Item 1. Business
Background information
OUR HISTORY
“We”
,
“us”
,
“our”,
“Opticon”
and
“Infrax”
refer to Infrax Systems, Inc. (formally known as OptiCon Systems, Inc.),
a Nevada corporation. We were incorporated in Nevada on October 22, 2004. On January 10, 2010, we officially changed the name of
the Company from OptiCon Systems, Inc. to Infrax Systems, Inc. to reflect the change in the Company’s direction and were
issued a new trading symbol as “IFXY”.
The address of our executive offices is 3637 4
th
Street North, Suite 330, St. Petersburg, FL 33704 and our telephone number at that address is 727-498-8514. The address of our
web site is www.infraxinc.com. The information at our web site is for general information and marketing purposes and is not
part of this annual report for purposes of liability for disclosures under the federal securities laws.
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On January 10, 2010, we officially changed the name of the Company from OptiCon Systems, Inc. to Infrax Systems, Inc. and were issued a new trading symbol: “IFXY”.
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On June 29, 2010, the Company acquired the assets and management of Trimax Wireless Systems, Inc. (“Trimax”), in exchange for equity and a note payable. The Trimax product line is expected to provide an operating platform and enhanced operating effectiveness to the Secure Intelligent Energy Platform.
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On May 8, 2011 we acquired a 70% controlling interest in Lockwood Technology Corporation, to supply RFID and asset tracking, among other technology value to our product lines.
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On June 30, 2017 the Company sold its 70% controlling interest in Lockwood Technology Corporation to Sam Talari, the Company’s Chairman in exchange for approximately $735,000 of accrued compensation and related party debt payable to Mr. Talari.
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OUR BUSINESS
While we continue to enhance the OptiCon Network Management
platform, the Company has shifted its focus and energies towards the “Smart Grid” energy sector. The Company believes
our secure integrated platform will hasten the deployment of all Smart Grid technology for resource constrained small and mid-sized
utilities. Infrax’s advantage comes from our products ability to enable the creation of a secure platform scalable
to deliver a broad set of intelligent Smart Grid initiatives across millions of endpoints for Utilities.
INFRAX market opportunity exists in one of the largest industries
in the world. Globally, according to the International Energy Agency (IEA), this industry is expected to spend close to $10 trillion
dollars by 2030 to upgrade electrical infrastructure. Technology innovations in power delivery have been fermenting for years,
but only now is the confluence of physical need and social expectations creating an environment in which real and sustained monetary
commitments are being made to create a “Smart Grid” built on information-based devices, digital communication and advanced
analytics. Networking giant Cisco has estimated that the market for smart grid communications will grow into a $20 billion-a-year
opportunity as the infrastructure is built out over the next five years. Researchers at Specialists in Business Information (SBI)
forecast the market will grow to $17 billion-per-year by 2014 from today’s $6 billion. Globally, SBI expects the market for
smart grid technologies to grow to about $171 by 2014 up from approximately $70 billion in 2009.
According to a report issued to Congress
by the Office of Electricity Delivery and Energy Reliability, as required by Section 1309 of Title XIII of the Energy Independence
and Security Act of 2007, the security of any future Smart Grid is dependent on successfully addressing the cyber security issues
associated with the nation’s current power grid.
The complexity of the grid implies that
vulnerabilities exist that have not yet been identified. It is particularly difficult to estimate risk from cyber-attack because
of the size, complexity, and dynamic nature of the power grid and the unpredictability of potential attackers.
Infrax creates a unified solution path to securely manage
Advanced Metering Infrastructure (AMI) and other Smart Grid optimization applications such as substation and distribution automation.
Our product portfolio provides Network Transport and Management, Secure Intelligent Devices, Threat Detection, and Grid Optimization,
all integral components of a state-of-the-art Smart Grid solution.
Through our wireless broadband business unit, Infrax Networks,
we provide outdoor mesh-relay based wireless broadband networks used by customers as the metro-scale IP foundation upon which to
run one or many applications that help build greener, safer, smarter communities. Our products have been deployed globally to help
connect the unconnected. In addition, our networks are used by electric utilities to build large scale, reliable, and secure networks
that deliver the high bandwidth and low latency required for deploying smart grids.
Every utility, telecommunications carrier, wireless service
provider, government and businesses with the need to securely transmit data and manage their network is a potential customer for
the Infrax product line.
Infrax’s innovative and comprehensive solutions have
the power to secure the future.
Industry Background
In today’s environment of increasing threat sophistication
and regulatory pressures, managing risk has become a primary concern for Utility IT organizations. Today, a single breach can cost
millions, be devastating to industrial, commercial and residential consumers, and create a threat to national security. Infrax’s
Secure Network Interface Card (SNIC), GridMesh and GRid Intrusion Management (GRIM) products provide a secure solution for complete
grid, network and intelligent device management.
Like the internet does today, the utility network needs to
able to connect millions of devices and still operate in a reliable and secure grid. Because of increased demand and growing environmental
concerns, this grid also needs to become far more flexible than it is today, accommodating distributed power generation from renewable
sources and use several energy efficiency techniques. The vision of tomorrow’s utility grid involves a number of technologies
that need to be put in place to make the power grid smarter, with more automation within the network and tools to give end users
better information and control. The overall
change that the utility needs to make is to go from a centralized
generation and distribution model to one that is more distributed and diverse.
Today’s electric system was not designed to handle
extensive, well-organized acts of terrorism aimed at strategic elements. The threat of attack is growing and a widespread attack
against the infrastructure is more likely today than ever before. It is therefore critical that the Smart Grid address
security from the outset, making it a requirement for all the elements of the grid and ensuring an integrated and balanced approach
across the system.
Ongoing Mandates
Title XIII of the Energy Independence and Security Act
of 2007
, mandates that the Department of Energy provides a quantitative assessment and determination of the existing and potential
impacts of the deployment of Smart Grid systems on improving the security of the Nation’s electricity infrastructure and
operating capability, including recommendations on:
(1) How smart grid systems can help in making the
Nation’s electricity system less vulnerable to disruptions due to intentional acts against the system.
(2) How smart grid systems can help in restoring
the integrity of the Nation’s electricity system subsequent to disruptions.
