Item 1. Business
This Annual Report on Form 10-K (this "Report") contains "forward-looking statements" within the meaning of the Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as "anticipate," "believe," "estimate," "intend," "could," "should," "would," "may," "seek," "plan," "might," "will," "expect," "predict," "project," "forecast," "potential," "continue" negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.
Forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report, other SEC reports, or other such materials are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this current report and unless otherwise indicated, the terms “we”, “us”, “our” mean, Renavotio, Inc. and its subsidiaries, unless otherwise indicated.
DESCRIPTION OF BUSINESS
Reorganization of Corporate Structure
As a result of our acquiring Renavotio Infratech, Inc. via the April 3, 2020 Securities Exchange Agreement described on herein, we adopted a new business plan and corporate structure provided by our subsidiary, Renavotio Infratech, Inc. (“RI”) and RI’s s subsidiary, Utility Management Corp., and our subsidiaries Utility Management & Construction, LLC and Cross-Bo Construction, LLC (the “Reorganization”), that are engaged in the following businesses:
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Renavotio Infratech, Inc. (“RI”) provides Medical Infrastructure, including sales, marketing, and production of Personal Protection Equipment, Gowns, Mask, Gloves and Disinfectant.
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RI’s subsidiary, Utility Management Corp’s (“UMC) operating subsidiary Utility Management & Construction, LLC, which provides Water, Sewer and Environmental monitoring.
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UMS’s second operating subsidiary, Cross-Bo Construction, LLC (“Cross-Bo”) provides Underground Infrastructure installation including Fiber optic, 5G, Water and Sewer installations and construction.
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As a result of the Reorganization, our wholly owned subsidiaries became:
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Renavotio Infratech, Inc., a Delaware corporation, incorporated on March 19, 2020, which operated as a private company from its date of incorporation until we acquired it.
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Utility Management Corp, a Delaware corporation, incorporated on March 22, 2020, which operated as a private company from its date of incorporation until we acquired it.
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Utility Management & Construction, LLC and Cross-Bo Construction, LLC, both Oklahoma Limited Liability Companies, incorporated as Limited Liability Companies in Oklahoma on November 29, 2006 and December 22, 2004, respectively, which operated as private companies from their date of incorporation until we acquired them.
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Corporate History
We were incorporated in the State of Nevada on January 30, 2013 under the name, Altimo Group Corp, which had a business plan of placing and operating frozen yogurt making machines.
Effective July 14, 2014, we had a change in control. In accordance with the terms and provisions of a May 5, 2014 stock purchase agreement by and among Control Block Seller, Marek Tomaszewski, the seller of an aggregate of 8,000,000 shares of our common stock and Control Block Purchaser, Success Holding Group Corp. USA, a Nevada corporation, the Control Block Purchaser purchased from the Control Block Shareholders, all of the 8,000,000 shares. In connection therewith, effective as of July 14, 2014, we accepted the resignations of our sole officer and director, Marek Tomaszewski as President, Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer effective July 14, 2014. Simultaneously, our Board of Directors (the “Board”) appointed Steve Chen as a member of our Board and the Chief Executive Officer and Brian Kistler as our Director, President, Secretary, Treasurer and Chief Financial Officer. Effective July 14, 2014, our Board, and our majority shareholders approved an amendment to our articles of incorporation to change our name to “Success Entertainment Group International, Inc.” (the “Name Change Amendment”). The Name Change Amendment was approved by our Board of Directors to better reflect our new business operations. The Name Change Amendment was filed with the Secretary of State of Nevada on August 22, 2014 changing our name to “Success Entertainment Group International, Inc.” effective as of the Closing Date.
On July 15, 2014, the Board of Directors of Altimo Group Corp authorized and approved the execution of that certain general release and waiver of debt agreement (the “Release Agreement”) with Marek Tomaszekwsi, our prior President, Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer (the “Creditor”), pursuant to which the Creditor agreed to waive and release the debt due and owing to it in the aggregate amount of $5,100 (the “Released Debt”). The Release Agreement provides that the Creditor agrees to release, acquit, covenant not to sue and specifically release and waive any claims or rights relating to the Released Debt. Effective July 15, 2014, pursuant to the r change in ownership described above, the focus our direction to becoming a producer/developer of Internet movies and business training films.
On December 1, 2014, our Board authorized an amendment to its Bylaws to change our fiscal year end From March 31 to December 31.
On December 2, 2014, our Board accepted Steve Chen’s resignation our Chief Executive Officer and appointed Chris (Chi Jui) Hong as the Chief Executive Officer and a member of our Board of Directors. Following this appointment, our Board consisted of three members: (i) Steve Andrew Chen; (ii) Brian Kistler; and (iii) Chris (Chi Jui) Hong.
On November 19, 2015, we acquired 100% shares of Double Growth Investment Ltd. On December 9, 2015, we acquired 100% shares of Coronet Limited, Fortunate Yields Limited, Solution Elite Limited, Ultimate Concept Limited, Viva Leader Limited. All these subsidiaries were registered in Republic of Seychelles. We made these acquisitions for future investment purpose. In 2016, we discontinued Coronet Limited, Fortunate Yields Limited, Solution Elite Limited, Ultimate Concept Limited, Viva Leader Limited.
On December 14, 2017, we acquired 100% shares of Success Events (Hong Kong) Limited, a company registered in Hong Kong Special Administrative Region. Success Events (Hong Kong) Limited holds 60% shares of Shenzhen Internet Media Co., Ltd. and 100% shares of Distribution Network Inc. Shenzhen Internet Media Co., Ltd, which was registered in China. Distribution Network Inc. was registered in Seychelles and its main business are holding seminar in Great China Area.
On February 28, 2018, Success Events (Hong Kong) Limited transferred 60% shares of Shenzhen Internet Media Co., Ltd. to the China company , Shenzhen Internet Media Co., Ltd., which is no longer our subsidiary.
On May 30, 2018, Success Events (Hong Kong) Limited acquired 100% shares of Success Win (Shanghai) Co., Ltd.
Effective July 15, 2014, as a result of the change in ownership and management described above, we abandoned our former business plan and adopted the business of producing and developing Internet movies and training films.
On September 26, 2014 we received approval from the FINRA to give effect to the name change approved on July 14, 2015. Our trading symbol concurrently changed to "SEGN" and we were assigned the new CUSIP number 86457R107.
On December 1, 2014, our Board authorized an amendment to our Bylaws to change our fiscal year end From March 31 to December 31.
On December 2, 2014, our Board accepted Steve Chen’s resignation as our Chief Executive Officer, and appointed Chris (Chi Jui) Hong as the Chief Executive Officer and as a member of our Board . Following this appointment, our Board consisted of three members: (i) Steve Andrew Chen; (ii) Brian Kistler; and (iii) Chris (Chi Jui) Hong.
On November 19, 2015, we acquired 100% of the outstanding securities of Double Growth Investment Ltd. On December 9, 2015, we acquired 100% of the outstanding securities of Coronet Limited, Fortunate Yields Limited, Solution Elite Limited, Ultimate Concept Limited, Viva Leader Limited. All these subsidiaries were registered in Republic of Seychelles. We made these acquisitions for future investment purpose.
In 2020, we entered into the acquisition agreements detailed below in a) – f):
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a)
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On April 3, 2020, we entered into an acquisition agreement to acquire Renavotio Infratech, Inc. (“RII”) pursuant to which a new business plan was adopted consisting of the Delaware corporation, Utility Management Corp. (“UMC”), an underground infrastructure installation including fiber optic, 5G, and Medical Infrastructure, including Personal protection equipment sales and production. Also, on April 3, 2020, Steve Chen resigned as the Company’s Chairman, Chris (Chi Jui) Hong resigned as our Chief Executive Officer/Director and Brian Kistler resigned as President.
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b)
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On April 3, 2020, William Robinson was appointed as our Chairman/Chief Executive Officer/President. Following this appointment, our Board of Directors consisted of William Robinson, Steve Andrew Chen, and Brian Kistler.
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c)
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On July 15, 2020, we completed the purchase of UMC and its two Oklahoma limited liability company subsidiaries, Utility Management & Construction, LLC (“UMCCO”) and Cross-Bo Construction, LLC (“Cross-Bo”). We paid the purchase price of $1,300,000 through the issuance of 18,571,428 shares of our common stock valued at $0.07 per common share.
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d)
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On July 29, 2020, we filed an application with FINRA for a name change to Renavotio, Inc. (“RI”) and a new trading symbol, RIII, to better illustrate our current business operations, which application FINRA approved on October 11, 2020.
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e)
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On August 29, 2020, we sold our 3 overseas non-core operating subsidiaries, SEGN Taiwan Limited, Hong Kong Events LTD., and Double Growth, pursuant to an agreement with Success Holding Group Corp. (“SHGR”). SHGR agreed to assume all of the labilities associated with the overseas operations and to in complete its original acquisition of RII, we agreed to issue to SHGR 6,000,000 of our common stock restricted shares.
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f)
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On October 21, 2020 we entered an agreement to purchase all of the capital stock of Tritanium Labs USA, Inc., an Oklahoma company and its subsidiaries, Tritanium Labs, LLC, an Illinois Limited Liability Company, TruCleanz Distribution, Inc., an Oklahoma Corporation, and Pro N95 USA, LLC, a New Jersey Limited Liability Company. The purchase price of $6,000,000 was to be paid with equity and cash consideration.
