering controls are operating and that protective equipment
requirement and personal hygiene measures are being followed. Only authorized
personnel should have access to this material. They should be properly trained
regarding its hazards and its safe use.
There should be no possible ignition
sources, (e.g. sparks, open flames). It is very important to keep areas where
this material is used clear of other materials which can burn (e.g. cardboard,
sawdust). If impurities are present on the carbon black this could be at risk
of being an explosion hazard. A non-sparking ventilation system,
explosion-proof equipment and intrinsically safe electrical systems in areas of
use must be installed. Carbon black should be stored in dust-tight, labeled
containers and should be kept closed when not in use. Methods to control
hazardous conditions include mechanical ventilation, local exhaust ventilation,
and process enclosure if necessary, to control airborne dust.
Handling and Storage of Fuel Oil
Fuel oil has a high vapor pressure,
evaporating quickly and will go stale in a few weeks if not chemically treated.
It has high ignition temperature (about 1100° F). Stored fuel oil must be
treated with a butylhydroxytoluene additive and protected from moisture if it
is to be stored for any length of time. Fuel tanks should be stored in a
well-ventilated area building.
Any electrical fixtures surrounding the
fuel oil tank should be explosion proof (sealed) and wired in sealed conduit to
prevent fuel vapors from coming into contact with electrical sparks. Smoking or
carrying of smoking materials within 50 feet of the fuel pumps should be
prohibited.
Employees
As of to date, we had no
full-time employees and no part-time employees. We have engaged a consultant
who provides various services to our company.
Principal Business Office & Administrative Branch
Office
Our
administrative office for North American investor relations and U.S. regulatory
reporting is located at Suite
6623
Las Vegas Boulevard, South Street, 255, Las Vegas Nevada, 89119, Telephone: 702-629-1883, Facsimile: 702-562-9791.
ITEM
1A. RISK FACTORS
Any of the
following risks could materially adversely affect our business, financial condition,
or operating results.
All parties and individuals reviewing this Annual
Report on Form 10K and considering us as an investment should be aware of the financial
risk involved. When deciding whether to invest or not, careful review of the
risk factors set forth herein and consideration of forward-looking statements
contained in this registration statement should be adhered to. Prospective investors
should be aware of the difficulties encountered as we face all the risks including
competition, and the need for additional working capital. The likelihood of our
success must be considered in light of the problems and expenses that are frequently
encountered in connection with operations in the competitive environment in which
we will be operating.
***You should read the following risk factors
carefully before purchasing our common stock. ***
RISKS RELATING TO OUR BUSINESS
We have a limited operating history upon which an evaluation of our prospects can be made. For that reason, it would be difficult for a potential investor to judge our prospects for success.
We were organized in November 2010. We entered into the Agreement with Omega on October 3, 2011. We have had limited operations since our inception from which to evaluate our business and prospects. There can be no assurance that our future proposed operations will be implemented successfully or that we will have the ability to generate profits. If we are unable to sustain our operations, you may lose your entire investment. We face all the risks inherent in a new business, including the expenses, difficulties, complications and delays frequently encountered in connection with conducting operations, including capital requirements and management's potential underestimation of initial and ongoing costs. As a new business, we may encounter delays and other problems in connection with the methods of product distribution that we implement. We also face the risk that we will not be able to effectively implement our business plan. In evaluating our business and prospects, these difficulties should be considered. If we are not effective in addressing these risks, we will not operate profitably and we may not have adequate working capital to meet our obligations as they become due.
If we do not raise $ 250,000 to purchase the APS200
System by June 30, 2013, we are liable for the price increase if applicable
Our Agreement with Omega provides that the APS200
system can be purchased at a fixed price of $ 500,000 prior to June 30, 2013.
Subsequent to this date, Omega may increase the purchase price to reflect
rising costs of raw materials. We may not have sufficient working capital to
pay the increase in purchase price.
If Alpha does not raise its portion
of the $ 250,000 by June 30, 2013, there is no assurance that we will have the
working capital to purchase the APS200 System
Alpha is obligated to raise $
250,000 by June 30, 2013. If Alpha does not raise such funds by this date,
there can be no assurance that we will be in a position to raise the remaining
balance or appoint another joint venture partner that would participate in the
joint purchase of the APS200 system.