(3) How smart grid systems can facilitate nationwide,
interoperable emergency communications and control of the Nation’s electricity system during times of localized, regional,
or nationwide emergency.
(4) What risks must be taken into account that smart
grid systems may, if not carefully created and managed, create vulnerability to security threats of any sort, and how such risks
may be mitigated.
The National Institute for Standards and Technology (NIST)
stated, “Identifying and implementing security controls is vital in protecting the confidentiality, integrity, and availability
of the connected systems and the data that is transferred between the systems. If security controls are not in place or if they
are configured improperly, the process of establishing the interconnection could expose the information systems to unauthorized
access.”
Our SNIC and GRid Intrusion Management (GRIM) systems provide
an enhanced Cyber Security platform which prevents unwarranted intrusion into any part of the electrical grid. Using advanced encryption
algorithms, a secure virtual network can be created over a private or public network. Infrax's GRIM technologies will evolve to
include software and hardened hardware solutions for substation deployment.
The energy industry’s assets and systems are not equipped
to handle well designed acts of cyber terrorism. With the growing threat of internet attacks, it is critical that robust security
is introduced for all the elements of the grid. The deployment of a Smart Grid that reaches from the producer to the consumer,
will ultimately add over 150,000,000 communications capable meters in the U.S. alone, creating over 150,000,000 unsecure access
points into the grid that previously did not exist. The lack of secure AMI solutions is a major concern of utilities
and regulators alike, and Infrax can fill the void.
The market for Infrax’s SNIC and GRIM solutions includes
over 3,400 electric utilities in the United States, several thousand more globally, large consumers of commercial power, as well
as power producers and utilities providing water and gas.
According to the research-based business strategy firm Zpryme,
Smart Grid IT hardware and software spending in the U.S. was $39.4 billion by 2014.
Our Technology and Solution
The foundation of our technology is a standards-based and
secure network. Our network is composed of our hardware such as collectors and repeaters (where required), our network operating
system, and our Electric Power Grid Mesh software suite, which together provide electric power utilities the ability to communicate
with and control devices connected to the electric power grid. We plan to offer a suite of solutions that run on top of our network,
including advanced metering, distribution automation, and demand-side management. These solutions include additional hardware,
such as our collectors and concentrators, and applications from our asset tracking and management and networking software. Our
solutions combine with devices from the large number of third parties with whom we collaborate to form end-to-end smart electric
power grid offerings built on our network. In addition, we offer a wide range of services that enable our utility customers to
deploy, operate and maintain our networking platform and solutions. These service offerings include professional services to implement
our products, managed services and software to assist electric power utilities with managing the network and solutions, and ongoing
customer support.
Key Features and Benefits of Our Networking Platform
We believe that utilities require a robust networking platform
that allows them to transform the power grid infrastructure into the
smart grid, thereby generating significant benefits to utilities,
consumers and the environment. We believe that the only way to effectively enable the smart grid is through the implementation
of a robust networking platform that meets stringent requirements: We have designed and built our networking platform from the
ground up for the sole purpose of enabling electric power utilities to transform the electric power grid infrastructure into the
smart electric power grid. We believe our utility customers benefit in the following ways:
Standards-Based. We believe the most successful networks
have been those based on open standards. With an open, standards-based networking platform, utilities can choose from a diverse
set of products from a variety of vendors. Our networking platform is based on standards, which enable electric power utilities
to deploy standards-based networking throughout their infrastructure and allows for interoperability with other standards-based
devices. As a result, we believe electric power utilities can readily extend our networking platform to support a broad set of
end-to-end smart electric power grid offerings in a cost-effective and timely manner. We utilize web services and open software
standards and interfaces to enable integration with third-party software and devices. We believe this open and flexible architecture
enables multi-vendor interoperability and facilitates integration with devices and software from other vendors. As a result, we
believe utilities can readily extend our networking platform to support a broad set of end-to-end smart grid offerings in a cost-effective
and timely manner.
High-Performance. We believe a networking platform must deliver
high performance by maximizing throughput and minimizing latency. To accommodate an increasing number of solutions, such as distribution
automation and demand-side management, the networking platform must be able to easily and economically support these solutions
without negatively impacting performance. Our networking platform delivers high-bandwidth, low-latency performance and traffic
prioritization, which allows electric power utilities to run multiple solutions, including those that require high-throughput communications,
such as distribution automation, while maintaining robust operating performance and meeting the stringent requirements of multiple
time-sensitive solutions for the smart grid. Our network hardware devices incorporate powerful two-way multi-channel radios, sophisticated
routing techniques and high-speed node-to-node communications. Our platform is specifically designed to have ample bandwidth, which
allows utilities to run multiple solutions including those that require high-throughput communications, such as distribution automation,
while maintaining robust operating performance.
Scalable. We believe a networking platform must be easily
and quickly scalable to accommodate an ever-increasing number of devices generating and transmitting ever-increasing amounts of
data. Large utilities have millions of consumers, and the networking platform must be capable of supporting all of them and the
addition of many new devices in the future. Our networking platform can be deployed rapidly at scale to accommodate millions of
devices on the electric power grid, allowing electric power utilities that deploy our networking platform to easily and cost-effectively
expand beyond the scope of their initial deployments.
Extensible. We believe a networking platform requires upgradable
software and hardware designed to allow utilities or developers to expand its capabilities. Extensibility reduces the need for
additional future investments and mitigates the risk of technological obsolescence and stranded assets. Our communications modules
are designed for over-the-air upgrades, enabling us, for example, to deliver software over the air, allowing us to augment the
functionality of, and to deploy new solutions and applications to, previously deployed hardware. As a result, we believe our electric
power utility customers can mitigate the risk of technology obsolescence.
Secure. The power grid is vulnerable to the risk of data
loss, theft and malicious attacks, and a smart grid often provides a command-and-control function for the power grid. In addition,
many of the power grid’s components are located in easily accessible and unsecured, outdoor locations. As a result, a networking
platform for the smart grid must integrate highly sophisticated and proven security technologies deployed across multiple layers.