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Termination of the Tritanium Labs, Inc. Acquisition
We provided an extension document to Tritanium to extend the November 30, 2020 closing date, which Tritanium failed to respond to and the Tritanium agreement was terminated for failure to meet the closing date of October 30, 2020.
Significant Developments
We developed our sales and logistics in connection with the procurement and delivery process of our PPE products.
On October 28, 2020, we and an overseas supplier of 3M N95 1860 Face Masks (the “Face Masks’) completed an agreement for the supply from the overseas supplier for 10 Million Face Masks. Upon completion of our first purchase of 500,000 Face Masks, we are required to purchase the remaining 9.5 Million Face Masks within 2 months after the 500,000 Face Masks purchase. In December 2020, we mutually cancelled the P.O. for the remaining 9,500,000 N95 mask, on the P.O. for 10,000,000 N95 mask order due to issues related to product reliability and potential counterfeit masks being substituted for original issue mask.
In November 2020, we closed the sale of the first tranche of 500,000 N95 masks to a medical supply company representing a state agency buyer.
In December 2020, we received an order of 1,900,000 N95 masks. In December 2020, we cancelled the balance of the remaining 1,400,000 N95 mask, on the P.O. for 1,900,000 N95 mask order due to issues related to product reliability and potential counterfeit masks being substituted for original issue mask.
In December 2020, we expanded our marketing plans with Kevin Harrington who is a principal in Cicero Transact and on our Advisory Board.
In December 2020, we secured production of PPE to supply third parties with masks, gloves and gowns. This reduced the chance of counterfeit products being substituted for original manufactured products.
On January 29, 2021, we, as the Seller, entered into a Securities Purchase Agreement with Tysadco Partners, LLC, a Delaware Limited Liability Company (the “Purchaser), whereby we sold 4,000,000 of our Common Stock Shares to the Purchaser for the Purchase Price of $220,000 or five and one-half cents per share.
On February 1, 2021, we entered into a Corporate Development Advisory Agreement with ClearThink Capital and its affiliate, Tysado Partners, LLC (“Consultant”), for the Consultant to provide various consulting services to us to increase awareness and visibility of the investment community, including developing and implementing an ongoing stock market support system, drafting and distributing our press release, social media engagement, corporate profiles, and providing public market oversight. We agreed to compensate the Consultant with a monthly fee of $7,500 consisting of: (a) $2,500 cash; and (b) $5,000 of our restricted common stock shares to be issued on a quarterly basis in the name of Tysado Partners LLC based on the closing price on the last day of the preceding period. At our option, any portion of the stock compensation may be payable in cash to us. Should we uplist to NASDAQ or the NYSI, the monthly fee payable to the Consultant will increase to $10,000 per month, with the cash component increases to $5,000 per month. We have the option to pay the entire monthly fee in all cash.
On February 1, 2021, we entered into a Marketing and Distribution Agreement (the “Marketing Agreement“) with VerifyMe, Inc. (Nasdaq: VRME) (“VerifyMe”), a company that provides anti-counterfeiting and brand protection solutions. The Marketing Agreement provides that: (a) VerifyMe appoints us as non-exclusive global preferred sales representative to promote, market, distribute and sell VerifyMe products as an enhancement to our personal protection equipment products (“PPE”), including face masks, gloves, gowns, goggles, and face shields, to ensure the authenticity and origin of our PPE; (b) we will not enter into similar agreements or arrangements with any competitor of VerifyMe without its written consent; (c) VerifyMe will grant us preferential pricing of its products for incorporation into our PPE; (d) if we make a sale of PPE incorporating VerifyMe products, we will make prompt payment to VerifyMe for such products; and (e) if we facilitate a direct sale by VerifyMe of PPE incorporating VerifyMe products, VerifyMe will pay us a commission of 15% of revenue that it receives from such sale. The Marketing Agreement may be terminated on 30 days’ notice by either party.
On February 8, 2021, we entered into Master Distribution Agreement with Resgreen Group (RGGI), a leading mobile robotics company, to market and handle all of the logistical functions such as order processing, shipping, billing and collections for the Wanda SD/SA, disinfecting robot.
On February 22, 2021, we announced that we had secured a $2,150,000 initial purchase order from a PPE supplier for boxes of surgical gloves, which order is subject to the buyer's product inspection and final 60% payment.
At our Annual of Stockholders (the “Annual Meeting”) held on February 22, 2021, our stockholders approved each of the proposals set forth below by the final voting results set forth below.
Proposal 1
To elect the following individuals as our directors, each to serve a term of one year or until his or her successor is duly elected or appointed:
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Number of Shares
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Votes For
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Votes Withhold
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William Robinson
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188,710,842
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588,681
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Dr. Robert Mackey
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188,653,001
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646,522
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Steven Chen
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188,653,001
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646,522
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Brian Kistler
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185,453,158
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3,846,365
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Proposal 2
To ratify the appointment of Yichien Yeh, CPA, as our independent registered public accounting firm:
Number of Shares
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Votes For
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Votes Against
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Abstain
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189,399,273
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57,500
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500
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Proposal 3
To ratify the name change from Success Entertainment Group International, Inc. to Renavotio, Inc.:
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Number of Shares
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Votes For
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Votes Against
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Abstain
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189,309,757
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147,516
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0
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Proposal 4
To approve by an advisory vote regarding executive compensation:
Number of Shares
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Votes For
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Votes Against
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Abstain
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188,008,118
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1,055,007
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236,398
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Proposal 5
To approve by an advisory vote the frequency of future executive compensation advisory votes:
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Number of Shares
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One Year
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Two Years
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Three Years
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Abstain
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38,474,913
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1,697,613
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148,616,086
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510,913
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Proposal 6
To ratify our 2019 Non-Qualified Stock Incentive Plan and the 2020 Equity Incentive Plan:
Number of Shares
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Votes For
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Votes Against
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Abstain
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188,079,258
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944,192
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276,073
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Proposal 7
To increase the authorized preferred stock from an aggregate of 32,442,857 shares of preferred stock to 50,000,000 shares of preferred stock, $0.00001 par value:
Number of Shares
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Votes For
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Votes Against
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Abstain
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184,544,374
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4,382,335
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372,814
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Following the Annual Meeting, our Board approved the reappointment of the following executive officers:
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William Robinson as Chairman of the Board, CEO, President, Secretary/Treasurer, Interim CFO
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Dr. Robert Mackey as Chief Operating Officer
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On March 4, 2021, we entered into an Amended Corporate Development Advisory Agreement , which canceled the February 1, 2021 Agreement, and replaced the compensation terms, as follows: (a) we pay the Consultant a $8,333.33 Monthly Fee for a period of 24 months, which amount will be paid via our restricted common stock shares to be issued in the name of Tysadco; and (b) we pay the Consultant that number of restricted common stock shares earned is 4,000,000 based on our stock value at the March 2, 2020 closing price.
March 24, 2021, we announced that we had secured an additional $1.8 Million purchase order from a PPE medical distributor for surgical gloves, the order is subject to the buyer's product inspection and final payment.
Name Change and Symbol Change
On September 25, 2020, with a Market Effective Date of September 28, 2020, FINRA approved our name change from Success Entertainment Group International, Inc. to Renavotio, Inc., and our OTCQB ticker symbol change to “RIII.” We changed our corporate name with the State of Nevada to Renavotio, Inc. meaning “reborn or renew” in Latin, to better illustrate our current business operations, most significantly our infrastructure services as our tag line is renew and revitalize our infrastructure.
Industry Data
According to the 2021 American Infrastructure Report Card, issued by the American Society of Civil Engineers, all categories of American infrastructure require modernization and improvement. According to the report, nationwide infrastructure funding for the ten years to 2029 is projected to reach $3.3 trillion. Nevertheless, the same report concludes that, at this level of funding, the nation will still face an unmet infrastructure investment gap through 2031 of $2.6 trillion. By 2039, a continued underinvestment in the nation’s infrastructure at current rates will cost $10 trillion in GDP, as well as more than 3 million jobs and $2.4 trillion in exports by 2039. By 2039, America’s overdue infrastructure bill will cost the average American household $3,300 a year, or $63 a week.
Our Operations
We operate the following infrastructure and medical platforms through e-commerce, platform sharing; and database-membership:
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Fiber optics and 5G installation
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Utility Management
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Medical technology
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PPE infrastructure products
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Underground utility construction
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Our operations are conducted through:
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Renavotio Infratech, Inc. (“RII”), a Delaware Corporation and its subsidiaries:
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Utility Management Corp (“Utility Management”) and its 2 Subsidiaries, Utility Management & Construction, LLC (“Utility Management, LLC”) and Cross-Bo Construction, LLC (“Cross-Bo, LLC”)
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RII’s sells personal protective equipment (medical gloves, face masks, medical gowns). RII has purchased these products from overseas manufacturers, however, due to price gouging and speculation pertaining to the Pandemic related market, RII seeks to develop relationships and agreements with manufacturers in the US to provide fixed price agreement to hospitals, medical distributers, and government agencies.
Utility Management Corp
Utility Management offers thru its subsidiaries the following:
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Management and operation of water utility systems
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Water and waste management technology
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The Internet of all Things (IoT)
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Underground infrastructure, construction, and installation
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5G technology solutions
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Utility Management & Construction LLC (Utility Management Subsidiary) (“UMCCO”)
UMCCO is an engineering and smart utility management company that provides a one-stop solution for rural communities to manage and maintain natural gas, internet, waste water, and water utilities for commercial, industrial, and municipal end users. UMCCO’s unique approach creates immediate bottom-line savings for clients, by providing the engineering, planning, permitting, and installation through their second wholly owned subsidiary, Cross-Bo Construction (“Cross-Bo”), an Oklahoma limited liability company, specializing in water, sewer, Telcom, and 5G design and installation, establishing a long-term value proposition while also achieving respective sustainability goals.
