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NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

i.          Advertising

The Company expenses the cost of advertising as incurred. For the three months ended September 30, 2011, advertising expenses totaled $0. When incurred they are included in direct costs and general and administrative expense in the accompanying statements of income.

                        j.          Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

k.         Income per Common Share

The computation of basic earnings per common share is based on the weighted average number of shares outstanding during each year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year, plus the common

stock equivalents that would arise from the exercise of stock options and warrants outstanding, using the treasury stock method and the average market price per share during the year.

                        l.          Impairment of Long-Lived Assets

The Company reviews long-lived assets such as property, equipment, investments and definite-lived intangibles for impairment annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.  As required by Statement of Financial Accounting Standards No. 144, the Company uses an estimate of the future undiscounted net cash flows of the related asset or group of assets over their remaining economic useful lives in measuring whether the assets are recoverable. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent of other groups of assets.

Assets to be disposed of are reported at the lower of the carrying amount or fair value, less the estimated costs to sell.  In addition, depreciation of the asset ceases.  During the three months ended September 30, 2011, no impairment of long-lived assets was recorded.

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NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

            m.        Concentration of Credit Risk and Significant Customers

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of receivables and notes receivable. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses which, when realized, have been within the range of management's expectations.

The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.                         

NOTE 3 – ESTIMATES

The preparation of financial statements in conformity with accounting principles generally   accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts. Accordingly, actual results could differ from those estimates.

NOTE 4 – SHORT-TERM NOTES PAYABLE AND LINES OF CREDIT

On January 27, 2011, March 15, 2011, and June 1, 2011 the Company issued promissory notes in the amounts of $75,000, $60,000, $40,000 respectively, to Asher Enterprises, Inc., an unrelated party, at an interest rate of 8%, with a nine month term, and an option to convert the outstanding balance into shares of the Company’s common stock at a 40% discount off the market price at the time of conversion. At September 30, 2011, $57,000 of the amount due had been converted to common stock (see Note 10).

Additionally, the Company has from time to time short-term borrowings from various unrelated and related entities.  These advances are non-interest bearing, unsecured and due upon demand. Due to the short-term nature of the notes the Company has not imputed an interest rate. 

NOTE 5 – REVERSE ACQUISITION          

On April 14, 2010, the Company, Intelspec and those shareholders of Intelspec holding a majority of its outstanding shares closed a transaction pursuant to that certain Share Exchange Agreement, whereby the Company is to acquire up to 100% of the outstanding shares of Intelspec’s common stock from the shareholders of Intelspec in exchange for an aggregate of 14,000,000 shares of its common stock. As a result of closing the transaction the former shareholders of Intelspec will hold approximately 70% of the Company’s issued and outstanding common stock. The shares of common stock of the Company issued pursuant to the Share Exchange Agreement were issued in reliance upon the exemptions from registration provided by Section 4(2) and Regulation S of the Securities Act of 1933, as amended.

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NOTE 6 – LITIGATION

The Company may become or is subject to investigations, claims or lawsuits ensuing out of the conduct of its business.  The Company is currently aware of the following such items which it believes could have a material effect on its financial position:

a.         Intel Corporation

Legal proceedings were initiated by Intel Corporation against Intelspec and Intelspec, LLC on October 12, 2011, Intel Corporation v. Intelspec International Inc. and Intelspec LLC, CV11-

00962, filed in the United States District Court for the District of Delaware. The claim alleges trademark infringement and seeks to (i) restrain the Company from using its Intelspec trade name, (ii) transfer ownership of the Company's intelspec.com web address to Intel, and (iii) damages, if any. The Company disagrees with Intel’s claims as it does not believe that it competes with Intel in any way and does not believe that its trade name causes consumer confusion anywhere in the world, nor does Intelspec’s use of its trade name weaken the Intel mark. The Company has retained intellectual property counsel and is evaluating its response to the case.

b.         Mark B. Aronson

Legal proceedings were initiated by Mark B. Aronson against the Company on November 7, 2011, Mark B. Aronson vs. Infrastructure Developments Corp., Civil Action No., GD 11-023062, filed in the Court of Common Pleas of Allegheny County, Pennsylvania. The claim alleges infringement of the Pennsylvania Unsolicited Telecommunication Advertisement Act for the plaintiff's receipt of spam emails marketing the Company's common stock. The Company completely and unequivocally disagrees with Mr. Aronson's claims as it did not send the emails in question to Mr. Aronson. Further the Company does not engage in marketing of its common stock by email or any other non-disclosed source. The Company is evaluating its response to the case and is investigating the possibility of a countersuit due to the frivolity of the plaintiff's claim.

