Notes to the Financial Statements
September 30, 2010
NOTE 1 - ORGANIZATION AND HISTORY
Infrastructure Developments Corp. (the “Company”), formerly 1st Home Buy and Sell Ltd., was incorporated under the laws of the state of Nevada on August 10, 2006. The Company changed its name to “Infrastructure Developments Corp.” on March 1, 2010.
On April 14, 2010, the Company and Interspec International, Inc. (“Interspec”, formerly Intelspec International, Inc.), a Nevada corporation, engaged in engineering, construction, and project management executed a stock exchange agreement, whereby the Company agreed to acquire 100% of the issued and outstanding shares of Interspec in exchange for 14,000,000 shares of the Company’s common stock. Because the owners of Interspec became the principal shareholders of the Company through the transaction, Interspec was considered the acquirer for accounting purposes and this transaction is accounted for as a reverse acquisition or recapitalization of Interspec. Interspec was dissolved subsequent to the period ended June 30, 2014.
Effective June 25, 2014, the Company acquired the assets, business, and operations of Orbis Real Estate ("Orbis"), a real estate brokerage firm based in Dubai, United Arab Emirates. The transaction involved issuance of the Company's common shares in return for full control of Orbis’ business. The owners of Orbis became affiliate shareholders of the Company. Accordingly Orbis is accounted for as the predecessor to the Company and the historical financial statements are presented as those of the Company through June 25, 2015 after which the financial statements are consolidated with those of Infrastructure Developments Corp.
On July 1, 2015 the Company agreed to divest Orbis back to its original owners. Consideration to the Company included the return of the 160,000,000 shares issued to the owners of Orbis, and the assumption of all Orbis liabilities as of June 30, 2015. The Company has returned the 160,000,000 shares back to its treasury, and no longer consolidates the Orbis financial statements.
In the nine month period ending September 30, 2016 the Company sold its owned inventory of one Wing House, repaid a note payable of $65,379, converted a total of $189,403 in notes payable to common stock at par value $0.001 per share, and added an additional member to its board of directors. In June 2016 the company also signed an agreement to acquire Bidlive Management FZE, (“Bidlive”) a U.A.E. based entity that provides a software platform for webcasting live auctions to bidders. The acquisition closed on August 23, 2016, but was immediately reversed by mutual agreement due to disagreement over funding.
The Company’s project management business still provides services through a network of consultants and subsidiaries located in markets where the Company either is investigating project opportunities or opportunities to market its Wing House mobile shelters. The Company is also marketing alternative energy products such as solar panel, battery back-up systems, and magnetic transducer generators.
NOTE 2 – GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. Accordingly, they do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has accumulated losses and working capital and cash flows from operations are negative which raises doubt as to the validity of the going concern assumptions. These financials do not include any adjustments to the carrying value of the assets and liabilities, the reported revenues and expenses and balance sheet classifications used that would be necessary if the going concern assumption were not appropriate; such adjustments could be material.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation
The financial statements up to June 30, 2015 include the operations of the Orbis. For the periods subsequent to the acquisition date of June 25, 2014, up to June 30, 2015, the financial statements reflect the consolidated financial position and operations of the Company and Orbis. All intercompany transactions and balances have been eliminated in consolidation. The consolidation was discontinued after July 1, 2015.
b. Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities to the Company of three months or less to be cash equivalents.
c. Accounts Receivable
Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Specific reserves are estimated by management based on certain assumptions and variables, including the customer’s financial condition, age of the customer’s receivables, and changes in payment histories. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance has not been received by the contractual pay date. Interest is not charged on trade receivables that are past due.
d. Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation and amortization on capital leases and property and equipment are determined using the straight line method over the estimated useful lives (usually ten years) of the assets or terms of the leases. Expenditures for maintenance and repairs are expensed when incurred and betterments are capitalized. Gains and losses on the sale of property and equipment are reflected in operations.
e. Revenue Recognition
Revenues from Sales and Services consist of revenues earned in activities by the Company though project & construction management, sales of Wing Houses, and misc. services provided. All sales/service
INFRASTRUCTURE DEVELOPMENTS CORP.