Our Business
We operate the following infrastructure and medical platforms through e-commerce, platform sharing; and database-membership:
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Utility, Water Plant treatment and distribution management
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Medical Infrastructure, PPE Production and distribution
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Underground infrastructure, water, sewer, Fiber optic and 5G installation
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Our operations are conducted through:
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Renavotio Infratech, Inc. (“RII”), a Delaware Corporation and its subsidiaries:
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Utility Management Corp (“Utility Management”), a Delaware corporation and its 2 Subsidiaries; Utility Management & Construction, LLC (“Utility Management LLC”) and Cross-Bo Construction, LLC (“Cross-Bo LLC”), both Oklahoma Limited Liability Companies, and Renavotio Infratech, Inc. is currently the sole member of Utility Management Corp.
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Renavotio Infratech, Inc., “(RII”)
RII’s sells personal protective equipment (medical gloves, face masks, face shields, medical gowns). RII has purchased these products from overseas manufacturers; however, due to price gouging and speculation pertaining to the Pandemic related market, over the next 24 months RII seeks to develop direct factory relationships and agreements with manufacturers in the US to provide fixed price agreements to hospitals, medical distributors, and government agencies, for which there are no assurances that RII will be successful in securing such agreements.
Utility Management Corp, (“RII Subsidiary”)
RII’s wholly owned subsidiary, Utility Management, offers the following through its subsidiaries, Utility Management & Construction LLC and Cross-Bo Construction LLC:
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Management and operation of water utility systems
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Water and waste management technology
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The Internet of all Things (IoT)
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Underground infrastructure, construction, and installation
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5G technology solutions
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Our acquisition of Utility Management Corp. (“Utility Management”) is for the purpose of entering the utility management and underground utility space. In December 2020, Utility Management completed its initial expansion of its turn-key managed utility and constructions services by adding two additional municipalities to its portfolio of customers.
Utility Management & Construction LLC (Utility Management Subsidiary) (“UMCCO”)
UMCCO, an Oklahoma limited liability company, is an engineering and smart utility management company that provides a one-stop solution for rural communities to reduce the consumption of electricity, natural gas, and water utilities for commercial, industrial, and municipal end users. UMCCO’s unique approach creates immediate bottom-line savings for clients, by providing the engineering, planning, permitting, and installation through their second wholly owned subsidiary, Cross-Bo Construction (“Cross-Bo”), an Oklahoma limited liability company that specializes in water, sewer, Telcom, and 5G design and installation, establishing a long-term value proposition while also achieving respective sustainability goals.
UMCCO also provides consulting and operational services to small towns or county CO-OPS that operate their own water and sewer systems to provide long-term savings, utilizing smart-utility monitoring and dedicated engineering and service personnel. These utility related platforms capture utility data from handheld GPS devices or in-place sensors, with planned use of drones to identify waste contamination, leak detection, and topographic underground utility installation planning. As a community-based management company based in Oklahoma, it specializes in the management and operation of small utility systems (Rural Waters Systems or Public Trusts or Authority), including record keeping, reporting, budgeting, customer correspondence, billing, and engineering. provides water-systems management. Utility Management provides services to over 1200 customers in the Northeast Oklahoma and Southeast Kansas area and intends to expand into other areas of the Midwest.
UMCCO provides geographic information system (“GIS”) solutions, infrastructure management and “smart city” infrastructure technology to construction, environmental consulting, utility, and government clients in the United States. (A “smart city” is an urban area that uses different types of electronic Internet of Things (“IoT”) sensors to collect data and them to manage assets and resources efficiently.)
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The Utility platforms enables local and distributed teams to do field data collection using mobile devices (iOS and Android) and manage all geospatial data using a web interface; and
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The Utility Platforms are a collection of components and application program interfaces (APIs) that make it easy to create a full, custom mapping solution very quickly. These components enable extensive and intensive data analysis, routing, and dissemination of geospatial information
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UMCCO has licensed products that use of georeferenced imagery and vector datasets to obtain insights about that data. They can be used for field asset management, cadaster mapping, urban planning, the analysis of aerial and satellite imagery and other typical GIS use cases. These solutions are currently used across a variety of sectors, including utilities, intelligence, materials (mining), industrial (transportation), government (local, state, national and international) and others. In addition, UMCCO has been using this software user for more than three years, these solutions to help map and visualize the locations of subsurface as-built conditions. Going forward, Bravo expects to expand its use of these solutions to locate and map underground telecoms infrastructure. We intend to invest in research and development to increase the functionality this technology, including incorporating active IoT sensor monitoring and network-connected sensor products that can help create a comprehensive “smart infrastructure” solution for clients. Over the next 24 months, we intend to pursue commercialization of these solutions through investment in product, sales, and business development, and to integrate these platforms into our Infrastructure Services business, of which there are no assurances.
UMCCO’s solutions leverage cloud technology and a mobile-first approach to data acquisition and geo-analytics. The solutions are a set of cloud-based tools to collect, visualize and analyze geographic information. With the UMCCO solutions, a field crew can collect and update data using iOS and Android smartphones and tablets working online or offline. The web interface enables its users to display, analyze and share data easily. Incorporating these solutions allows organizations to streamline mapping workflows and reduce repetitive mapping workflows. On occasions where the customer has a pre-existing GIS or computer-aided design (CAD) system, APIs and plug-ins enable easy integration with them.
Cross-Bo Construction, LLC (Utility Management Subsidiary) (“Cross Bo”)
Cross-Bo operates in Oklahoma, Kansas, and Missouri and provides services on infrastructure projects, specializing in Utility System installation and maintenance, which includes providing the hard assets and expertise to install pipelines for water, wastewater, storm water and gas systems up to thirty-six (“36”) inches in diameter. Cross Bo’s Hydrovac excavators, drilling, and heavy excavating equipment enables it to compete in the municipal utility bidding market for installation of water, wastewater, storm water, and gas system construction and installation. Cross-Bo has expertise in the installation of HDPE, PVC, and Ductile Piping Systems.
Additionally, Cross-Bo operates as a subsurface utility engineering (referred to in the industry as “SUE”) location, inspection and maintenance company, and has developed methodologies, combined with the use of its equipment, to generate detailed records of subsurface “as-built conditions”, such as the location of water, electrical, gas, fiber optic and other critical underground utility infrastructure assets. These services enable construction and maintenance activities to be conducted on a given physical site with the precision needed to limit damage to underground utility infrastructure and to avoid utility outages.
In December 2020, Utility Management and Construction completed 1500 smart meter installations across the state of Oklahoma. Along with its subsidiary, Cross-Bo Construction, LLC, both companies have completed over 50,000 feet of water line installations and are now bidding on multiple proposals with Municipalities reopening the bidding process, giving Utility management and Cross-Bo potential increased revenue opportunities in 2021.
Our Future Plans
Over the next 24 months, we will attempt to expand our business and service offerings, as follows:
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Expand our Infrastructure Services, developing relationships with municipalities, utilities, and construction companies.
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Through Cross-Bo, should it be successful in is planned rollout of 5G mobile telecommunications services, develop and market those 5G services through an expanded geographic area, initially into Kansas and Missouri.
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Capitalize on infrastructure expansion project in Tulsa, Oklahoma. Capitalize on ATT’s 5G expansion in the Midwest to provide support Infrastructure Services.
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Acquire private companies in the Infrastructure Services area.
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Seek strategic partnerships and/or revenue sharing opportunities in the niche infrastructure technology solutions area. .
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With all of our acquisitions, we intend to focus on post-transaction integration and business improvements, including through cross-selling opportunities and the leveraging of operational efficiencies through a central platform of finance, legal and human resources capabilities.
These solutions will provide our Infrastructure Services business with a potential competitive advantage and will enable us to develop and commercialize new services and products. We intend to continue to invest in the development of additional platform capabilities, including capabilities relating to smart IoT sensors and to help create niche “smart infrastructure” solutions for clients.
There are no assurances that we will be successful in any of the above described business plans.
Technology-Enabled Infrastructure Solutions
We believe that the infrastructure and infrastructure services industries are starting to adopt new technology solutions to deliver cost savings and compliance adherence. As a result, we believe that smart utility products will provide our Infrastructure Services business with a significant competitive advantage. Similarly, we believe that our Infrastructure Services business will provide our Technology Solutions business with insights from a broad range of infrastructure clients, helping to guide the development of our technology products. We believe our technology platform coupled with our infrastructure client relationships and insights will enable us to develop and commercialize new services and products faster than if we were either an infrastructure services-only, or a technology solutions-only, business. We also expect that sustained operational and business development activities across our businesses will accelerate the commercial penetration of our technology solutions into the infrastructure markets we already serve.
Business Strategies
Our goal is to provide innovative, market-leading solutions for the public and private infrastructure services industry, in particular where new technologies can enhance conventional service and product offerings, for revenue generating opportunities, economies of scale and potential improved operating result. which we plan to achieve our goal through the implementation of the following strategies:
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Acquire Complementary Companies. We plan to selectively acquire companies that expand our existing operations, can leverage their businesses using our existing platform and are accretive to long-term stockholder value.