Our networking platform incorporates an end-to-end, multi-layer security architecture and uses proven technologies and associated
security techniques to allow electric power utilities to operate large-scale networks while minimizing security risk. By encrypting
data to and from the devices and by ensuring the devices are authenticated, we preserve the integrity of the entire network even
if an individual device is compromised. We use standards based encryption technologies and associated security techniques to enable
our utility customers to benefit from a technology that has had to evolve over the decades to address constant, increasingly sophisticated
attacks in a wide variety of industries and applications. Our robust security and enhanced authentication schemes prevent man-in-the-middle
attacks and allows utilities to operate large-scale networks while mitigating security risk. Our security model incorporates sophisticated
techniques to secure every device on the network but is also designed d to preserve the integrity of the entire network even if
an individual device is compromised. We are focused on using highly encrypted data over secure tunnels using a variety of communications
medium including WiFi, Cellular or other public communication media. We believe this is more reliable and secure than radio frequency
(RF) technology. Our SEIP incorporates a communications transport known as Electric power gridMesh™, and a device and data
security management tool known as GRiM. Secure management of the "last mile" backhaul is necessary for electric power
utilities to implement Smart Electric power grid applications such as AMI, and substation and distribution automation.
Reliable. Much of the physical infrastructure that makes
up the network must reside outdoors, where factors such as weather, the growth of foliage or construction can change operating
conditions over the infrastructure’s lifetime. In addition, this infrastructure can be deployed in locations that are costly
or difficult to service. As a result, a networking platform must be resilient, self-configuring and self-healing to function reliably
with minimal intervention. Our communications modules communicate with
multiple access points, providing redundant paths to the
utility, and dynamically adjust their connections to the network and to neighboring devices to accommodate changes in the physical
environment that impact wireless throughput, such as new construction or foliage growth. In addition, our GridMesh network operating
system routinely re-evaluates the optimal path for communications traffic. As a result, utilities benefit from built-in optimization
and self-healing capabilities that allow our networking platform to function reliably with minimal interruption and limited manual
intervention.
Cost-Effective. The networking platform must deliver a compelling
business case, both at installation and as additional solutions are added to the network. Maintenance and upgrade costs must also
be low, and the network must integrate with the utility’s existing information technology and systems to facilitate deployment
without expensive installation or integration costs. Our architecture enables our electric power utility customers to leverage
a single network, rather than build multiple networks, when deploying additional solutions. This approach limits capital and operational
expenditures and enhances our electric power utility customers’ return on investment. Our networking platform is designed
to limit both capital and operational expenditures relative to more expensive alternatives such as cellular- or PLC-based architectures.
In contrast to such alternatives, our architecture enables our utility customers to leverage a single network, rather than build
multiple networks, when deploying additional solutions such as distribution automation and demand-side management. Equipment requirements
are mitigated because our access points support data from thousands of our communications modules, and all communications modules
can act as relays for data from other communications modules. Our hardware and software is highly automated and operates with minimal
manual intervention, thereby reducing upfront and ongoing maintenance expenses. We believe this approach limits capital and operational
expenditures and enhances our utility customers’ return on investment.
Components of our smart energy platform.
Our product portfolio provides Network Transport and Management,
Secure Intelligent Devices, Threat Detection, and Electric power grid Optimization, all integral components of a state-of-the-art
Smart Electric power grid solution. Our devices and platform are built on information-based devices, digital communications and
advanced analytics. Through our wireless broadband business unit, Infrax Networks, we provide outdoor mesh-relay based wireless
broadband networks used by customers as the metro-scale IP foundation upon which to run one or many applications that help build
greener, safer, smarter communities. In addition, our networks are used by electric power utilities to build large scale, reliable,
and secure networks that deliver the high bandwidth and low latency required for deploying smart electric power grids.
Secure Intelligent Energy Platform (SIEP) ™
Our Secure Intelligent Energy Platform (SIEP) ™ competes
in three distinct market segments of the smart electric power grid industry;
-Network Transport and Management
(secure, two-way communication),
-Secure Smart Sensors and Devices
(Smart Meters),
-Asset Tracking;
-a electric power grid Optimization
and
-Threat Detection, Electric power
grid Optimization and Security.
We have developed a series of interrelated operational management,
communications, and electric power grid security related products and services, under one platform, that together enable a comprehensive
and unified solution for communications and applications management of the Smart Electric power grid. Each product meets a specific
need in the spectrum of controls necessary to effectively manage a Smart Electric power grid and together they will offer unparalleled
security and data management.
To address this international opportunity, we plan to aggressively
invest in our products, marketing efforts and delivery capabilities to serve these markets.
Our Secure Intelligent Energy Platform enables utilities
to transform the existing power grid infrastructure into the smart grid and includes our networking platform and solutions that
run on top of the network as well as complementary services. Our networking platform facilitates two-way communications between
the utility back office and devices on the power grid. We also offer a suite of solutions and applications that run on top of our
network including advanced metering, distribution automation, and demand-side management. These solutions and applications are
integrated with third-party products from the large number of third parties with whom we partner to form end-to-end smart grid
offerings. In addition, we offer a wide range of services that enable our utility customers to deploy, operate and maintain our
Secure Intelligent Energy Platform.
Within our Secure Intelligent Energy Platform, we provide
a full stack of software capabilities that underlie our networking platform and enable the solutions and applications we offer
on top of our network. At the core is our operating system that drives the functionality of all our devices. Our GridMesh suite
provides management and security for our overall network. The Asset Tracker application suites provide business intelligence and
management for our solutions..
Communications Platform
At the foundation of our Secure Intelligent Energy Platform
is a standards-based and secure network. The networking platform is composed of our hardware such as access points and repeaters,
network operating system, and our GridMesh management and security software. This network provides utilities the ability to communicate
with devices connected to the power grid.
Communication Devices:
• Secure Network Interface Card (SNIC).
Our SNIC is a combo card that resides inside the utility power meter. The meter data such as usage, voltage, current etc. are encrypted
and transported to the collector via a wireless module over proprietary mesh architecture. The wireless devices, operating in the
2.4 GHz spectrum link devices in the neighborhood area network to a utility’s back office or data center over the wide area
network.
• Collectors, concentrators and repeaters.
Our collectors are devices that communicate to the SNIC on one side and transport the data over an appropriate wide area network
(WAN) to a concentrator, typically installed at a utility’s substation. Repeaters are devices that extend the reach of our
network. Collector has the option to support a variety of WAN modules such as RF, cellular, WiMax etc. These devices are engineered
to withstand harsh environmental conditions, including wind, lightning strikes, and rain, snow, and temperature extremes; are packaged
in a standard form factor; and can be installed in a variety of locations such as a power pole.