NOTE 7 – RELATED PARTY TRANSACTIONS

The Company had a non-current note payable with a related party of $2,409,003 as of September 30, 2011. The payable had 6% annual interest effective from May 17, 2011, unsecured and was due in five years. Interest accrued up to end of quarter was $48,345.

NOTE 8 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, investments, receivables, payables, and notes payable.  The carrying amount of cash, investments, receivables, and payables approximates fair value because of the short-term nature of these items.  The carrying amount of long-term notes payable approximates fair value as the individual borrowings bear interest at market interest rates.

NOTE 9 – RECENT ACCOUNTING PRONOUNCEMENTS

We have examined all recent accounting pronouncements and believe that none of them will have a material impact on the financial statements of our company.

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NOTE 10 – STOCKHOLDERS' EQUITY

As of June 30, 2011, the Company had 120,125,000 shares of common stock issued and outstanding.

During the three months ended September 30, 2011, we issued shares of our common stock upon receiving conversion notices by Asher Enterprises, Inc. (see Note 4) as follows:

NOTE 11 – SUBSEQUENT EVENTS
 

In accordance with Accounting Standards Codification (ASC) topic 855-10 “Subsequent Events”, the Company has evaluated subsequent events through the date which the financial statements were available to be issued. The Company has determined that the following such event warrants disclosure or recognition in the financial statements:

a.         Common stock issuance for settlement

On October 13, 2011, the board of directors authorized the issuance of 3,666,000 shares of common stock to Thomas R. Morgan, the Company's CEO and a director, pursuant to an accord and satisfaction agreement for the settlement consideration of $109,980 or $0.03 per share, thereby satisfying the terms of his employment agreement with Intelspec.

b.         Common stock issuances for convertible debt

Subsequent to the three months ended September 30, 2011, we issued shares of our common stock upon receiving conversion notices by Asher Enterprises, Inc. (see Note 4) as follows:

                                                * Includes $3,000 in interest on the note.

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Item 2.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this quarterly report contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by words such as “anticipates,” “expects,” “believes,” “plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include but are not limited to those discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition below. The following discussion should be read in conjunction with our financial statements and notes thereto included in this report. All information presented herein is based on our quarterly period ended September 30, 2011. Our fiscal year end is June 30.

The Company is a global engineering and project management business that provides services through a network of branch offices and subsidiaries located in markets where the Company either has active projects, is bidding on projects, or is investigating project opportunities.

We serve an underserved niche in the global project spectrum, by targeting specialized projects and subcontracts that are too small to attract multinational firms but still require world class engineering expertise. Our business typically focuses on small to mid-size contracts and subcontracts in the $1 million to $10 million range. Few small to medium sized engineering firms in the developed world have the capacity to work in the less developed markets we serve, and local companies generally lack the international-standard expertise demanded by project investors.

We initially targeted a wide variety of private and government funded jobs in the Middle East, particularly in the U.A.E., but the substantial economic slowdown in these markets shifted our focus to U.S. government contracts and subcontracts in Southeast Asia and more recently to projects within the U.S. itself.

The Company conducts business through its wholly-owned subsidiaries, Intelspec International, Inc. (“Intelspec”) a Nevada corporation, and Intelspec’s subsidiaries: (i) Intelspec LLC, a Delaware limited liability, and (ii) Power Track Projects FZE (“Power Track”), a United Arab Emirates registered Free Zone Enterprise.

For the three month period ended September 30, 2011:

(i)               The Company continued construction on the design / build contract for the U.S. Navy’s Lido Phase II Project in Indonesia that was awarded to us in September 2010. The project includes building a two-storey barrack, dining facilities, a mess hall, a kitchen, roads, parking areas, and site utilities. We also began discussions with the client to prepare for bids on subsequent phases of the Lido project on the same site.

(ii)               The Company continued contact with U.S. firms to establish strategic partnerships for domestic U.S. military projects.

(iii)             The Company identified and began the bidding process for additional projects in Southeast Asia.

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(iv)       The Company entered into a memorandum of understanding with Cleanfield Energy, Inc., dated July 1, 2011 as amended on July 7, 2011. Pursuant to the MOU we expect to enter into a joint venture with the company or will acquire the company. Our right to acquire the company is granted pursuant to our providing them interim funding to cover expenses for the furtherance of our business plan of converting fleet vehicles to compressed natural gas (CNG) and to provide CNG fueling points at new or existing gas stations. We are planning on opening a conversion location with Cleanfield Energy, Inc., in the Phoenix, Arizona area and have concentrated our fueling point efforts on Colorado and Utah.

Subsequent to the period ended September 30, 2011:

(i)         The Company completed the U.S. Navy’s Lido Phase II Project in Indonesia.