Condensed Notes to the Financial Statements (Unaudited)
September 30, 2016
revenue is recognized when the sale/service is complete and the Company has determined that the sale/service proceeds are collectible.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Stock Based Compensation
The Company adopted SFAS No. 123-R effective January 1, 2006 using the modified prospective method. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123-R. The Company issued no compensatory options to its employees during the year ended December 31, 2015 and the year ended December 31, 2014.
g. Foreign Exchange
The Company’s reporting currency is the United States dollar. The Company’s functional currency is also the U.S. Dollar. (“USD”) Transactions denominated in foreign currencies are translated into USD and recorded at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated into USD at the foreign exchange rates prevailing at the balance sheet date. Realized and unrealized foreign exchange differences arising on translation are recognized in the income statement.
The Company expenses the cost of advertising as incurred. For the period ended September 30, 2016 and the period ended September 30, 2015, the Company had NIL as advertising expenses.
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.
j. 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 period.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. 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 period ended September 30, 2016 and September 30, 2015, no amounts were written off from the Company’s long-lived assets.
l. 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.
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.
n. Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.
o. 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
INFRASTRUCTURE DEVELOPMENTS CORP.
Condensed Notes to the Financial Statements (Unaudited)
September 30, 2016
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 4 – SHORT-TERM NOTES PAYABLE
The Company has from time to time short-term borrowings from various unrelated and related entities. These advances are typically non-interest bearing, unsecured and due upon demand. Because of the short-term nature of the notes the Company has not imputed an interest rate.
NOTE 5 – RELATED PARTY TRANSACTIONS
The Company had a balance of $32,066 in payables to related parties as of June 30, 2016, and $61,830 as of December 31, 2015.
NOTE 6 – STOCKHOLDERS' EQUITY
The Company is authorized to issue 3,000,000,000 shares of $0.001 par value common stock and 10,000,000 shares of preferred stock, par value $0.001 per share. All common stock shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.
As of September 30, 2016, the Company had 1,186,194,524 shares of common stock and no preferred Stock issued and outstanding.
NOTE 7 – 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 is not aware of any subsequent events which would require recognition or disclosure in the financial statements.
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 current report contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can also 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 current report. Our fiscal year end is December 31.
The Company was incorporated in Nevada as “1st Home Buy & Sell Ltd.” on August 10, 2006, to operate as a real estate company. On August 31, 2008, the Company ceased all operations to become a “shell” company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and sought to identify a suitable business opportunity. On March 1, 2010, while evaluating possible business combinations, acquisitions or development opportunities, the Company changed its name from “1st Home Buy & Sell Ltd.” to “Infrastructure Developments Corp.”
On April 7, 2010 the Company signed a share exchange agreement to acquire Intelspec International, Inc. (“Intelspec”) in exchange for 14,000,000 shares of its common stock. The acquisition of Intelspec was completed on April 14, 2010, whereby the shareholders of Intelspec acquired 70% of the Company. The closing of the transaction represented a change in control which for financial reporting purposes was characterized as a reverse acquisition or recapitalization of Intelspec. Following the closing, our principal business became that of Intelspec. On April 26, 2010, the Company disclosed the information that would have been required if it were filing a general form for registration of securities on Form 10, as required under Item 2.01(f) of Form 8-K, thereby removing its status as a “shell” company.
The Company effected a six for one forward split of its common stock on June 11, 2010 that increased the Company’s issued and outstanding shares from 20,000,000 to 120,000,000.
Intelspec changed its name to Interspec International, Inc. ("Interspec") pursuant to an out-of-court legal settlement with Intel Corporation on November 21, 2011
On February 6, 2012, the Company made the determination to change its fiscal year end from June 30 to December 31.
On February 4, 2013, the Company authorized the issuance of 9,000,000 of its 10,000,000 available shares of Super Voting Preferred Stock for the settlement of nearly $256,000 in debt. The holders of Super Voting Preferred Stock are entitled to fifty votes for each share of Super Voting Preferred Stock held at each meeting of stockholders of the Company.
On March 31, 2014, stockholders consented in writing to amend the Company's Articles of Incorporation (the "Articles of Amendment") to increase the Company’s authorized shares of common stock from 500,000,000 common shares to 3,000,000,000 shares. The Company subsequently disseminated a Definitive Information Statement. The Articles of Amendment became effective upon filing with the Nevada Secretary of State on June 23, 2014.
On June 25, 2014, the Company closed the Agreement with Joseph and acquired Orbis Real Estate ("Orbis") as a wholly owned subsidiary. The Company authorized the issuance of 160,000,000 shares to Joseph pursuant to the Agreement. At that time the Company ceased being a "shell” company.