Networking Software:
• GridMesh: Our proprietary mesh software
for the SNIC is powerful software based on clustering concept to help build a dynamic mesh network between the meters and the collector.
GridMesh allows our hardware devices to securely join the network and communicate with each other. GridMesh provides a comprehensive
set of advanced networking features including network discovery, network addressing and address management, advanced routing, and
secure communications. GridMesh also allows our devices to be remotely programmable over the air, enabling device upgrades without
costly maintenance visits.
Secure Network Interface Card (SNIC)
Our advanced metering solution provides utilities with two-way
communications from our communications module integrated into a third-party meter to their back office, enabling utilities to remotely
perform such functions as reading meter usage, capturing time-of-use consumption data, connecting and disconnecting service, and
detecting power outages. Our current version of the card is made for Itron’s Centron II meters, with the ability to modify
the geometric design to fit inside other third party meters. Our advanced metering solution comprises communications modules that
are integrated into partner meters and our UtilityIQ software applications. We do not manufacture meters; instead, we partner with
various meter manufacturers to provide a range of meter options for our utility customers. We are in the process of completing
a Security and Network Interface Card (SNIC), based on higher levels of encryption, which can be imbedded in all intelligent end
devices including Smart Meters and sensors. We plan to offer our SNIC in a variety of configurations; all equipped with standards
based encryption with robust authentication schemes. Data traffic passing through our SNIC will be encrypted using AES 256, once
the devices are authenticated. These keys are periodically rotated to negate “man in the middle” attacks. When combined
with our security based software and management tools, our SNIC will create an impenetrable barrier against cyber-attacks. Our
SNIC coupled with our Grid Intrusion Management (GRIM) system, will provide an enhanced cyber security platform which prevents
unwarranted intrusion into any part of an electrical electric power grid. Using advanced encryption algorithms, a secure virtual
network can be created over a private or public network. We believe our SNIC is the next generation of electric power grid security
products. SNIC addresses the advanced metering infrastructure requirements of electric power utilities and provides the highest
level of meter security available to date. SNIC employs military grade encryption, meeting or exceeding current and emerging security
standards. The universal host interface board carries a single wireless module for both home area networking (HAN) and for communicating
the data to the electric power utility’s control center using standards based communications technology called GridMesh.
GridMesh
We believe our wireless smart meter mesh platform solves
what has been the biggest challenge faced by electric power utilities, connecting each home to the smart electric power grid in
an efficient, scalable and secure way. Utilizing our proprietary wireless system, GridMesh enables each smart meter to interconnect
with one another to create a large, scalable mesh network.
UMAX and UMAX + The Utility Max (UMAX) product family is
an extremely cost effective wireless solution for electric power utilities and telephone carrier who are looking to either set
up a point-to-point or point-to-multipoint Ethernet links. The UMAX+ uses an adjunct box that is connected to the UMAX radio over
an Ethernet link to provide T1/E1 communications at the remote locations. Due to the advanced implementation of both, frequency
division duplex and time division duplex in the wireless domain the UMAX products can operate on a single channel eliminating the
need for a guard band between the transmit and receive signals.
Grid Intrusion Management (GRIM)
We expect our GRIM system to evolve to include software and
hardened hardware solutions for substation deployment.
Distribution Automation
Our current version of distribution automation solution provides
a very reliable two-way communications from distribution devices along the power grid to the back office or substations, providing
utilities with real-time information for grid monitoring and control. While utilities have been implementing distribution automation
for many years, adding two-way communications over a common networking platform significantly improves their visibility into and
control over the power grid. As a result, utilities gain the information needed to better contain and more quickly resolve outages,
monitor power-quality metrics with greater granularity, and adjust voltage levels dynamically to reduce energy waste.
Secure Intelligent Energy Platform Services
Through our Smart Grid Consulting & Professional Services
organization, we offer a wide range of services related to the initial deployment and ongoing operation of our networking platform.
Our services include professional services, managed services and customer support, including Network Design, Deployment Support
and Program Management. We offer an array of services to help utilities deploy our networking platform and solutions. Our Professional
Services include network design and optimization, taking into account geographical terrain, wireless propagation characteristics,
device density and routing design, to ensure data is transmitted through the network in an efficient and secure manner. Soon we
will have the ability to provide installation services directly to the utilities. We will be able to provide complete deployment
support to ensure that our hardware devices are properly installed and registered with the network..
Professional Services
Infrax Systems has introduced a new division which provides
engineering and professional services to its energy customers. This division is charged with packaging Infrax Systems products
into engineered solutions that are marketed to their customers. Professional services provides engineering, construction and project
managements services to the smaller utilities such as local municipalities, Rural Electric Cooperatives and Investor Owned Utilities
who may not have the manpower or expertise to accomplish their goals. By leveraging our over 100 years of combined experience in
the electric utility and telecommunications industries, Infrax Systems is well placed in an industry which is becoming the newest
high tech phenomenon. The Smart Grid vision relies on vast networks of intelligent devices which sources in the Data and Enterprise
Network industry indicate will surpass by several orders of magnitude of any know data network of today. Even a relatively small
utility will have upwards of a million devices operating on thousands of individual domains. These networks not only will control
instant and real time power flow but will also be the cash register for the Utility industry. Security, scalability and authenticity
as well as day to day maintainability are the utmost concerns in providing an intelligent power grid that is safe and secure. Infrax
Systems will be a leader in designing, building and securing these networks and solutions.
Initial marketing campaigns have been targeting the municipalities
and Electrical Cooperatives. Currently we have responded to one major RFP for Capacitor Bank networks and Smart Grid infrastructure
worth in excess of 1.5 million dollars. We are also working on a pilot project for our AMI product with the availability of the
SNIC, with a major utility. If the pilot project is accepted and successful, we may be asked to provide AMI to all their customers.
The revenue from such project, for only one utility, will be overwhelmingly substantial. We are also in the process of negotiations
for a contract to provide customer engineer expertise for a fiber optic construction project and we have installed several radios
for one of our initial customers. We have started to communicate with few utilities in Florida to become qualified bidders for
the coming projects. We will continue this process with utilities all along the east coast of USA.