(ii)        The Company began CNG conversion operations at our facility in Thailand with the conversion of a 250Kva/200Kw Cummins diesel generator. We expect to expand CNG operations in Thailand in the coming months.

Net Losses

Net loss for the three months ended September 30, 2011 was $117,441 as compared to $233,929 for the three months ended September 30, 2010, a decrease of 50%. The decrease in net loss over the comparable periods is due to the realization of a gross profit in the current period and a decrease in operating expenses. The Company is confident that it will transition to net income in the next twelve months based on the prospective award of new project management contracts and the anticipated entry into CNG related activities in the U.S.  

Net Revenues

Net revenues for the three months ended September 30, 2011 were $279,728 as compared to $311,903 for the three months ended September 30, 2010, a decrease of 10%. The decrease in net revenues over the comparable periods can be attributed to the lack of contract income or revenue from sales of material in the current period due to the suspension of quarry operations offset by management contract revenue related to Lido Phase II. We expect net revenues to increase over the next twelve months as project management contract revenue from the Lido Phase II project will continue through November 2011, as we remain in competition for several project management contracts, and as the result of our entry into CNG related activities in the U.S.

Gross Profit/ Loss

Gross profit for the three months ended September 30, 2011 was $23,203 as compared to a gross loss of $57,486 for the three months ended September 30, 2010. The transition to gross profit in the current period is due to revenues from our Lido Phase II project which exceeded costs. We expect to continue with gross profits over the next twelve months in step with our expectation of an increase in revenues.

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Operating Expenses

Operating expenses for the three months ended September 30, 2011 decreased to $101,507 from $176,152 for the three months ended September 30, 2010, a decrease of 42%. Operating expenses are from general, selling and administrative expenses, salaries and wages, and depreciation and amortization expense. Over the periods general, selling and administrative expenses decreased to $34,809 from $82,460 and salaries and wages decreased to $66,698 from $93,692. We expect operating expenses to decrease in the near term as we continue to streamline our expenses. We had no depreciation and amortization expenses for the three months ended September 30, 2011 and 2010.

Other Expenses

Other expenses for the three months ended September 30, 2011 were $39,136 compared to $290 for the three months ended September 30, 2010. Other expenses in the current period were comprised of interest expenses related to our loan from WWA Group and Asher. Despite interest expenses going forward we expect to transition to other income in the next three month period due to a settlement agreement with our chief executive officer that caused us to issue our common stock at a premium to market to satisfy amounts due subsequent to the current period end.  

Liquidity and Capital Resources

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue operations.

As of September 30, 2011, we had a working capital deficit of $468,405. Our current and total assets were $156,849 consisting of cash of $95,056, prepaid expenses of $40,740 and other current assets of $21,053. Our current liabilities were $625,254 consisting of notes payable, accounts payable and accrued expenses while our total liabilities were $3,034,257 consisting of current liabilities as well as long-term debt of $2,409,003. Stockholders deficit was $2,877,408 as of September 30, 2011.

Cash flows used in operating activities for the three months ended September 30, 2011 were $77,337 compared to cash flows provided by operating activities of $58,635 for the three months ended September 30, 2010. Cash flow used in operating activities in the current period is primarily due to net losses and a decrease in notes payable. Although cash flows used in operating activities has risen over the comparative three month periods we do expect to transition to cash flow provided by operations over the next twelve months once we transition from net losses to net income.

Cash flows provided by investing activities for the three months ended September 30, 2011 and September 30, 2010 were $0. We expect to use cash flow in investing activities over the next twelve months as we enter the distribution of CNG market in the U.S.

Cash flows provided by financing activities for the three months ended September 30, 2011 were $89,420 as compared to $0 for the three months ended September 30, 2010. Cash flows provided by financing activities in the current period are attributable to the issuance of common stock to discharge debt owed to Asher and common stock subscriptions in the period. We expect to realize cash flows provided by financing activities over the next twelve months as Asher discharges debt in exchange for common stock and we remain reliant on debt or equity financings to continue operations.

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Our current assets are insufficient to meet the Company’s business objectives over the next twelve (12) months. We need a minimum of $500,000 in debt or equity financing to maintain operations and to fulfill our business plan. Although, we have no commitments or arrangements for this level of financing, our shareholders remain the most likely source of loans or equity placements to ensure our continued operation though such support can in no way be assured. Our inability to obtain additional financing will have a material adverse affect on our business operations.

We have no lines of credit or other bank financing arrangements in place.

We have no commitments for future capital expenditures that were material at the end of the period.

We have no defined benefit plan or contractual commitment with any of our officers or directors.

We have no current plans for the purchase or sale of any plant or equipment.
 

We have no current plans to make any changes in the number of employees.