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Potential Increased Revenue from Existing Clients. We intend to expand our relationships with our existing clients and increase their business with us by cross selling our technology solutions and infrastructure services, including in multiple markets in the U.S. and globally.
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Attract New Clients. We intend to invest in sales and business development efforts, including to expand the geographies in which we sell our infrastructure services and technology solutions. For example, Cross-Bo is licensed in Oklahoma, Kansas, and Missouri, and is currently targeting specific projects relating to the 5G telecommunications rollout, a new opportunity in the Midwest and throughout the United States. Additionally, UMMC is utilizing multiple infrastructure management software tools for use in its rural utility management program.
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Continuously Improve Operations. We intend to continually improve our operations, including reducing costs and increasing productivity, initially through the centralization of shared management services in our parent company. Selectively Invest in Technology and New Services and Products. We intend to invest in our technology and infrastructure platforms to serve the evolving needs of our clients.
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Competition
There are many competitors in the sales of personal protection equipment and infrastructure services that have greater assets, revenues, operational resources and financial resources then we do.
We believe there is a significant market opportunity to build a leading infrastructure-focused business that facilitates industry consolidation and delivers cost-effective infrastructure services and technology solutions.
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Large and Growing Client Market
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Essential Nature of Infrastructure Services
Multiple opportunities in the rural footprint we currently operate in
One stop service company offering utility management and installation
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Infrastructure services are often essential expenditures for municipal governments and others. We believe that the essential nature of infrastructure services for many clients and potential clients will result in long-term growth opportunities and also help generate stable revenue streams over the economic cycle.
Highly Fragmented Provider Market
The U.S. has a large number of small and medium-sized companies providing infrastructure services to public and private customers on a local or regional basis. We believe that many of these companies are closely held or family-owned and -run, whose owners may have few exit opportunities. In addition, we believe that many of these companies need and want to align with larger and better capitalized platforms, potentially resulting in opportunities for our focused acquisition strategy.
Increasing Adoption of New Technologies
Many municipalities, utilities and other market participants are in the early stages of adopting new technologies to monitor and support their infrastructure, such as geospatial mapping and remote sensor technology. These new technology solutions have the potential to increase productivity in, and reduce costs associated with, construction, maintenance, and related activities.
Website
Our website is located at www.renavotio.com. No information from this website is included in this Prospectus.
Research and Development
We have not incurred any research or development expenditures over the last two (2) fiscal years or since our inception.
Intellectual Property
We do currently have any patents, trademarks, or other intellectual property.
Revenue
We generate revenue from the following:
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Sale of Medical Personal Protection Equipment
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PPE Production Logistics
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Infrastructure Services
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Utility Management
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Engineering and Service Fees
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Reoccurring long term operational contracts
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Installation of Smart utility monitoring of Water, Sewer, Cable and Gas
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Installation of Water, Sewer, Cable and Gas
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Planned Fiber Optic and 5G installation
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Target Markets
Our target markets include:
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Hospitals, medical facilities, medical distributors
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Municipalities, State and Federal and other government bodies
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Utility companies, Commercial Development projects and Rural Telcom
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Intellectual Property
We have no registered patents, trademarks, or other intellectual property.
Dependence on One or a Few Major Customers
We are not dependent upon any major customers.
Employees
We have 3 employees consisting of our Chairman/Chief Executive and Chief Financial Officer, Billy Robinson, Brian Kistler, Corporate Compliance Officer and our Chief Operating Officer, Dr. Robert Mackey.
Utility Management & Construction LLC has the following employees:
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President, who is also our Chief Operating Officer
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Controller
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Operations Manager
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3 Administrative personnel
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2 Supervisors
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1 Meter Reader
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13 Technicians
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Cross-Bo Construction LLC has the following employees:
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President, who is also our Chief Operating Officer
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General Manager
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Contracts Specialist
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1 Foreman
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6 Operators
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Dump truck operator
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Shop Maintenance Laborer
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Shop Maintenance
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Seasonality of Business
Seasonality does not materially affect our business.
Sources and Availability of Products
We purchase, inventory, and deliver medical protection equipment from our leased fulfillment center in Chattanooga Tennessee. We import medical protective equipment from China, Vietnam, Korea, and Malaysia.
We purchase and inventory waterline, sewer line, meters, and fiber optic cable for our water related infrastructure services through various US located sources.
Raw Materials
We do not use raw materials in our business.
Government Regulations
We are subject to government regulation by the Environmental Protection Agency with respect to our infrastructure services. We are subject to regulation of the following agencies with respect to our sales of medical protection equipment.
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Department of Commerce
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US Treasury
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US Customs
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EFA
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Research and Development
We did not incur any research or development expenditures over the last two (2) fiscal years.
Intellectual Property
We do not currently have any intellectual property.
Real Property
Our executive, administrative and operating offices are located at 601 South Boulder Ave, Suite 600 Tulsa, OK 74119. We pay $300 per month for shared use of the space on a month-to-month basis. We believe that our facilities are adequate for our needs and that additional suitable space is available on acceptable terms as required.
We also own a four-acre 5,500 square foot office complex and a 5,000 square foot warehouse in Ochelata, Oklahoma from which our corporate operations, including Utility Management Corp, Utility Management & Construction, LLC and Cross-Bo Construction, LLC, operate from We purchased the office complex and warehouse, which is subject to an SBA loan of $905,163 and requires a monthly payment of $10,125.
We have PPE fulfillment operation in Chattanooga, Tennessee where we operate in a 230,000 square foot facility. We have a monthly minimum operations cost of $750 monthly on a month-to-month lease basis. All fulfillment operations are on a contract basis and vary month to month.
RISK FACTORS
An investment in our securities involves a high degree of risk. You should not invest in our securities if you cannot afford to lose your entire investment. In deciding whether you should invest in our securities, you should carefully consider the following information together with all of the other information contained in this Current Report. Any of the following risk factors can cause our business, prospects, financial condition or results of operations to suffer and you to lose all or part of your investment.
Item 1A. Risk Factors
Much of the information included in this annual report includes or is based upon estimates, projections or other “forward looking statements”. Such forward looking statements include any projections and estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
Such estimates, projections or other “forward looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward looking statements”.
RISKS RELATED TO OUR BUSINESS
We have a history of losses, which raise substantial doubt about our ability to continue as a going concern.
For the year ended December 31, 2020, we have incurred aggregate net losses of $1,752,145. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the unpredictability of when we will successfully begin or complete production of any films, the demand for our productions, and the level of competition and general economic conditions.
Our company’s operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. No assurance can be given that we may be able to operate on a profitable basis.
Due to the nature of our business and the early stage of our development, our securities must be considered highly speculative. We have not realized a profit from our operations to date and there is little likelihood that we will realize any profits in the short or medium term. Any profitability in the future from our business will be dependent upon the successful commercialization or licensing of our planned film(s), which is subject to numerous risk factors as set forth below.
We expect to continue to incur development costs and operating costs. Consequently, we expect to incur operating losses and negative cash flows until we successfully produce and sell or license one or more movies. Our history of losses and no revenues raise substantial doubt about our ability to continue as a going concern.
We have had negative cash flows from operations since inception; we will require significant additional financing, the availability of which cannot be assured, and if our company is unable to obtain such financing, our business may fail.
To date, we have had negative cash flows from operations and have depended on sales of our equity securities and debt financing to meet our cash requirements. We may continue to have negative cash flows. We have estimated that we will require approximately $2,000,000 to carry out our business plan for the next twelve months. There is no assurance that actual cash requirements will not exceed our estimates. We will require additional financing to finance working capital and pay for operating expenses and capital requirements until we achieve a positive cash flow.
Our ability to produce and market internet movies will be dependent upon our ability to raise significant additional financing. If we are unable to obtain such financing, we will not be able to fully develop our business. Specifically, we will need to raise additional funds to:
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support our planned growth and carry out our business plan;
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hire top quality personnel for all areas of our business; and
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address competing technological and market developments.
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We may be unable to obtain additional equity or debt financing on acceptable terms as required. Even if financing is available, it may not be available on terms that are favorable to us or in sufficient amounts to satisfy our requirements. Any additional equity financing may involve substantial dilution to our then existing shareholders. If we require, but are unable to obtain, additional financing in the future, we may be unable to implement our business plan and our growth strategies, respond to changing business or economic conditions, withstand adverse operating results and compete effectively. More importantly, if we are unable to raise further financing when required, we may be forced to scale down our operations and our ability to generate revenues may be negatively affected.
If we fail to effectively manage the growth of our company and the development of our business, our future business results could be harmed and our managerial and operational resources may be strained.
As we proceed with the development of our business, we expect to experience significant growth in the scope and complexity of our business. We will need to add staff to develop, produce, and market our productions, manage operations, and perform finance and accounting functions. We anticipate that we will be required to hire a broad range of additional personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our potential business, or the failure to manage growth effectively, could have a material adverse effect on our business and financial condition.
Because we face intense competition from larger and better-established companies that have more resources than we do, we may be unable to implement our business plan or increase our revenues.
The market for infrastructure and personal protection equipment is intensely competitive and highly fragmented. Many of these competitors may have longer operating histories, greater financial, technical and marketing resources, and enjoy existing name recognition and customer bases. New competitors may emerge and rapidly acquire significant market share. In addition, new distribution services and technologies likely will increase the competitive pressures we face. Competitors may be able to respond more quickly to technological change, competitive pressures, or changes in consumer demand. As a result of their advantages, our competitors may be able to limit or curtail our ability to compete successfully.