If we do not receive shareholder loans we may be
unable to continue meeting our minimum funding requirements.
We will require shareholder loans to meet our working
capital needs; however, we have no formalized agreements with shareholders
guaranteeing that any required funding will be available to us. We may exhaust
this source of funding at any time, which would cause us to cease operations.
We must hire qualified engineering and professional services personnel
.
We cannot be certain that we can attract or
retain a sufficient number of highly qualified engineers and professional
services personnel to efficiently maintain and enhance the APS200 system. To
meet our needs for engineers and professional services personnel, we may use more
costly third-party contractors and consultants to supplement our own staff. Our
business may be harmed if we are unable to establish and maintain relationships
with third-party implementation providers.
If we do not receive funding through private placements
or shareholder as we may be unable to continue meeting our minimum funding
requirements.
We require short term funding in the amount of
approximately $71,000 in the next 12 months to fund our operations. Although
our shareholders are committed to providing the necessary funding in order to
generate revenues they are not obligated to do so. We have no formal
agreements with our shareholders. If we do not receive shareholder loans or
any other form of funding, our operations would cease indefinitely.
We may not be able to compete effectively against our competitors, which could force us to curtail or cease business operations.
Many of our competitors have significantly greater name recognition, financial resources and larger distribution channels. If we are not able to compete effectively against our competitors, we will be forced to curtail or cease our business operations. We do not have any market share in the industry at this time.
We may face product liability for the product we sell.
We may become liable for any damage caused by our products when used in the manner intended. Any such claim of liability, whether meritorious or not, could be time-consuming and result in costly litigation. We do not carry insurance. Any imposition of liability could severely harm our business.
We are dependent on the services of our President and the loss of her services could have a material adverse effect on our ability to carry on business.
We are substantially dependent upon the efforts and skills of our company President, Ms. Rosemary Samuels. We do not have an employment contract and thus she has no obligation to fulfill his capacities as President for any specified period of time. The loss of the services of Ms. Samuels will have a material effect on our business in that we would not have the necessary leadership to continue operations.
Our shareholders may not be able to enforce U.S. civil liabilities claims.
Our assets are located outside the United States and all of our director and officers are located outside the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. In addition, a shareholder should not assume that the courts in any other country (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or other laws of the United States.
RISKS RELATED TO OUR COMMON STOCK
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the penny stock rules promulgated by the SEC, FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. 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, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares.
An investor’s ability to trade our common stock may be limited by trading volume.
A consistently active trading market for our common stock may not occur on the OTCBB. A limited trading volume may prevent our shareholders from selling shares at such times or in such amounts as they may otherwise desire.
Because we will not pay dividends in the foreseeable future, stockholders will only benefit from owning common stock if it appreciates.
We have never paid dividends on our common stock
and we do not intend to do so in the foreseeable future. We intend to retain
any future earnings to finance our growth. Accordingly, any shareholder who
anticipates the need for current dividends from his investment should not
purchase our common stock.
We intend to attempt to have our common
stock quoted on the OTC Bulletin Board, which will limit the liquidity and
price of our securities more than if our securities were quoted or listed on a
national exchange.
Initially, our securities will be traded in the
over-the-counter market. We intend to commence the process of obtaining a
quotation of our common stock on the OTC Bulletin Board (“OTCBB”). In order for
our common stock to trade on the OTCBB, a registered broker-dealer, serving as
a market maker, must be willing to list bid and ask quotations for our common
stock, sponsor our listing on the OTCBB, and file an application with the OTCBB
on our behalf to make a market in our common stock. It is not possible to
predict how long it may take to obtain a listing on the OTCBB. In the event an
application for quotation of our common stock is submitted to the OTCBB, there
can be no guaranty that the OTCBB will approve the application. Quotation of
our securities on the OTC Bulletin Board will limit the liquidity and price of
our securities more than if our securities were quoted or listed on a national
exchange.