We do not expect to pay cash dividends in the foreseeable future.

Future Company Financings

We will continue to rely on debt or equity sales to continue to fund our business operations even though the issuance of additional shares will result in dilution to our existing stockholders. 

Company Reporting Obligations

We do not anticipate any contingency upon which it would voluntarily cease filing reports with the Securities and Exchange Commission as it is in the interest of the Company to report its affairs quarterly, annually and currently to provide accessible public information to interested parties.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Interest Rates

Interest rates are generally controlled. The majority of our debt is owed to a related party at a fixed interest rate so fluctuations in interest rates do not impact our result of operations at this time. However, we may need to rely on bank financing or other debt instruments in the future in which case fluctuations in interest rates could have a negative impact on our results of operations.  

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Forward Looking Statements and Factors That May Affect Future Results and Financial Condition

The statements contained in the section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this annual report, with the exception of historical facts, are forward looking statements. We are ineligible to rely on the safe-harbor provision of the Private Litigation Reform Act of 1995 for forward looking statements made in this annual report. Forward-looking statements reflect our current expectations and beliefs regarding our future results of operations, performance, and achievements. These statements are subject to risks and uncertainties and are based upon assumptions and beliefs that may or may not materialize. These statements include, but are not limited to, statements concerning:

·         our financial performance;

·         the sufficiency of existing capital resources;

·         our ability to fund cash requirements for future operations;

·         uncertainties related to the growth of our business and the acceptance of our services;

·         our ability to achieve and maintain an adequate customer base to generate sufficient revenues to maintain and expand operations;

·         the volatility of the stock market; and

·         general economic conditions.

We wish to caution readers that our operating results are subject to various risks and uncertainties that could cause our actual results to differ materially from those discussed or anticipated including the factors set forth in the section entitled Risk Factors included elsewhere in this report. We also wish to advise readers not to place any undue reliance on the forward looking statements contained in this report, which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to update or revise these forward-looking statements to reflect new events or circumstances or any changes in our beliefs or expectations, other than is required by law.

Going Concern

Our auditors included an explanatory statement in their report on the Company’s consolidated financial statements for the years ended June 30, 2011 and 2010, expressing an opinion as to our ability to continue as a going concern as a result of a working capital deficit, negative cash flows, and accumulated net losses. Our ability to continue as a going concern is subject to the ability of the Company to transition to net income in 2012 and obtaining additional funding from outside sources. Management’s plan to address the Company’s ability to continue as a going concern includes (i) increasing our gross profit; (ii) financing from private placement sources; and (iii) converting outstanding debt to equity. Although the Company believes that it will be able to remain a going concern, through the methods discussed above, there can be no assurances that such methods will prove successful.

Recent Accounting Pronouncements

Please see Note 9 to our consolidated financial statements for recent accounting pronouncements.

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Stock-Based Compensation

We have adopted Accounting Standards Codification Topic (“ASC”) 718, Share-Based Payment, which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments.

We account for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 505. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services.

ITEM 3.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4.          CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were ineffective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was not accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period ended September 30, 2011, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.          LEGAL PROCEEDINGS

Legal proceedings were initiated by Intel Corporation against Intelspec and Intelspec, LLC on October 12, 2011, Intel Corporation v. Intelspec International Inc. and Intelspec LLC, CV11-00962, filed in the United States District Court for the District of Delaware. The claim alleges trademark infringement and seeks to (i) restrain the Company from using its Intelspec trade name, (ii) transfer ownership of the Company's intelspec.com web address to Intel, and (iii) damages, if any. The Company disagrees with Intel’s claims as it does not believe that it competes with Intel in any way and does not believe that its trade name causes consumer confusion anywhere in the world, nor does Intelspec’s use of its trade name weaken the Intel mark. The Company has retained intellectual property counsel and is evaluating its response to the case.

Legal proceedings were initiated by Mark B. Aronson against the Company on November 7, 2011, Mark B. Aronson vs. Infrastructure Developments Corp., Civil Action No., GD 11-023062, filed in the Court of Common Pleas of Allegheny County, Pennsylvania. The claim alleges infringement of the Pennsylvania Unsolicited Telecommunication Advertisement Act for the plaintiff's receipt of spam emails marketing the Company's common stock. The Company completely and unequivocally disagrees with Mr. Aronson's claims as it did not send the emails in question to Mr. Aronson. Further the Company does not engage in marketing of its common stock by email or any other non-disclosed source. The Company is evaluating its response to the case and is investigating the possibility of a countersuit due to the frivolity of the plaintiff's claim.