Asset Tracker solution
Our Asset Tracker solution provides for complete inventory
management of utility smart electric power grid assets, including meters, collectors and concentrators, as well as all substation
and field deployable assets. Asset Tracker validates inventory and equipment information received via RFID from tagged assets and
seamlessly provides that information across the enterprise bus of an electric utility in a format customizable for each utility.
Access to real time information provides operations personnel with the ability to locate material, track consumption and streamline
procurement.
Business Benefits of Our Smart Energy Platform
Our networking platform is designed to yield significant
benefits to electric power utilities, end users and the environment. We believe that utility investments in the networking platform
will help utilities mitigate future costs and improve their ability to manage the power grid. Over time, we expect these benefits
will translate into rates for consumers below what they would otherwise have been, absent such investments. In addition, many of
the benefits will flow directly to consumers by empowering them to use energy more efficiently and save money. The benefits of
transforming the power grid into the smart grid via our technology include more efficient management of energy, improved grid reliability,
capital and operational savings, the ability to
pursue new initiatives, consumer empowerment, and compliance
with evolving regulatory mandates through reduced carbon emissions. EPRI estimates the benefits of deploying a smart grid in the
United States to be worth $1.3 to $2.0 trillion in 2010 dollars between 2010 and 2030.
Examples of the tangible benefits delivered by our networking
platform and solutions include:
Operational savings for electric power utilities. Utilizing
our advanced metering solution, electric power utilities can significantly reduce costs by automating certain key operational functions
required to run their business, including meter reading, and connecting and disconnecting electricity service. These tasks have
historically been labor intensive for electric power utilities and inconvenient for end users.
Empowering end users. When completed, our demand response
solution will allow electric power utilities to engage and empower end users by offering new time-based pricing options and connecting
in-home technologies to provide opportunities for end users to better understand their energy usage and save money. With these
new pricing options, utilities can better smooth electric demand, reducing the need to build additional power plant capacity to
accommodate peak demand, generating large capital expense savings from avoiding construction of power plants and reduced operating
costs of generating electricity during peak times.
Increasing the efficiency of the electric power grid. With
our advanced metering and distribution automation solutions, electric power utilities can more effectively and efficiently deliver
electricity to homes and businesses with less waste. With our products, electric power utilities can monitor actual voltage levels
at each consumer’s location and adjust system voltage remotely, improving energy efficiency. Green Circuits, a distribution-efficiency
initiative led by EPRI, has shown that utilities can achieve 1.8% to 2.7% overall energy reduction with conservation voltage reduction.
Pacific Northwest National Laboratory estimates that 2% energy savings in the United States from conservation voltage reduction
and advanced voltage control can reduce carbon emissions by 2% in the United States, or 59 million metric tons per year, by 2030.
McKinsey & Company estimates that by 2019, energy savings from conservation voltage reduction and volt-VAR optimization will
total $43 billion in 2009 dollars annually in the United States.
Competitive pricing. We believe our SEIP will is priced to
facilitate and hasten the deployment of smart electric power grid technology among resource constrained small and mid-sized electric
power utilities. There are 3,448 small to mid-sized electric power utilities in the United States, a majority of which we believe
lack the resources to adequately migrate to the smart electric power grid infrastructure.
Our Competitive Strengths
We believe we have a number of unique advantages that position
us for continued leadership and growth in providing the networking platform and solutions electric power utilities use to transform
the electric power grid infrastructure into the smart electric power grid. Our competitive strengths include:
Secure, reliable network for the smart electric power grid.
Our primary purpose is help electric power utilities build a reliable communication network with a strong emphasis on security
to help the utilities transform the power grid into the smart grid. The core of our technology is the network, which was designed
and built from the ground up for the specific purpose of addressing the stringent requirements of the smart electric power grid.
Alternative solution providers often repurpose networking technologies that have not comprehensively addressed the challenging
requirements of the smart electric power grid.
Innovative technology. We are building our networking platform
through our focused development of core networking, communications, semiconductor and power electronics technologies. We have developed
what we believe is the most secure networking platform that enabled two-way communications between electric power utilities and
millions of devices connected to the electric power grid. We are continuing to add features and functionality to improve our networking
platform and currently have our second generation of technology under development. We are also building a significant core competency
in key software disciplines, including operating system design, network management, security and analytics that both underlie our
networking platform and also enable the advanced solutions and applications we offer on top of our network.
Low total cost of ownership. We are designing our networking
platform to be high-performing, flexible and capable of supporting multiple solutions. As a result, we believe electric power utilities
can reduce their capital and operational expenditures by leveraging a single platform as compared to alternatives that will likely
require the deployment of additional, duplicative networking infrastructures to support additional solutions. The design of our
networking platform, which includes features such as self-healing, high-powered and modular architectures, allows for cost-effective
implementation in support of a single solution, such as advanced metering. Utilities that choose to deploy additional solutions,
such as distribution automation and demand-side management, can leverage their existing networking platform, resulting in lower
operating expenses, better capital efficiency and faster deployment, ultimately resulting in shorter time to value. We believe
for every solution that electric power utilities add to our networking platform, they further reduce their total cost of ownership
when compared to these alternatives.
Encryption and detection. Based on our review of smart electric
power grid related products against which SEIP now competes,
we believe that none of them provide the required encryption
and threat detection capabilities required to secure the smart electric power grid.
Blue chip utility relationships. Our relationships are with
some of the largest and most recognizable electric power utilities in the United States. We have worked closely with these utility
customers with a focus on delivering superior products and a high level of service, allowing us to form long-term relationships.
Our close working relationships provide us with early and deep insight into their needs and future requirements, which then drives
our development efforts. When new projects arise with these customers, our relationships position us well to compete for their
business. In addition, our existing utility customers often serve as strong references when we compete for business from new utility
customers.
Our Strategy
Our objective is to provide the leading networking platform
and solutions that enable electric power utilities to transform the electric power grid into the smart electric power grid, ultimately
becoming the industry standard for electric power utilities worldwide. To achieve this objective, we intend to:
Exceed our customers’ expectations. We seek to differentiate
ourselves from our competitors through superior product reliability, performance and service. We believe that this focus has strengthened
our relationships with our existing utility customers. We have regular feedback sessions with our utility prospects, which allow
us to better understand their evolving needs and continuously improve our products and services. We also believe that a global
presence and investments in software engineering and support will create competitive advantages in serving domestic and international
utilities.