Trading On The OTC
Bulletin Board May Be Volatile And Sporadic, Which Could Depress The Market
Price Of Our Common Stock And Make It Difficult For Our Stockholders To Resell
Their Shares.
Trading in stock quoted on the OTC Bulletin
Board is often thin and characterized by wide fluctuations in trading prices,
due to many factors that may have little to do with our operations or business
prospects. This volatility could depress the market price of our common stock
for reasons unrelated to operating performance. Moreover, the OTC Bulletin
Board is not a stock exchange, and trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on a
quotation system like NASDAQ or a stock exchange like Amex. Accordingly,
shareholders may have difficulty reselling any of their shares.
Trading Of Our Stock May
Be Restricted By The SEC’s Penny Stock Regulations And FINRA’s Sales Practice
Requirements, Which May Limit A Stockholder’s Ability To Buy And Sell Our
Stock.
The Securities and Exchange Commission has
adopted Rule 15g-9 which generally defines “penny stock” to be any equity
security that has a market price (as defined) less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions. Our
securities are covered by the penny stock rules, which impose additional sales
practice requirements on broker-dealers who sell to persons other than
established customers and “accredited investors”. The term “accredited
investor” refers generally to institutions with assets in excess of $5,000,000
or individuals with a net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 jointly with their spouse. 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 in a
form prepared by the SEC which 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 monthly account statements showing the market value of each
penny stock held in the customer’s account. The bid and offer quotations, and
the broker-dealer and salesperson compensation information, must be given to
the customer orally or in writing prior to effecting the transaction and must
be given to the customer in writing before or with the customer’s confirmation.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from these rules, the broker-dealer 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. These disclosure requirements may have the effect of reducing the
level of trading activity in the secondary market for the stock that is subject
to these penny stock rules. Consequently, these penny stock rules may affect
the ability of broker-dealers to trade our securities. We believe that the
penny stock rules discourage investor interest in, and limit the marketability
of, our common stock.
In addition to the “penny stock” rules promulgated by
the Securities and Exchange Commission, the Financial Industry Regulatory
Authority has adopted rules that require that in recommending an investment to
a customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. 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 Financial Industry
Regulatory Authority believes that there is a high probability that speculative
low-priced securities will not be suitable for at least some customers. The
Financial Industry Regulatory Authority’ requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock,
which may limit your ability to buy and sell our stock.
If we issue additional shares in the future, it will
result in the dilution of our existing shareholders.
Our board of directors may choose to issue some or all
of such shares to acquire one or more businesses or to provide additional
financing in the future. The issuance of any such shares will result in a
reduction of the book value and market price of the outstanding shares of our
common stock. If we issue any such additional shares, such issuance will cause
a reduction in the proportionate ownership and voting power of all current
shareholders. Further, such issuance may result in a change of control of our
corporation.
Our stock is substantially controlled by one shareholder for the foreseeable future and as a result, that shareholder will be able to control our overall direction.
Our directors and officers and principal shareholders own 61% of our outstanding shares. As a result, they will be able to control the outcome of all matters requiring stockholder approval and will be able to elect all of our directors. Such control, which may have the effect of delaying, deferring or preventing a change of control, is likely to continue for the foreseeable future and significantly diminishes control and influence which future stockholders may have in our company. See "
Principal Stockholders
."
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
Principal Business Office
Our principal business office is located at
6623 Las Vegas Boulevard,
South Street, 255, Las Vegas Nevada, 89119, Telephone: 702-629-1883, Facsimile: 702-562-9791.
We conduct our business in the office of a company controlled
by a shareholder. There has been no charge for this use. If there was a charge,
it would be insignificant.
There are currently no proposed programs for the renovation,
improvement or development of the facilities that we currently use. We believe
that this arrangement is suitable given the nature of our current operations, and
we also believe that we will not need to lease additional administrative offices
in the immediate future.
ITEM 3. LEGAL
PROCEEDINGS
We know of no material,
existing or pending legal proceedings against our company, nor are we involved
as a plaintiff in any material proceeding or pending litigation. There are no
proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial stockholder, is an adverse party or has a material
interest adverse to our interest.
ITEM 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
None