ITEM 1A.       RISK FACTORS
 

Our operations and securities are subject to a number of risks. Below we have identified and discussed the material risks that we are likely to face. Should any of the following risks occur, they will adversely affect our operations, business, financial condition and/or operating results as well as the future trading price and/or the value of our securities.

Risk Factors Relating To Our Business

The Company’s ability to continue as a going concern is in question

Our auditors included an explanatory statement in their report on our consolidated financial statements for the years ended June 30, 2011 and 2010, stating that there are certain factors which raise substantial doubt about the Company’s ability to continue as a going concern. These factors include a working capital deficit, negative cash flows, and accumulated losses.

The scope of our business is currently limited to small and mid-sized private and government contracts.

The Company is a global engineering and project management service provider; however a substantial economic slowdown in these markets has led us to focus primarily on U.S. government contracts and subcontracts.  If we cannot continue to attain new government contracts and/or new subcontracts from some larger engineering contractors, our business could be adversely affected. Furthermore, if the demand engineering and project management continues to slowdown within our market, the Company could be adversely affected.

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From time to time we may be required to suspend services to commercial and private customers to meet the priority demands of governmental military contractors, which may adversely impact our marketing to commercial and private customers.

The priority needs of governmental military contractors may require that we suspend services to some or all of our contracts from the commercial and private sector.  The size and level of priority of services from governmental agencies are irregular and unpredictable, and from time to time in the past, we have had to delay fulfilling contracts from our commercial and private customers until priority governmental contracts have been fulfilled. This may damage our reputation among the commercial and private sector and potential future contracts and, in turn, adversely impact our marketing to such customers and potential customers in the commercial sector. 

We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could seriously harm our business. 

Due to the specialized nature of our businesses, our future performance is highly dependent upon the continued services of our key engineering personnel and executive officers, the development of additional management personnel, and the recruitment and retention of new qualified engineering, manufacturing, marketing, sales, and management personnel for our operations. Competition for personnel is intense, and we may not be successful in attracting or retaining qualified personnel.  In addition, key personnel may be required to receive security clearances and substantial training in order to work on government sponsored programs or perform related tasks.  The loss of key employees, our inability to attract new qualified employees or adequately train employees, or the delay in hiring key personnel could impair our ability to prepare bids for new projects, fill orders, or develop new products.

Our activities are affected by the level of U.S. defense spending, and a reduction in current defense budget expenditures or changing governmental priorities could significantly reduce sales under governmental contracts.

Our revenues from the U.S. government largely result from contracts awarded by military purchasers under various defense programs. The funding of defense programs is subject to the overall U.S. governmental budget and appropriation decisions and processes, and our programs must compete for funding with nondefense programs and other defense programs in which we are not involved. U.S. governmental budget decisions, including defense spending, are based on changing governmental priorities and objectives, which are driven by numerous factors, including national and international geopolitical events and economic conditions, and are beyond our control.  In recent years, the overall level of U.S. defense spending has increased for numerous reasons, including increases in funding of operations in Iraq and Afghanistan and the U.S. Department of Defense’s military transformation initiatives. We cannot assure that U.S. defense spending will continue to grow, particularly in view of the recent changes in the controlling political party in Congress. Significant changes to U.S. defense spending could have long-term consequences for the market of our services. In addition, as a result of changing governmental priorities and requirements, defense spending could shift away from the current importance of military force and facility construction into new areas, and the timing of funding of force and facility construction could change.  Shifts or reductions in defense spending or changes in timing could result in the reduction or elimination of, or the delay in, funding of one or more of our defense programs, which could negatively impact our results of operations and financial condition.

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A large scope of our business is governed by U.S. governmental contracts, which are subject to continued appropriations by Congress and termination. 

We supply engineering and project management either directly or as a subcontractor for various U.S. governmental civilian and military programs, all of which are generally subject to congressional appropriations.  Congress generally appropriates funds on a fiscal year basis even though a program may extend for several years.  Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations.  U.S. governmental contracts and subcontracts under a program are subject to termination or adjustment if appropriations for such program are not available or change.  In addition, U.S. governmental contracts generally contain provisions permitting partial or total termination, without prior notice, at the U.S. government’s convenience as well as termination for default based on performance.  Upon termination for convenience, we generally will be entitled to compensation only for services rendered and commitments completed at the time of termination.  A termination arising out of our default could expose us to liability and have a negative impact on our ability to obtain future contracts and orders.