Expand internationally. Our goal is to be the leader in every
market we enter. We believe the smart electric power grid has become a priority for electric power utilities worldwide, and to
address this opportunity we plan to aggressively invest in our products, marketing efforts and delivery capabilities to serve international
markets including Australia, South America, Europe and Asia. We have prioritized our international activities based on countries
with a combination of the following attributes: high GDP, high total and per-capita electricity consumption, utilities with a large
number of homes and businesses, government mandates, available RF spectrum, high energy theft, reliability concerns and operating
inefficiencies. To address this international opportunity, we plan to aggressively invest in our products, marketing efforts and
delivery capabilities to serve these markets.
Broaden our solutions and services. We strive to broaden
the scope of our solutions and services to maximize the benefit our utility customers receive from having deployed our Secure Intelligent
Energy Platform. This expansion includes providing electric power utility customers with additional solutions and services from
our current portfolio and developing new solutions and services to address our electric power utility customers’ evolving
requirements.
Extend our technology leadership. We intend to continue to
invest in research and development to further enhance our technology leadership. Since the deployment of our networking platform,
we have been able to simultaneously reduce hardware production costs while materially enhancing its functionality. Over the long
term, we believe our networking platform has the potential to be extensible to areas beyond electric energy, enabling the Internet
of things.
Build relationships. We are in the process of building relationships
with electric power utilities, manufacturers, major DC lobby firms, and international law firms, and certain government officials
nationally and locally. These relationships will afford us the visibility needed for government grants, loan guarantees, and funding,
as well as aid in the prioritization of global markets.
We intend to generate revenues from the design, sales, installation,
and support of the hardware, software and technology, associated with SIEP™. Additionally, revenues may be generated from
licensing our GRiM and, Infrax Networks wireless communications and future products. We believe that by continuing to execute our
strategy and connect additional homes and businesses, we will experience a network effect that will establish our Secure Intelligent
Energy Platform as the platform of choice for electric power utilities.
Our Partners
Although we believe our networking platform is the core enabler
of the smart grid, meters and other third-party products are critical to meeting the needs of our utility customers and unlocking
the full value of our platform. Because our products are built using open standards, third-party hardware and software vendors
can integrate both new and existing devices with our platform, forming end-to-end smart grid offerings.
To meet the needs of the market, we have entered into a Technical
Information License Agreement with Itron, Inc., the leading manufacturer of smart meters. The license agreement allows us to design
our SNIC and communications module for inclusion in the Itron Centron I & Centron II meters. We have been working closely with
Itron during this process to ensure that we are fully compliant and the results to date have all met Itron’s criteria. When
the qualification testing process is finished, we will be able to license the communications module to Itron and sell the product
directly as Itron-compliant.
While we have also been in discussions with several other
global meter manufacturers regarding the inclusion of the SNIC and GridMesh into their AMI meters, we believe that Itron’s
dominant market position and the strength of our relationship will drive the results required to meet our business objectives.
Our hardware vendors manufacture meters, capacitor bank controllers,
in-home displays, electric vehicle charging stations, energy storage devices, smart thermostats and other related devices. Our
software vendors provide various applications including meter data management, consumer information management, energy management,
work order management, and outage management software that leverages our outage detection application.
INFRAX Strategy
We intend to generate revenues from the design, sales, installation,
and support of the hardware, software and technology, associated with our integrated solution, Infrax Secure Intelligent Energy
Platform (SIEP) ™. Additionally, revenues may be generated from licensing our Security, GRiM and, Infrax
Networks wireless communications and future products.
Our efforts are presently focused on attaining the following:
INCREASED MARKET PENETRATION OF OUR WIRELESS BROADBAND
PRODUCTS
Our strategy is to capitalize on the millions of dollars
and thousands of man hours invested in one of our core technologies, the T-Max family of wireless broadband products, developed
by Trimax Wireless, Inc, which we acquired in June 2010. We own the Intellectual Property of these systems having acquired Trimax
Wireless, Inc and have enhanced the T-Max product line for use in Smart Grid applications for utility infrastructure management.
The new UMAX and UMAX+ product lines provide additional functionality
and features to an already robust platform. Designed to provide data acquisition, network extension and backhaul capabilities,
the UMAX+ is now available in 4-port and 8-port configurations supporting either 4 or 8 T1 links. The units provide Ethernet on
the drop side in addition to handling TDM traffic.
INCREASED MARKET PENETRATION AND INTEGRATION OF OUR
ASSET MANAGEMENT PRODUCTS
We continue to discover new and exciting applications for
the asset management, tracking and security products developed by Lockwood Technology. Infrax acquired controlling interest in
Lockwood in April 2011 and has been focused on integrating Lockwood’s capabilities into the Secure Intelligent Energy Platform.
While we continue to support Lockwood’s existing municipal and public safety applications, there is vast potential to deploy
this technology within the utility sector.
Asset management has long been a goal of utilities, especially
in times of storms and weather related circumstances. Disaster response can be greatly improved through comprehensive reporting
on asset and material location and availability. The Asset Tracker allows utility vehicles to be quickly and accurately inventoried
each time they are deployed and return for restocking. Mobile solutions are also available to relay asset utilization over wireless
links on a real time basis from the site of a service interruption.
EXPAND OUR STRATEGIC ASSOCIATIONS
Since our inception, we have built relationships with Utilities,
Manufacturers, major DC Lobbyist Firms, and International Law firms, and certain Government Officials nationally and locally. These
relationships will afford us the visibility needed for Government grants, loan guarantees, and funding, as well as aid in the prioritization
of global markets.
DRIVE BUSINESS DEVELOPMENT
We believes the industry will be driven by a few, key early
adopters who will set the stage for North American smart grid deployments, especially those companies that have been awarded millions
in stimulus grants . Initially we have been focusing our efforts on utilities that have recently obtained grants from the Stimulus
Act. Upon funding, we will direct our business development effort towards the 3,448 small to mid-sized utilities in
the United States, as the majority of these utilities lack the resources to adequately migrate to the Smart Grid infrastructure.