Our by-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.
Our by-laws contain provisions with respect to the indemnification of our officers and directors against all expenses, liability and loss (including attorneys’ fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him or her in connection with any action, suit or proceeding to which they were made parties by reason of his or her being or having been one of our directors or officers. In the event that any of our officers or directors incurs any expenses, liability or loss resulting from any such action, suit or proceeding, we will be responsible for such expenses, liabilities, or losses, which could have a material adverse effect on our business and financial condition.
The success of our business depends upon the continuing contribution of our key personnel.
We are substantially dependent on the services of William Robinson, our Chairman of the Board of Directors and Chief Executive Officer and other members of our senior management team. The knowledge of Mr. Robinson of our business would be difficult to replace in the event we should lose his services. There can be no assurance that Mr. Robinson will continue in his present capacity for any particular period of time. Other than non-compete provisions of limited duration included in employment agreements that we may or will have with certain individuals, we do not generally seek non-compete agreements with key personnel, and they may leave and subsequently compete against us. The loss of service of any of our senior management team, particularly those who are not party to employment agreements with us, or our failure to attract and retain other qualified and experienced personnel on acceptable terms, could have a material adverse effect on our business.
Our officers and director may be subject to conflicts of interest
Our officers and directors provide their services on a non-exclusive, part-time basis, and may therefore become subject to conflicts of interest resulting from their other activities. Mr. Robinson and Mr. Kistler , for example, devotes part of his working time to other business endeavors, which include serving as Chairman and Compliance Officer of UAV Corp, with is engaged in Airship and Drone production and technology production business. Potential conflicts which may arise from these relationships include conflicts in deciding how much time to devote to our affairs, as well as what business opportunities should be presented to us. Currently, we have no policy in place to address such conflicts of interest. As a result, our business and results of operations could be materially adversely affected.
If we are unable to manage our acquisitions and growth effectively, our business could be adversely affected.
A significant expansion of our operations with the addition of our operating subsidiaries, and new personnel will be required in all areas of our operations in order to implement our recent acquisitions in the business of infrastructure services and sales of personal protection equipment. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully. For us to continue to manage such growth, we must put in place legal and accounting systems, and implement human resource management and other tools. There is no assurance that we will be able to successfully manage this anticipated rapid growth. A failure to manage our growth effectively could materially and adversely affect our results of operations.
We have a limited operating history and are subject to the risks encountered by early-stage companies.
Because our new business has a limited operating history within our operations, you should consider and evaluate our operating prospects in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets.
We expect to incur substantial expenses to meet our reporting obligations as a public company.
We estimate that it will cost approximately $250,000 annually to maintain the proper legal, management and financial controls for our filings required as a public reporting company, funds that would otherwise be spent for our business operations. Our public reporting costs may increase over time, which will increase our expenses and may decrease our potential profitability.
We will need substantial additional funding to continue our operations, which could result in dilution to our stockholders; we may be unable to raise capital when needed, if at all, which could cause us to have insufficient funds to pursue our operations, or to delay, reduce or eliminate our development of new programs or commercialization efforts.
We expect to incur additional costs associated with operating as a public company and to require substantial additional funding to continue to pursue our business and our expansion plans. We may also encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may increase our capital needs and/or cause us to spend our cash resources faster than we expect. Accordingly, we expect that we will need to obtain substantial additional funding in order to continue our operations. To date, we have financed our operations entirely through equity investments by related parties and other investors and the incurrence of debt. We expect to continue to do so in the foreseeable future. Additional funding from those or other sources may not be available when or in the amounts needed, on acceptable terms, or at all. If we raise capital through the sale of equity, or securities convertible into equity, it will result in dilution to our existing stockholders, which could be significant depending on the price at which we may be able to sell our securities. If we raise additional capital through the incurrence of additional indebtedness, we will likely become subject to further covenants restricting our business activities, and holders of debt instruments may have rights and privileges senior to those of our equity investors. In addition, servicing the interest and principal repayment obligations under debt facilities could divert funds that would otherwise be available to support development of new programs and marketing to current and potential new clients. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce, or eliminate development of new programs or future marketing efforts. Any of these events could significantly harm our business, financial condition, and prospects.
Our officers and director may be subject to conflicts of interest
Some of our officers and directors provide their services on a non-exclusive, part-time basis, and may therefore become subject to conflicts of interest resulting from their other activities.
Billy Robinson, our Chief Executive Officer/Chief Financial Officer, devotes his working time also to other business endeavors, which include serving as Chairman of UAV Corp, an Aerospace communications, Airship, and drone business. Potential conflicts may arise between our CEO’s responsibilities to us and those to UAV Corp, including how much time he devotes to our affairs, as well as what business opportunities may be presented to him, which may arise in a conflict of interest between his interests in UAV Corp and our interests. Billy Robinson controls 50.11% of our outstanding voting shares through his ownership of 19,650,000 Preferred Class A Shares.
Dr. Robert Mackey, our Chief Operating Officer/Director is also the President of Utility Management and Construction, LLC and Cross Bo Construction, LLC, which companies are our wholly owned subsidiaries. Dr. Robert Mackey on a fully diluted basis owns 6.81% of our outstanding shares. Accordingly, there are potential and actual conflicts of interests between and among our Chief Operating Officer’s interests and our interests.
Currently, we have no policy in place to address such conflicts of interest. As a result, our business and results of operations could be materially adversely affected if our officers favor the interests of their interests in other corporations they control over our interests.
A terrorism attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue, such as the current Coronavirus outbreak, could negatively impact our operations.
Our operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political instability, and natural disasters. The occurrence of any of these events could have an adverse effect on our business results and financial condition.
We are susceptible to a widespread outbreak of an illness or other health issue, such as the recent Coronavirus (also referred to herein as “COVID-19 19”) outbreak first reported in Wuhan, Hubei Province, China in December 2019, resulting in millions of confirmed cases identified around the world and in countries in which we conduct business, including the United States. The outbreak has caused governments to implement quarantines, implement significant restrictions on travel, closed schools, and workplaces, and implement work restrictions, all of which can impair normal business operations. Globally air travel has been significantly interrupted as has air freight, ocean freight, and even truck deliveries.
As a result of pandemic outbreaks, businesses have been and can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Governmental mandates may require forced shutdowns of our facilities for extended or indefinite periods. In addition, these widespread outbreaks of illness could adversely affect our workforce resulting in serious health issues and absenteeism. Pandemic outbreaks could also interfere with general commercial activity related to our supply chain and customer base, which could have an adverse effect on our financial condition and operational results.
See additional risk factors regarding COVID-19 below.
Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.
Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our information technology (“IT”) systems to sophisticated and targeted measures known as advanced persistent threats. While we employ comprehensive measures to prevent, detect, address and mitigate these threats (including access controls, data encryption, vulnerability assessments, management training, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. While no cybersecurity attack to date has had a material impact on our financial condition, results of operations or liquidity, the threat remains and the potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness and results of operations.
We have made and expect to continue to make acquisitions as a primary component of our new business plan and growth strategy; we may be unable to identify suitable acquisition candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions, which could disrupt our operations and adversely impact our business and operating results.
A primary component of our growth strategy has been to acquire complementary businesses to develop our new business plan of infrastructure services. We intend to continue to pursue acquisitions of complementary technologies, products, and businesses as a primary component of our growth strategy to enhance our infrastructure services and expand our customer base and provide access to new markets and increase benefits of scale. Acquisitions involve certain known and unknown risks that could cause our actual growth or operating results to differ from our expectations. For example:
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we may be unable to identify suitable acquisition candidates or to consummate acquisitions on acceptable terms
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we may pursue international acquisitions, which inherently pose more risks than domestic acquisitions
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we compete with others to acquire complementary products, technologies, and businesses, which may result in decreased availability of, or increased price for, suitable acquisition candidates
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we may be unable to obtain the necessary financing, on favorable terms or at all, to finance any or all of our potential acquisitions
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we may ultimately fail to consummate an acquisition; and
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acquired technologies, products or businesses may not perform as we expect, and we may fail to realize anticipated revenue and profits.
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In addition, our acquisition strategy may divert management’s attention away from our existing business, resulting in the loss of key customers or employees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successor for undisclosed or contingent liabilities of acquired businesses or assets.
If we fail to conduct due diligence on our potential targets effectively, we may, for example, not identify problems at target companies or fail to recognize incompatibilities or other obstacles to successful integration. Our inability to successfully integrate future acquisitions could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations. The integration process may disrupt our business and, if new technologies, products, or businesses are not implemented effectively, may preclude the realization of the full benefits expected by us and could harm our results of operations. In addition, the overall integration of new technologies, products or businesses may result in unanticipated problems, expenses, liabilities, and competitive responses. The difficulties integrating an acquisition include, among other things:
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issues in integrating the target company’s technologies, products, or businesses with ours
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incompatibility of marketing and administration methods
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maintaining employee morale and retaining key employees
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integrating the cultures of both companies
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preserving important strategic customer relationships
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consolidating corporate and administrative infrastructures and eliminating duplicative operations; and
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coordinating and integrating geographically separate organizations
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In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all.