Our financial performance is highly dependent on our procurement, performance, and payment under our U.S. governmental contracts.  The termination of one or more large contracts, whether due to lack of funding, for convenience, or otherwise, could materially adversely affect our business.  In such an event, our losses would likely increase as we would continue to incur operating costs as we sought to procure new U.S. government contracts to offset the revenues lost as a result of any termination of our contracts.  Among the factors that could materially adversely affect our federal governmental contracting business are: 

·         budgetary constraints affecting federal government spending generally, or defense and intelligence spending in particular, and annual changes in fiscal policies or available funding;

·         changes in federal governmental programs, priorities, procurement policies, or requirements;

·         new legislation, regulations, or governmental union pressures on the nature and amount of services the government may obtain from private contractors;

·         federal governmental shutdowns (such as during the government’s 1996 fiscal year) and other potential delays in the governmental appropriations process; and

·         delays in the payment of our invoices by governmental payment offices due to problems with, or upgrades to, governmental information systems, or for other reasons.

These or other factors could cause federal governmental agencies, or prime contractors when we are acting as a subcontractor, to reduce their purchases under contracts, to exercise their right to terminate contracts, or to not exercise options to renew contracts, any of which could reduce sales, including our sales backlog, while costs continued as are sought to develop sales have a materially adverse effect on our business, financial condition, and results of operations.

We enter into fixed-price contracts that could subject us to losses in the event that we have cost overruns. 

Many of our contracts are entered into on a fixed-price basis.  This allows us to benefit from cost savings, but we carry the financial risk of cost overruns. If our initial estimates on project completion are incorrect, we can lose money on these contracts.  In addition, some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts, then we may not realize their full benefits.  Lower earnings caused by cost overruns and cost controls would reduce or eliminate the gross margins under our contracts.

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We could be suspended or debarred from contracting with the federal government. 

We could be suspended or debarred from contracting with the federal government generally or any significant agency in the intelligence community or Department of Defense for, among other things, actions or omissions that are deemed by the government to be so serious or compelling that they affect our contractual responsibilities.  For example, we could be debarred for committing a fraud or criminal offense in connection with obtaining, attempting to obtain, or performing a contract or for embezzlement, fraud, forgery, falsification, or other causes identified in applicable federal acquisition regulations. In addition, our reputation or relationship with the governmental agencies could be impaired. If we were suspended or debarred, or if our relationship or reputation were impaired, our sales opportunities and revenues would be reduced and our operating loss would increase.

International and political events may adversely affect our operations.

Our revenue is derived entirely from non-United States operations, which exposes us to risks inherent in doing business in each of the countries in which we transact business. The occurrence of any of the risks described below could have a material adverse effect on our results of operations and financial condition.

Operations in countries other than the United States are subject to various risks peculiar to each country. With respect to any particular country, these risks may include:

·         expropriation and nationalization of our assets in that country;

·         political and economic instability;

·         civil unrest, acts of terrorism, force majeure, war, or other armed conflict;

·         natural disasters, including those related to earthquakes and flooding;

·         inflation;

·         currency fluctuations, devaluations, and conversion restrictions;

·         confiscatory taxation or other adverse tax policies;

·         governmental activities that limit or disrupt markets, restrict payments, or limit the movement of funds;

·         governmental activities that may result in the deprivation of contract rights; and

·         governmental activities that may result in the inability to obtain or retain licenses required for operation.

Due to the unsettled political conditions in many oil-producing countries and countries in which we provide governmental logistical support, our revenue and profits are subject to the adverse consequences of war, the effects of terrorism, civil unrest, strikes, currency controls, and governmental actions.

We work in international locations where there are high security risks, which could result in harm to our employees and contractors or substantial costs.

Some of our services are performed in high-risk locations where the country or location is suffering from political, social or economic issues, or war or civil unrest. In those locations where we have employees or operations, we may incur substantial costs to maintain the safety of our personnel. Despite these precautions, the safety of our personnel in these locations may continue to be at risk, and we have in the past and may in the future suffer the loss of employees and contractors.

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We are subject to significant foreign exchange and currency risks that could adversely affect our operations and our ability to reinvest earnings from operations, and our ability to limit our foreign exchange risk through hedging transactions may be limited.

A sizable portion of our consolidated revenue and consolidated operating expenses are in foreign currencies. As a result, we are subject to significant risks, including:

·         foreign exchange risks resulting from changes in foreign exchange rates and the implementation of exchange controls; and

·         limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries.

In particular, we conduct business in countries that have non-traded or “soft” currencies which, because of their restricted or limited trading markets, may be difficult to exchange for “hard” currencies. The national governments in some of these countries are often able to establish the exchange rates for the local currency. As a result, it may not be possible for us to engage in hedging transactions to mitigate the risks associated with fluctuations of the particular currency. We are often required to pay all or a portion of our costs associated with a project in the local soft currency. As a result, we generally attempt to negotiate contract terms with our customer, who is often affiliated with the local government, to provide that we are paid in the local currency in amounts that match our local expenses. If we are unable to match our costs with matching revenue in the local currency, we would be exposed to the risk of an adverse change in currency exchange rates.