PURSUE OUR ROLE AS A SECURE SYSTEMS INTEGRATOR
We are committed to our role as a supplier of secure Smart
Grid communications platforms. We will continue to expand our professional services including network design, hardware and software
development and integration, installation support, operator training and network management. Our understanding of the architecture,
hardware, and software requirements of major utilities from our prior experience enables us to design solutions from the ground
up and to meet utility requirements. We intend to design, manufacture and market all of the key components of the network.
BECOME A
LEADING SOLUTIONS PROVIDER WITH
A DIVERSIFIED PLATFORM AND A GLOBAL PRESENCE
Our customers’ requirements create the need for our
products and our goal is to drive application development to meet these needs. While Infrax’s Secure Intelligent Energy
Platform incorporates our secure wireless technology, we believe that growth in the Smart Grid communications industry will come
primarily as utilities deploy Smart Grid applications including AMR/AMI, distribution and substation automation. These future points
of entry for Smart Grid applications may include home energy management systems, demand response tools and other applications which
will require the secure access provided by our Secured Network Interface Card (SNIC) ™ technology currently under development.
EXPAND OUR STRATEGIC COLLABORATIVE RELATIONSHIPS
Continued collaboration with our development partners, utility
customers and synergistic smart grid application providers will further enhance the development and functionality of our Secure
Intelligent Energy Platform. We have established joint development arrangements with a host of technology providers to keep us
on the cutting edge of new technologies, and we will continue to create working relationships with leading suppliers of critical
network and IEDs (Intelligent Endpoint Devices) components such as sensors, integrated communication hub and aggregators, consumer
centric energy management devices as well as metering solution providers. We are working with electric utilities to
conduct application trials. We intend to strengthen these relationships and to seek out new strategic and commercial relationships
with utilities and other technology companies.
Infrax Systems has entered into a Technical Information License
Agreement (TIL) with Itron, the leading manufacturer of smart meters. The license agreement allows Infrax to design its Secure
Network Interface Card (SNIC) and communications module for inclusion in Itron Centron I & Centron II meters. We have been
working closely with Itron during this process to ensure that we are fully compliant and the results to date have all met Itron’s
criteria. When the qualification testing process is finished, Infrax can license the communications module to Itron and sell the
product directly as Itron-compliant.
While we have also been in discussions with several other
global meter manufacturers regarding the inclusion of the SNIC and GridMesh into their AMI meters, we believe that Itron’s
dominant market position and the strength of our relationship will drive the results required to meet our business objectives.
ACTIVELY PURSUE TARGETED STRATEGIC ACQUISITIONS
We intend to actively pursue selective acquisitions to enhance
our product/service offerings and to further expand our solutions into the alternative energy and intelligent energy solutions
sector. Utilizing our core platform as the foundation for additional products and services, we can increase the potential of other
technology products by integrating them with our solution. We have identified several potential technology companies which have
technologically advanced products to complement our solution. We intend to look for opportunities to acquire technologies
that would support and enhance our current technology platform with a particular focus on growing managed services offerings through
our energy management solutions.
Our Intellectual Property and Its Protection
Infrax Systems: Opticon Network Manager
software and Smart Grid products
Our intellectual property consists of all of Corning Cable,
Inc,’s intellectual property related to the Opticon Network Manager software. Our rights by purchase in our intellectual
property are equivalent to that of any developer or creator of intellectual property. We have exclusive ownership of the Opticon
Network Manager software and all its revisions and new versions, including R4, with the exclusive right to license it to others.
Additionally, our intellectual property relating to our Smart
Grid products includes the design of the Secure Network Interface Card (SNIC) and its associated proprietary mesh routing scheme,
customized modifications to our security software platform, and the wireless equipment hardware and software designs as well as
the associated patents included in the Trimax Wireless, Inc. acquisition.
We regard all of our hardware, software and its documentation
as proprietary and the source code for the software as a trade secret. We intend to complete the implementation of confidentiality
procedures, contractual arrangements, physical security systems and other measures to protect our proprietary and trade secret
information when we begin to hire employees. As part of our confidentiality procedures, we will generally enter into non-disclosure
agreements with our key employees, and our license agreements will include provisions for protection of our proprietary information.
We also plan to educate our employees on trade secret protection and employ measures to protect our facilities and equipment. We
plan to license our software products under signed license agreements that impose restrictions on the licensee’s ability
to utilize the software and do not permit the re-sale, sublicense or other transfer of the software.
We have filed two provisional patent applications for our
Smart Grid products, and intend to do more as development progresses. We do hold seven patents associated with the Trimax acquisition
and continue to patent our wireless mesh technology as we
complete each development phase.
Our software is protected under U.S. and international copyright
laws and laws related to the protection of intellectual property and proprietary information. We do not need to do any further
steps to protect our IP than stated. Neither we, nor to our knowledge Corning Cable, has filed a U.S. copyright registration. We
will file a registration for the Secure Intelligent Energy Platform products as they are completed. We take measures to label our
product with the appropriate proprietary rights notices, and we plan to actively enforce such rights in the U.S. and abroad. We
believe that our ability to maintain and protect our intellectual property rights is important to the success of our business.
Our intellectual property is at this time our only asset that will enable us to engage in our planned business. The measures for
its protection described in this section may not provide sufficient protection and our intellectual property rights may be challenged.
Efforts to enforce our intellectual property rights in litigation, or defend suits brought against us for copyright infringement,
which we do not have reason to expect, would be expensive and consume substantial amounts of our management’s time. Our ability
to pursue remedies against person who we believe may infringe our intellectual property rights will depend on our financial condition
from time to time.
Trimax Wireless Systems (acquired intellectual property
June 29, 2010)
Trimax' solutions enable multiple applications to run concurrently
over the same standards-based infrastructure, leveraging capital investment and operating costs. Trimax has a growing
list of Solution Partners that provide best-of-breed complementary products to help customers implement whole product solutions.
The Trimax Wireless TMAX™ Cross Platform product line
is the first to combine Wi-Fi, WiMAX and DECT into a single unified system. TMAX includes base stations, broadband wireless routers,
edge nodes and CPE devices. The entire TMAX product line is based on modular, rugged outdoor platforms that support a common set
of radio modules.