Further, acquisitions may cause us to:
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issue common stock that would dilute our current stockholders’ ownership percentage
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use a substantial portion of our cash resources
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increase our interest expense, leverage, and debt service requirements if we incur additional debt to pay for an acquisition
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assume liabilities for which we do not have indemnification from the former owners; further, indemnification obligations may be subject to dispute or concerns regarding the creditworthiness of the former owners
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record goodwill and non-amortizable intangible assets that are subject to impairment testing and potential impairment charges
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experience volatility in earnings due to changes in contingent consideration related to acquisition earn-out liability estimates
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incur amortization expenses related to certain intangible assets
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lose existing or potential contracts as a result of conflict-of-interest issues
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become subject to adverse tax consequences or deferred compensation charges
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incur large and immediate write-offs; or
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become subject to litigation
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Our by-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.
Our by-laws contain provisions with respect to the indemnification of our officers and directors against all expenses, liability and loss (including attorneys’ fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him or her in connection with any action, suit or proceeding to which they were made parties by reason of his or her being or having been one of our directors or officers. In the event that any of our officers or directors incurs any expenses, liability or loss resulting from any such action, suit or proceeding, we will be responsible for such expenses, liabilities, or losses, which could have a material adverse effect on our business and financial condition. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Our financial statements may not be comparable to those of other companies.
Pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates, and our stockholders and potential investors may have difficulty in analyzing our operating results if comparing us to such companies.
Our Chief Executive Officer has the ability to control corporate and stockholder matters, providing him with the ability to control or influence stockholder decisions.
Our Chief Executive Officer, William Robinson, owns 19,650,000 Preferred A Shares, which shares on a fully diluted basis may be converted into 136,480,212 Common Shares, which would represent 50.11 % of our Voting Common Stock Shares outstanding. Our Chief Executive Officer’s ability to convert his Preferred A Shares into a majority of our Common Stock Shares outstanding gives him the control over a majority of our outstanding voting power, enabling him to control corporate and stockholder matters, including funding employee equity incentive programs, electing directors, and determining the outcome of all matters submitted to a vote of our stockholders.
Preferred C Shares issued pursuant to Advisory Agreements, if converted into Common Shares, will cause material dilution to Common Stock held by our shareholders.
We have Advisory Agreements with Kevin Harrington and Joe Abrams, which provide for the issuance of an aggregate of 11,442,857 Preferred C Shares. The 11,442,857 Preferred C Shares are convertible at any time at the holder’s option into Common Stock Shares at a valuation of $0.07 per share. Should the 11,442,857 or any material amount thereof be converted into Common Stock Shares, there may be material dilution to the shareholder interests of our shareholders.
We do not have an independent board of directors which could create a conflict of interests and pose a risk from a corporate governance perspective.
Our Board of Directors consists mostly of current executive officers and consultants, which means that we do not have any outside or independent directors. The lack of independent directors:
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May prevent the Board from being independent from management in its judgments and decisions and its ability to pursue the Board responsibilities without undue influence.
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May present us from providing a check on management, which can limit management taking unnecessary risks.
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Create potential for conflicts between management and the diligent independent decision-making process of the Board.
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Present the risk that our executive officers on the Board may have influence over their personal compensation and benefits levels that may not be commensurate with our financial performance.
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Deprive us of the benefits of various viewpoints and experience when confronting challenges that we face.
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Because officers serve on our Board of Directors, it will be difficult for the Board to fulfill its traditional role as overseeing management.
Because we do not have a nominating or compensation committee, shareholders will have to rely on the entire board of directors, no members of which are independent, to perform these functions.
We do not have a nominating or compensation committee, or any such committee comprised of independent directors. The board of directors performs these functions. No members of the board of directors are independent directors. Thus, there is a potential conflict in that board members who are also part of management will participate in discussions concerning management compensation and audit issues that may affect management decisions.
Our election not to opt out of the JOBS Act extended accounting transition period may not make our financial statements easily comparable to other companies.
Pursuant to the JOBS Act of 2012, as an emerging growth company we can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the PCAOB or the SEC. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the application date for private companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. As of present, there are no new or revised accounting standards that have been issued by the PCAOB or the SEC applicable to us for which we have adopted the application date for private companies.
The JOBS Act will also allow us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information provided in reports filed with the SEC. The recently enacted JOBS Act is intended to reduce the regulatory burden on emerging growth companies. The Registrant meets the definition of an emerging growth company and so long as it qualifies as an “emerging growth company,” it will, among other things:
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be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
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be exempt from the “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and certain disclosure requirements of the Dodd-Frank Act relating to compensation of its chief executive officer;
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be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934 and instead provide a reduced level of disclosure concerning executive compensation; and
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be exempt from any rules that may be adopted by the Public Registrant Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.
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We intend to take advantage of some or all the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an “emerging growth company”. We have elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Among other things, this means that the Registrant’s independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as it qualifies as an emerging growth company, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an emerging growth company, we may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers that would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Registrant. As a result, investor confidence and the market price of our common stock may be adversely affected.
We may have difficulty obtaining officer and director coverage or obtaining such coverage on favorable terms or financially be unable to obtain any such coverage, which may make it difficult for our attracting and retaining qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage or financially be unable to obtain such coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner, our business could be harmed, and our stock price could decline.
Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm. The standards that must be met for management to assess the internal controls over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards.
We expect to incur expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In addition, although attestation requirements by our independent registered public accounting firm are not presently applicable to us, we could become subject to these requirements in the future and we may encounter problems or delays in completing the implementation of any resulting changes to internal controls over financial reporting. In the event that our Chief Executive Officer or Chief Financial Officer determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how the market prices of our shares will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.
These and other new or changed laws, rules, regulations, and standards are, or will be, subject to varying interpretations in many cases due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Further, compliance with new and existing laws, rules, regulations and standards may make it more difficult and expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. Members of our board of directors and our principal executive officer and principal financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive officers, which could harm our business. We continually evaluate and monitor regulatory developments and cannot estimate the timing or magnitude of additional costs we may incur as a result.
COVID-19 RELATED RISKS
The outbreak of the coronavirus may negatively impact sourcing and manufacturing of the products that we sell as well as consumer spending, which could adversely affect our business, results of operations and financial condition.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and could adversely affect our business, results of operations and financial condition.
The outbreak of the COVID-19 may adversely affect our supply chain.
The worldwide outbreak of corona virus could adversely affect our business, results of operations and financial condition. The coronavirus outbreak may materially impact sourcing and manufacturing of our personal protection equipment products that are manufactured in other countries and materials for our products that are sourced in other countries by overseas manufacturers and in other affected regions. Travel within and into other overseas countries may be restricted, which may impact our manufacturers’ ability to obtain necessary materials and inhibit travel of manufacturers and material suppliers. Additionally, there are potential factory closures, inability to obtain materials, disruptions in the supply chain and potential disruption of transportation of goods produced other countries adversely impacted by the coronavirus outbreak, or threat or perceived threat of such outbreak. As a result, we may be unable to obtain adequate inventory from sources from these regions, which could adversely affect our business, results of operations and financial condition.
The outbreak of the COVID-19 may adversely affect our customers.
The above risks could also adversely affect our customers' financial condition, resulting in reduced spending for the merchandise we sell. Risks related to an epidemic, pandemic, or other health crisis, such as COVID-19, could also lead to the complete or partial closure of one or more of our facilities or operations of our sourcing partners. The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. These and other potential impacts of an epidemic, pandemic, or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition, and results of operations.
The COVID-19 Pandemic poses threats to manufacturing capacity and temporary disruption of operations.
Some customers, distributors, and end users alike, are stockpiling product and placing orders to assure a continued supply of garments and personal protective equipment through the duration of the COVID-19 Pandemic. The ability of our industry to ramp up production to meet demand, and how long the pandemic lasts, will have a direct impact on the amount of inventory remaining in distribution channels once the pandemic subsides. This factor, coupled with the possibility of economic recession, could have a deleterious impact on sales for a significant period that could negatively impact our revenues and our third-party manufacturing efficiencies. Our ability to increase market penetration is predicated upon our continued ability to sub-manufacturer at a sufficient capacity, however, there can be no guarantees that our manufacturing will not be negatively impacted by the pandemic or government responses to it. Additionally, there is a risk that government responses to thwart the spread of the virus, in the form of local or regional quarantine or shelter-in-place orders, could require temporary curtailment of manufacturing operations of our manufacturers, or prevent the export of our products from the country of origin. In such cases, our inability to deliver product would negatively impact sales.
RISKS RELATED TO OUR SALES OF PERSONAL PROTECTION EQUIPMENT
Because we do not own manufacturing facilities to manufacture personal protective equipment, we are at a competitive disadvantage and subject to other risks.
Other distributors of personal protective equipment have a competitive advantage over us because they operate their own manufacturing facilities, which provides them with a sustainable strategic advantage. This permits such distributors the ability to rapidly scale up production to meet emergency demand, shift production between locations to take advantage of new trade agreements or avoid complications that may arise from trade disputes. By comparison, because we do not have our own manufacturing facilities, we lack the ability to respond as quickly to emergency situations because contractor agreements typically require forecast lead-times.
Our results of operations pertaining to sales of personal protection equipment could be negatively affected by potential fluctuations in foreign currency exchange rates.
Our third-party manufacturing or suppliers of personal protection equipment require payment to be made in US dollars or foreign currencies. Any decrease in the value of the US dollar in relation to foreign currencies could increase the cost of the services provided to us pursuant to existing and future contracts. There can be no assurance that we will be able to increase product prices to offset any such cost increases, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.