Risks Relating to Our Common Stock

Our stock price is volatile.

The market price of our common stock is highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

·         services offered by us or our competitors;

·         additions or departures of key personnel;

·         our ability to execute its business plan;

·         operating results that fall below expectations;

·         loss of any strategic relationship;

·         industry developments;

·         economic and other external factors; and

·         period-to-period fluctuations in our financial results.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

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FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

The Financial Industry Regulatory Authority (“FINRA”) has adopted rules that relate to the application of the Commission’s penny stock rules in trading our securities and require that a broker/dealer have reasonable grounds for believing that the investment is suitable for that customer, prior to recommending the investment. Prior to recommending speculative, low priced securities to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative, low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker/dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock.

We incur significant expenses as a result of the Sarbanes-Oxley Act of 2002, which expenses may continue to negatively impact our financial performance.

We incur significant legal, accounting and other expenses as a result of the Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission, which control the corporate governance practices of public companies. Compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, as discussed in the following risk factor, has increased our expenses, including legal and accounting costs, and made some activities more time-consuming and costly.

Our internal controls over financial reporting are not considered effective, which could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 we are required to furnish a report by our management on our internal controls over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. For the current period ending September 30, 2011, we were unable to assert that our internal controls were effective. Accordingly, our shareholders could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.

Our past and future capital funding needs  have resulted in dilution to existing shareholders.

During the year ended September 30, 2011 we realized funding of $175,000 from Asher Enterprises, Inc., in the form of convertible notes, $75,000 of which (including $3,000 in interest) to date has been converted into nearly 5,000,000 shares of our common stock. Additionally, we will need to realize capital funding over the next year to further our business plan. We intend to raise this capital through equity offerings, debt placements or joint ventures. Should we secure a commitment to provide us with capital, such commitment may obligate us to issue shares of our common stock, warrants or create other rights to acquire our common stock. The issuances to Asher Enterprises and any new issuances of our common stock result in a dilution of our existing shareholders interests.

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Our common stock is currently deemed to be “penny stock”, which makes it more difficult for investors to sell their shares.

Our common stock is and will be subject to the “penny stock” rules adopted under section 15(g) of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company remains subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of the Company’s securities.

The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights for our directors, officers and employees may result in substantial expenditures by the Company and may discourage lawsuits against our directors, officers and employees.

Our certificate of incorporation contains a specific provision that eliminates the liability of directors for monetary damages to the Company and the Company’s stockholders; further, the Company is prepared to give such indemnification to its directors and officers to the extent provided by Nevada law. The Company may also have contractual indemnification obligations under its employment agreements with its executive officers. The foregoing indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which the Company may be unable to recoup. These provisions and resultant costs may also discourage the Company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by the Company’s stockholders against the Company’s directors and officers even though such actions, if successful, might otherwise benefit the Company and its stockholders.

ITEM 2.          UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 

On January 27, 2011, March 15, 2011, and June 1, 2011 the Company issued promissory notes in the amounts of $75,000, $60,000, $40,000 respectively, to Asher Enterprises, Inc., an unrelated party, at an interest rate of 8%, each with a nine month term, and an option to convert the outstanding balance of principal and interest into shares of our common stock at a 40% discount off the market price at the time of conversion, pursuant to the exemptions from registration provided by Section 4(2) and Regulation D of the Securities Act. We have issued shares of our common stock upon receiving conversion notices by Asher Enterprises, Inc., as follows:

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            *    Includes $3,000 in interest from the note due on October 27, 2011.

The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on the following factors: (1) the offers were isolated private transactions by the Company which did not involve public offerings; (2) the offeree has access to the kind of information which registration would disclose; and (3) the offeree is financially sophisticated.

The Company complied with the requirements of Regulation D of the Securities Act by: (i) foregoing any general solicitation or advertising to market the securities; (ii) offering only to an accredited offeree; (iii) having not violated antifraud prohibitions with the information provided to the offeree; (iv) being available to answer questions by the offeree; and (v) providing restricted promissory notes to the offeree.

On October 13, 2011, the board of directors authorized the issuance of 3,666,000 shares of common stock to Thomas R. Morgan, our CEO and a director, pursuant to an accord and satisfaction agreement for the settlement consideration of $109,980 or $0.03 per share, thereby satisfying the terms of his now expired employment agreement with Intelspec, which shares were authorized pursuant to the exemptions from registration provided by Section 4(2) of the Securities Act.

The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on the following factors: (1) the offer was an isolated private transactions by the Company which did not involve a public offering; (2) the offeree has access to the kind of information which registration would disclose; and (3) the offeree is financially sophisticated.