Around the world, Trimax leads the way in helping to increase
public safety, improve mobile worker efficiency, boost the local economy, and deliver wireless broadband connectivity to people
wherever they are...and wherever they're going.
Lockwood Technology Corporation (acquired controlling
interest and intellectual property April 8, 2011)
Lockwood has focused on developing world class asset tracking
software and asset tracking services using bar coding, radio frequency (RFID), imaging, and wireless technologies. The "Lockwood
solution" is comprised of a "set" of services and products, which can be implemented as a whole or implemented as
building blocks. Each component is able to work independently of the others, yet when combined, serve to provide a complete seamless,
integrated system.
Our proprietary software provides:
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Mobile Public Safety - Providing public safety workers in the field with timely access to the information they need is reducing crime and saving lives
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Video Surveillance - A cost-effective alternative to adding additional people to increase security coverage, cameras are extending the visual reach of police, fire, lifeguards and park rangers
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Utility Meter Reading - Centrally connected utility meters are improving customer satisfaction and encouraging conservation while lowering operational costs
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Intelligent Transportation Systems (ITS) - Real-time traffic analytics and control is minimizing congestion and improving safety on crowded roadways as well as reducing emissions
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Municipal Modernization and Mobility - Extending office IT resources to the field is improving worker efficiency, lowering costs, and raising citizen satisfaction
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Automated Parking Meters - Variable parking rates, and flexible payment options, are improving main street business.
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Industrial - Often operating in hostile conditions, industrial site networks are used for a range of activities that improve business operational efficiencies, reduce operating cost, and increase worker and site safety
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Public Access - Citywide, campus-wide, and hot zone Wi-Fi networks increase quality of life, educational opportunities, and economic development
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Security and Network Interface Card (SNIC)(Intellectual
Property Rights filed)
We have filed for global patent for our Security and Network
Interface Card after the successful completion of the field trials in 2014.
GridMesh (Intellectual Property Rights have been filed)
We have filed for global patent for our GridMesh technology
after the successful completion of the field trials in 2014.
Competitive Landscape
Competition in our market is intense
and involves rapidly changing technologies, evolving industry standards, frequent new product
introductions, and changes in customer
requirements. To maintain and improve our competitive position, we must keep pace with the evolving needs of our utility customers
and continue to develop and introduce new products, features and services in a timely and efficient manner.
The principal competitive factors that
affect our success include:
• Our ability to anticipate
changes in utility customer requirements and to develop new or improved products that meet these requirements in a timely
manner;
• The price, quality
and performance of our products and services;
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Our ability to differentiate our products and services from those of our competitors and thereby
win new utility customers;
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• Our reputation, including
the perceived quality and performance of our products and services;
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Our ability to ensure that our products conform to established and evolving industry standards
and governmental regulations;
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• Our customer service
and support;
• Warranties, indemnities,
and other contractual terms; and
• Customer relationships
and our ability to obtain strong customer references that will support future sales efforts and market awareness of our Secure
Intelligent Energy Platform.
We believe we compete effectively in
the market as a result of a number of factors including the innovative nature of our technology, the breadth of our product offerings,
field-proven performance, competitive cost of ownership, our extensive relationships with third-party vendors and strong references
from our utility customers.
Our competitors range from small to
very large and established companies. These companies offer a variety of products and services related to the smart grid and come
from a number of industries, including traditional meter manufacturers, application developers, telecommunications vendors, and
other service providers.
We compete with traditional meter manufacturers
that incorporate various communications technologies that provide some level of connectivity to the utility’s back office.
Our key competitors in this segment include Echelon Corporation, Elster Group SE, Landis+Gyr AG, and Sensus Metering Systems Inc.
Similarly, we compete with traditional providers of distribution automation equipment, such as S&C Electric Company and Schweitzer
Engineering Laboratories, Inc.
We also face competition from other
entrants that are providing specific narrowly focused products for the smart grid, including Coulomb Technologies Inc., Ambient,
Silver Springs, E2O Communications Inc., Grid Net Inc., OPOWER Inc., SmartSynch, Inc. and Tendril Networks Inc. We anticipate that
in the future, additional competitors will emerge that offer a broad range of products and services related to the smart grid,
some of which may be directly competitive with our offerings.
These companies may have competitive
advantages in the market, including strong brand recognition, long-standing customer relationships, established distribution networks,
deep financial resources and broad product portfolios. In addition, some of our competitors may have larger patent portfolios than
we have which may provide them with a competitive advantage and may require us to engage in costly litigation to protect and defend
our intellectual property rights.
We compete in four distinct market sectors:
-advanced metering,
-networking and communications,
-electric power grid optimization/distribution
automation, and
-software.
We may compete directly with certain
companies in certain sectors and indirectly in others. It is important to note that some market segments are more defined than
others.
The market for our products is in its
infancy and there is no clear market leader, which provides Infrax entry with a unique product line. We also believe that none
of our competitors offer a unique blend of network, device, data and security management as Infrax. In order to maintain and improve
our competitive position in the market, we must continue to invest in research and development, and continue to anticipate changes
in the market and our customers’ requirements.
Recent Competitor’s activity &
Recent Industry Acquisitions of Our Competitors
• Silver Springs Networks –
competitive advantage
»
Developed Smart Grid Energy Platform with NIC for GE meters and end
-
to
-
end
management
» Have won several utility contracts
for AMI deployment
» Public Company as of 2014 (SSNI)
• LandysGyr
» Large meter manufacturer
» Acquired by Toshiba in July 2011
for 2.3B
» Combined company targeting Advanced
Metering Infrastructure (AMI)
• eMeter
» A premium Meter Data Management
(MDM) company
» Acquired by Siemens – terms
not disclosed, but Siemens invested $12.5 M in 2008
• SmartSynch
» Smart Grid Company focused on
meter communications over public wireless
» In business since 2000 providing
innovative solutions for utilities
» Acquired in January 2012 by Itron
for $100M
• Schneider Electric
» Strong energy Management Company
with a variety of products for utilities
» Acquired Telvent, a provider
of IT and software solutions to the power grid for $2B in
June 2011
Our Employees
At the date of this annual report, we have four (4) full-time
and three part-time employees. The majority of employees work out of our offices in Saint Petersburg. We have no employees dedicated
to sales and deployments.