We are also exposed to foreign currency exchange rate risks as a result of our sales to customers in foreign countries. Our sales in these countries are usually denominated in the local currency. If the value of the US dollar increases relative to these local currencies, and we are unable to raise our prices proportionally, then our profit margins could decrease because of the exchange rate change. We are exposed to changes in foreign currency exchange rates as a result of our purchases and sales in other countries. To manage the volatility relating to foreign currency exchange rates, we seek to limit, to the extent possible, our non-US dollar denominated purchases and sales.
We face competition from other companies in the personal protection equipment business, a number of which have substantially greater resources than we do.
We face significant competition in sales of personal protection equipment. With sales of personal protection equipment, our competitors, such as DuPont, Honeywell, Ansell, Kimberly Clark, and others have substantially greater financial, marketing and sales resources than we do. In addition, we believe that the barriers to entry in the disposable and reusable garments and gloves markets are relatively low.
Technological change could negatively affect sales of our products and our performance.
The rapid development of fabric technology continually affects the state of personal protection equipment and may directly impact the performance of our personal protection products. We cannot assure you that we will successfully maintain or improve the effectiveness of our existing products that we obtain from third parties, nor can we assure you that we will successfully identify new opportunities or continue to have the needed financial resources to develop new fabric or apparel manufacturing techniques from third parties in a timely or cost-effective manner. In addition, products manufactured by others may render our products obsolete or noncompetitive. If any of these events occur, our business, prospects, financial condition, and operating results will be materially and adversely affected.
We are subject to risk as a result of international sub manufacturing agreements
Because most of our personal protection products are manufactured at facilities located in China, Vietnam, Malaysia, South Korea, and Turkey, our operations are subject to risks inherent in doing business internationally, including adverse effects on our operations from corruption, war, international terrorism, civil disturbances, political instability, government activities such as border taxes and renegotiation of treaties, deprivation of contract and property rights and currency valuation changes. In addition, periods of international unrest may impede our ability to manufacture goods in other countries and could have a material adverse effect on our business and results of operations.
We may be subject to product substitute inferior products and or counterfeit products that could have a material adverse effect on our business and results of operations.
Because most of our personal protection products are manufactured at facilities located in China, Vietnam, Malaysia, South Korea, South Vietnam and Turkey, our operations are subject to risks inherent in doing business internationally, including adverse effects on our operations from product substation, inferior products and counterfeit products being substituted for original manufacture products. This risk may cause lost funds due to in most cases the cost of PPE product being purchased having the total cost being paid up front.In the event one of these transaction is compromised could have a material adverse effect on our business and results of operations.
We may be subject to product liability claims, and insurance coverage could be inadequate or unavailable to cover these claims.
Our personal protection products are used for protection from viruses and bacteria and failure to use our products for their intended purposes, in addition to which the failure to use our products properly or the malfunction of our products could result in injury or death of the user. In such cases, we may be subject to product liability claims arising from the design, manufacture, or sale of our products. If these claims are decided against us, and we are found to be liable, we may be required to pay substantial damages. We cannot assure you that our insurance coverage would be sufficient to cover the payment of any potential claim. In addition, we cannot assure you that this or any other insurance coverage will continue to be available or, if available, that we will be able to obtain it at a reasonable cost. Any material uninsured loss could have a material adverse effect on our financial condition, results of operations and cash flows.
RISKS RELATED TO OUR INFRASTRUCTURE SERVICES
We face competition from other companies in the infrastructure business, a number of which have substantially greater resources than we do.
With respect to our infrastructure services, our competitors have greater financial, marketing, operational, and sales resources than we do, and such competition could have a material adverse effect on our net sales and results of operations.
Our infrastructure business is subject to various regulatory, development, operational and market risks that may affect our financial results.
Our ability to successfully execute our infrastructure projects is subject to various regulatory, development, operational, litigation and market risks, including:
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the ability to obtain necessary approvals and permits from governments and regulatory agencies on a timely basis and on acceptable terms and to maintain those issued approvals and permits and satisfy the terms and conditions imposed therein
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potential changes in federal, state, provincial and local statutes, and regulations, including environmental
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requirements, that may prevent a project from proceeding or increase the anticipated cost of the project
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impediments on our ability to acquire or renew rights-of-way or land rights on a timely basis and on acceptable terms
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opposition to our projects and operations by third parties, including interest groups
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the availability of skilled labor, equipment, and materials to complete projects
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the ability to construct projects within anticipated costs, including the risk of cost overruns resulting from inflation or increased costs of equipment, materials or labor, contractor, or supplier non-performance
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weather, geologic conditions or other factors beyond our control, that may be material
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general economic factors that affect the demand for our projects; and
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the ability to raise financing for these projects
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Climate related risks are integrated into multiple of our larger risk categories that encompass operational, financial and stakeholder consequences. This is done because of the interconnected economic, social, and environmental nature of climate impacts requires a comprehensive review within the context of other risks that impact us.
Erosion of stakeholder trust or confidence or changes in our reputation with stakeholders, interest groups, political leadership, the media or other entities could influence actions or decisions about us and our industry and have negative impacts on our business, operations or financial results.
Our infrastructure related operations, projects and growth opportunities require us to have strong relationships with key stakeholders including local communities, Indigenous communities, and other groups directly impacted by our activities, as well as governments and government agencies. Inadequately managing expectations and issues important to stakeholders, including those related to environment and climate change, could affect stakeholder trust and confidence and our reputation.
There could be negative impacts on our business, operations, or financial results due to erosion of stakeholder trust or confidence or changes in our reputation with stakeholders, interest groups (including non-governmental organizations), political leadership, the media, or other entities. Public and stakeholder opinion may be influenced by certain media and others’ negative portrayal of the industry in which we operate as well as their opposition to our projects and ongoing operations. Potential impacts of an erosion of stakeholder trust or confidence or negative public opinion may include loss of business, loss of ability to secure growth opportunities, delays in project execution, increased regulatory oversight, negative impact in obtaining necessary approvals and permits from governments and regulatory agencies on a timely basis and on acceptable terms, any one or a combination of which will negatively impact our results of operations.
Our infrastructure operations may be regulated and failure to secure regulatory approval for our proposed projects, or loss of required approvals for our existing operations, could have a negative impact on our business, financial condition or results of operations.
The nature and degree of regulation and legislation affecting infrastructure services in the United States has experienced significant growth. We may be unable to obtain or maintain all required regulatory approvals for our infrastructure projects. If there is a delay in obtaining any required regulatory approvals, if we fail to obtain or comply with them, or if laws or regulations change or are administered in a more stringent manner, the operations of facilities or the development of new facilities could be prevented, delayed or become subject to additional costs.
Our infrastructure operations are subject to numerous environmental laws and regulations, compliance with which may require significant capital expenditures, increase our cost of operations, and affect or limit our business plans, or expose us to environmental liabilities.
We are subject to environmental laws and regulations affecting many aspects of our present and future operations, including air emissions, water quality, wastewater discharges, solid waste, and hazardous waste. Failure to comply with environmental laws and regulations and failure to secure permits necessary for our operations may result in the imposition of fines, penalties and injunctive measures affecting our operating assets. In addition, changes in environmental laws and regulations or the enactment of new environmental laws or regulations, could result in a material increase in our cost of compliance with such laws and regulations. We may be unable to obtain or maintain all required environmental regulatory approvals and permits for our operating assets or development projects. If there is a delay in obtaining any required environmental regulatory approvals or permits, if we fail to obtain or comply with them, or if environmental laws or regulations change or are administered in a more stringent manner, the operations of facilities or the development of new facilities could be prevented, delayed or become subject to additional costs. We expect that costs we incur to comply with environmental regulations in the future may have a significant effect on our earnings and cash flows.
Our infrastructure operations are subject to operational regulation and other requirements, including compliance with easements and other land tenure documents, and failure to comply with applicable regulations and other requirements could have a negative impact on our business, financial condition or results of operations.
Operational risks relate to compliance with applicable operational rules and regulations mandated by governments, applicable regulatory authorities, or other requirements that may be found in easements or other agreements that provide a legal basis for our operations, breaches of which could result in fines, penalties, awards of damages, operating restrictions (including shutdown of lines) and an overall increase in operating and compliance costs. Scrutiny over the integrity of our assets and operations has the potential to increase operating costs or limit future projects. Potential regulatory changes and legal challenges could have an impact on our future earnings from existing operations and the cost related to new projects. Regulators' future actions may differ from current expectations, or future legislative changes may impact the regulatory environments in which we operate. While we seek to mitigate operational regulation risk by active monitoring and consulting on potential regulatory requirement changes with the respective regulators directly, or through industry associations, and by developing response plans to regulatory changes or enforcement actions, such mitigation efforts may be ineffective or insufficient.
Our infrastructure business requires the retention and recruitment of a skilled workforce, and difficulties recruiting and retaining our workforce could result in a failure to implement our business plans.
Our infrastructure operations and management require the retention and recruitment of a skilled workforce, including engineers, technical personnel, and other professionals. We and our affiliates compete with other companies in the infrastructure industry for this skilled workforce. If we are unable to retain current employees and/or recruit new employees of comparable knowledge and experience, our business could be negatively impacted. In addition, we could experience increased allocated costs to retain and recruit these professionals.
Our insurance coverage may be insufficient to cover our losses in the event of an accident, natural disaster, or other hazardous event.
Our operations are subject to many hazards inherent in our industry. Our assets may experience physical damage as a result of an accident or natural disaster. These hazards can also cause personal injury and loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage, and suspension of operations. If our insurance coverage is not adequate to cover claims for the foregoing hazards, our results of operations will be materially and negatively impacted.