ITEM 3.          DEFAULTS ON SENIOR SECURITIES

None.
 

ITEM 4.          (REMOVED AND RESERVED)

Removed and reserved
 

ITEM 5.          OTHER INFORMATION
 

None.

ITEM 6.          EXHIBITS

Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page 28 of this Form 10-Q, and are incorporated herein by this reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Infrastructure Developments Corp.                                        Date

            /s/ Thomas Morgan                                                                  November 18, 2011

By: Thomas Morgan

Its: Chief Executive Officer and Director

            /s/ Digamber Naswa                                                                 November 18, 2011

By: Digamber Naswa

Its: Chief Financial Officer and Principal Accounting Officer

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INDEX TO EXHIBITS

Number      Description

3.1.1*          Articles of Incorporation filed with the Nevada Secretary of State on August 10, 2006. Incorporated by reference as Exhibits to the Form SB-1 filed on May 11, 2007.

3.1.2*          Certificate of Amendment to the Articles of Incorporation filed with the Nevada Secretary of State on April 23, 2007. Incorporated by reference to the Company’s Registration Statement on Form SB-1 filed with the Commission on May 11, 2007.

3.1.3*          The Certificate of Amendment to the Company’s Articles of Incorporation was filed with the Secretary of State of the Nevada on March 1, 2010. Incorporated by reference to the Company’s Definitive Information Statement on Schedule 14C as filed with the Commission on February 2, 2010.

3.1.4*          The Certificate of Amendment to the Company’s Articles of Incorporation was filed with the Secretary of State of the Nevada on April 9, 2010. Incorporated by reference to the Company’s current Report on Form 8-K as filed with the Commission on April 14, 2010.

3.2*             Bylaws. Incorporated by reference to the Company’s Registration Statement on Form SB-1 filed with the Commission on May 11, 2007.

10.1*           Asset Purchase Agreement, dated July 1, 2008, between 1^st Home Buy & Sell, Ltd. and DK Group N.A. N.V. Incorporated by reference to our current Report on Form 8-K as filed with the Commission on July 3, 2008.

10.2*           Securities Purchase Agreement, dated July 1, 2008, between Intelspec, Intelspec LLC and Tom Morgan. Incorporated by reference to our current Report on Form 8-K as filed with the Commission on April 26, 2010.

10.3*           Employment Agreement, dated August 1, 2008, between Intelspec and Tom Morgan. Incorporated by reference to the Company’s current Report on Form 8-K as filed with the Commission on April 26, 2010.

10.4*           Share Exchange Agreement, dated September 2, 2008, between Intelspec and Power Track Projects, FZE. Incorporated by reference to our current Report on Form 8-K as filed with the Commission on April 26, 2010.

10.5*           Split-Off Agreement, dated September 5, 2008, between 1^st Home Buy & Sell, Ltd. and Pacific Coast Development Corp. Incorporated by reference to the Company’s current Report on Form 8-K as filed with the Commission on September 9, 2008.

10.6*           Share Exchange Agreement dated April 1, 2010, between the Company and Intelspec. Incorporated by reference to the Company’s current Report on Form 8-K as filed with the Commission on April 8, 2010.

10.7*           Promissory Note with WWA Group, Inc., dated May 17, 2011. Incorporated by reference to the Company’s Form 10-Q filed with the Commission on May 23, 2011.

10.8*           Security Purchase Agreement and Convertible Promissory Note with Asher Enterprises, Inc. . Incorporated by reference to the Company’s Form 10-K filed with the Commission on October 7, 2011.

10.9*           Memorandum of Understanding and Addendum with Cleanfield Energy, Inc. Incorporated by reference to the Company’s Form 10-K filed with the Commission on October 7, 2011.

10.10           Accord and Satisfaction with Thomas R. Morgan (attached).

14*              Code of Ethics adopted October 6, 2011. Incorporated by reference to the Company’s Form 10-K filed with the Commission on October 7, 2011.

21*              Subsidiaries. Incorporated by reference to the Company’s current Report on Form 8-K as filed with the Commission on April 26, 2010.                            

31.1             Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (attached).

31.2             Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (attached).

32.1             Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached).

32.2             Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached).

101. INS     XBRL Instance Document^†

101. PRE     XBRL Taxonomy Extension Presentation Linkbase^†

101. LAB    XBRL Taxonomy Extension Label Linkbase^†

101. DEF    XBRL Taxonomy Extension Label Linkbase^†

101. CAL    XBRL Taxonomy Extension Label Linkbase^†

101. SCH    XBRL Taxonomy Extension Schema^†

*              Incorporated by reference from previous filings of the Company.

 ^†                     Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.     

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