We may be subject to financial losses, penalties, and other liabilities if we fail to maintain safe work sites, equipment, or facilities regarding our infrastructure operations.
Our safety record with regard to our infrastructure services are critical to our reputation. We maintain health and safety standards to protect our employees, customers, vendors, and the public. Our business sites, including construction and maintenance sites, often put our employees and others in close proximity with large pieces of equipment, moving vehicles, pressurized water, chemicals, and other regulated materials. On many sites we are responsible for safety and, accordingly, must implement safety procedures. If we fail to implement such procedures or if the procedures, we implement are ineffective or are not followed by our employees or others, our employees and others may be injured or die. Unsafe work sites also have the potential to increase our operating costs. Any of the foregoing could result in financial losses, which could have a material adverse impact on our business, financial condition, and results of operations.
Legislation or other changes in U.S. tax law could adversely affect our business and financial condition.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many changes have been made to applicable tax laws and changes are likely to continue to occur in the future.
For example, the Tax Cuts and Jobs Act, or the TCJA, was enacted in 2017 and made significant changes to corporate taxation, including the reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), the limitation of the deduction for net operating losses from taxable years beginning after December 31, 2017 to 80% of current year taxable income and the elimination of net operating loss carrybacks generated in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely) and the modification or repeal of many business deductions and credits. In addition, on March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security Act” or the CARES Act, which included certain changes in tax law intended to stimulate the U.S. economy in light of the COVID-19 public health emergency, including temporary beneficial changes to the treatment of net operating losses, interest deductibility limitations and payroll tax matters.
It cannot be predicted whether, when, in what form or with what effective dates new tax laws may be enacted, or regulations and rulings may be enacted, promulgated or issued under existing or new tax laws, which could result in an increase in our or our shareholders’ tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax law or in the interpretation thereof.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds, we need in order to conduct our planned operations through the sale of equity securities, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest in our stock. If we are unable to raise the funds, we require for all of our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.
If we issue additional shares in the future, it will result in the dilution of our existing shareholders.
We are presently authorized to issue up to 500,000,000 shares of common stock with a par value of $0.001. The issuance of such shares will likely result in a reduction of the book value and market price of the original 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, in which case we would have to modify their existing limit on authorized shares, which they may do in the future.
Our common stock is quoted on the OTC Markets quotation system which may have an unfavorable impact on our stock price and liquidity.
Our common stock is quoted on the OTC Markets electronic quotation system, which is a significantly more limited trading market than the NYSE MKT or The NASDAQ Stock Market. The quotation of our shares on the OTC Markets may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
There is limited liquidity on the OTC Markets quotation system which may result in stock price volatility and inaccurate quote information.
When fewer shares of a security are being traded on the OTC Markets, volatility of prices may increase, and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in shares of our common stock, there may be a lower likelihood of one’s orders for shares of our common stock being executed, and current prices may differ significantly from the price one was quoted at the time of one’s order entry.
We expect the market price of our common stock to fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or ourselves. In addition, the OTC Markets is subject to extreme price and volume fluctuations in general. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
Our common stock is thinly traded, so you may be unable to sell at or near asking prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
Currently, our common stock is quoted in the OTC Markets electronic quotation system and future trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in OTC Markets stocks and certain major brokerage firms restrict their brokers from recommending OTC Markets stocks because they are considered speculative, volatile and thinly traded. The OTC market is an inter-dealer market much less regulated than the major exchanges and our common stock is subject to abuses, volatility and shorting. Thus, there is currently not a broadly followed and established trading market for our common stock. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded there.
The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder's ability to buy and sell our stock.
In addition to the "penny stock" rules described above, FINRA 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, 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 your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.
We have never declared or paid any cash dividends on common stock. For the foreseeable future, it is expected that earnings, if any, generated from our operations will be used to finance the growth of our business, and that no dividends will be paid to holders of our common stock. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value.
Applicable regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act, may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of its business and its ability to obtain or retain listing of our Common Stock.
We may be unable to attract and retain those qualified officers, directors and members of board committees required to provide for effective management because of the rules and regulations that govern publicly held companies, including, but not limited to, certifications required by principal executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series of related rules and regulations and the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock exchanges. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as directors and executive officers.
Further, some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management of our business and our ability to obtain or retain listing of our shares of Common Stock on any stock exchange (assuming we elect to seek and are successful in obtaining such listing) could be adversely affected.
The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our common stock may be highly volatile and could fluctuate in response to factors such as:
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actual or anticipated variations in our operating results
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announcements of developments by us or our competitors
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changes in the industries in which we operate
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regulatory actions regarding our products
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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, or capital commitments
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adoption of new accounting standards affecting the industries in which we operate
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additions or departures of key personnel
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introduction of new products by us or our competitors
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sales of our Common Stock or other securities in the open market; and
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other events or factors, many of which are beyond our control
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The price at which you purchase shares of our Common Stock may not be indicative of the price that will prevail in the trading market. Shareholders may experience wide fluctuations in the market price of our securities. These fluctuations may have a negative effect on the market price of our securities and may prevent a shareholder from obtaining a market price equal to the purchase price such shareholder paid when the shareholder attempts to sell our securities in the open market. In these situations, the shareholder may be required either to sell our securities at a market price, which is lower than the purchase price the shareholder paid, or to hold our securities for a longer period than planned. An inactive or low trading market may also impair our ability to raise capital by selling shares of capital stock. You may be unable to sell your shares of Common Stock at or above your purchase price, which may result in substantial losses to you and which may include the complete loss of your investment. Any of the risks described above could adversely affect our sales and profitability and the price of our Common Stock.
An investment in our shares is highly speculative.
The shares of our common stock are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the risk factors contained herein relating to our business and prospects. If any of the risks presented herein actually occur, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Our common stock is subject to the penny stock regulations and restrictions pertaining to low priced stocks that will create a lack of liquidity and make trading difficult or impossible.
The trading of our securities is on the over-the-counter market, OTCQB, which is operated by OTC Markets. An investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.
Rule 3a51-1 of the Exchange Act establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions that are not available to us. It is likely that our shares will be penny stocks for the immediately foreseeable future. This classification severely and adversely affects any market liquidity for our common stock.
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:
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the basis on which the broker or dealer made the suitability determination, and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Disclosure also must be made about the risks of investing in penny stocks in public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Additionally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities when our securities become publicly traded. In addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares, probably, will be subject to such penny stock rules for the foreseeable future and our shareholders will likely find it difficult to sell their securities.
Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Shares eligible for future sale may adversely affect the market.
From time to time, certain of our stockholders may be eligible to sell all or some of their shares of Common Stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements. Any substantial sales of our Common Stock pursuant to Rule 144 may have a material adverse effect on the market price of our Common Stock.
If we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected.
Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our Common Stock. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.
Our annual and quarterly results may fluctuate, which may cause substantial fluctuations in our Common Stock price.
Our annual and quarterly operating results may in the future fluctuate significantly depending on factors including the timing of purchase orders, new product releases by us and other companies, gain or loss of significant customers, price discounting of our product, the timing of expenditures, product delivery requirements and economic conditions. Revenues related to our product are required to be recognized upon satisfaction of all applicable revenue recognition criteria. The recognition of revenues from our product is dependent on several factors, including, but not limited to, the terms of any license agreement and the timing of implementation of our products by our customers.
Any unfavorable change in these or other factors could have a material adverse effect on our operating results for a particular quarter or year, which may cause downward pressure on our Common stock price. We expect quarterly and annual fluctuations to continue for the foreseeable future.
The Nevada Revised Statute contains provisions that could discourage, delay, or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our stock.
We are subject to the anti-takeover provisions of the NRS. Depending on the number of residents in the state of Nevada who own our shares, we could be subject to the provisions of Sections 78.378 et seq. of the Nevada Revised Statutes which, unless otherwise provided in the Company’s articles of incorporation or by-laws, restricts the ability of an acquiring person to obtain a controlling interest of 20% or more of our voting shares. Our articles of incorporation and by-laws do not contain any provision which would currently keep the change of control restrictions of Section 78.378 from applying to us.
We are subject to the provisions of Sections 78.411 et seq. of the Nevada Revised Statutes. In general, this statute prohibits a publicly held Nevada corporation from engaging in a “combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the combination or the transaction by which the person became an interested stockholder is approved by the corporation’s board of directors before the person becomes an interested stockholder. After the expiration of the three-year period, the corporation may engage in a combination with an interested stockholder under certain circumstances, including if the combination is approved by the board of directors and/or stockholders in a prescribed manner, or if specified requirements are met regarding consideration. The term “combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 10% or more of the corporation’s voting stock. A Nevada corporation may “opt out” from the application of Section 78.411 et seq. through a provision in its articles of incorporation or by-laws. We have not “opted out” from the application of this section.
Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks can be negatively affected from patterns of fraud and abuse.
Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
Our Bylaws and Articles of Incorporation exculpates our officers and directors from certain liability to us or our stockholders.
Our Articles of Incorporation contain a provision that no director or officer will be personally liable to us or our stockholders for damages regarding breaches of fiduciary duty. This limitation on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our stockholders from suing our officers and directors based upon breaches of their duties to our Company. We may also have contractual indemnification obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in our incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. Additionally, these provisions and resultant costs may also discourage our bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers, even though such actions, if successful, might otherwise benefit our company and shareholders. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.