On July 1 the Company agreed to divest Orbis back to its original owners. Consideration to the Company included the return of the 160,000,000 shares issued to the owners of Orbis, and the assumption of all Orbis liabilities as of June 30, 2015. The Company has returned the 160,000,000 shares back to its treasury, and no longer consolidates the Orbis financial statements.
Since the divestiture of Orbis, the Company sold back-up solar /battery power systems and Wing Houses for a total of $100,000 in gross revenue; borrowed and repaid $65,379 to a short term lender; converted a total of $189,403 in notes payable to common stock at par value $0.001 per share; and added two additional member to its board of directors. In June 2016 the company also signed an agreement to acquire Bidlive Management FZE, a U.A.E. based entity that provides a software platform for webcasting live auctions to bidders. The acquisition closed on August 23, 2016, but was immediately reversed by mutual agreement due to a disagreement over funding.
The Company’s operations and plans have been significantly impacted by global developments in 2015. In particular, the sustained downturn in global oil and commodity prices had significant repercussions in the Gulf Cooperation Council economies, notably the United Arab Emirates (UAE). The 2015 sustained slowdown in the UAE caused IDVC to divest its interest in Orbis Realty on June 30, 2015, retiring 160,000,000 shares of common stock in the process and incurring no loss. IDVC has also reduced its emphasis on energy-related markets in the Middle East and the U.S. in its marketing plans for the Wing House mobile shelters.
However, since the downturn in certain markets where the company operates, and the June 2015 divestiture of Orbis, the Company generated net profit in the full year of 2015 and the six months ending June 30, 2016. The Company has also virtually eliminated all its debt with minimal stockholder dilution, is carrying no depreciating assets, and accruing only nominal expenses.
The Company is focused on our project management business still provides services through a network of consultants and subsidiaries located in markets where the Company either is investigating project opportunities or opportunities to market its Wing House mobile shelters. The Company is also marketing alternative energy products such as solar panel, battery back-up systems, and magnetic transducer generators.
Wing House Mobile Shelters
The standard Wing House units are mobile modular prefabricated structures that fold out from standard 40-foot or 20-foot shipping containers to ready-to-use structures, with all baths, water, plumbing, air conditioning, lighting, cable, network and electrical fittings in place. This folding capacity allows a standard 40-foot unit delivered with a 320 square foot footprint to open into an 880 square foot structure in 4 to 5 hours, in a process requiring only basic hand tools and workers capable of following simple instructions. Any truck and hoisting equipment capable of handling standard shipping containers can transport and place a Wing House. Since container sizes are standard around the world, this equipment is widely available. The combination of standard ISO container dimensions and fittings and the ability to quickly unfold into a structure much larger than the original container makes the Wing House extremely economical to ship. Two or more Wing Houses can be joined end to end or side to side to form larger structures. Multiple standard floor plan configurations are available and custom plans can be ordered.
While other container-based prefabricated structures are available, they offer final available space equal to that of the original container. We are aware of no other container-based prefabricated modular structure that shares the ability of the Wing House to open into a structure much larger than the delivered unit.
Wing Houses are rated for extreme temperatures, safe in hurricanes and earthquakes, meet the highest safety and building code standards, and are very economical. The units use insulation sourced from Bradford Insulation, Australia’s leading insulation brand. The units carry a 5-star energy use rating and are ideal for use in extreme climates.
Wing Houses come in many building configurations and room configurations, and they retail at approximately $45,000-$85,000 ex-port in China. The Wing House is built in China by Renhe Manufacturing and has been re-branded by the Company. Renhe has an exclusive worldwide distribution agreement with MKL Asia, a company owned by the original patent holder who is also the principal of Renhe. MKL Asia has granted a sub-distribution license to the Company and its affiliates to market and sell Wing House in North America, the Middle East region and most of Southeast Asia.
Wing Houses are suitable for a wide range of applications, including:
living and office space
on site showrooms
forward operations bases
Standard configurations include:
3 bedrooms + 1 living room + 1 kitchen + 1 bath + 1 laundry
4 bedrooms + 2 kitchens + 2 baths
4 bedrooms + 4 baths
6 bedrooms + 6 baths
8 bedrooms + 4 baths
1 classroom + 1 bath + 1 office
1 large room
The Wing House is available in configurations specifically optimized for classroom use, wired with high speed Internet and with computer stations included.
The range of products also includes the newly developed “pop out” 20 and 40 foot rapid deployment units that slide out in minutes and are also pre-fit with all baths and fixtures.
The Freedonia Group predicted in March 2016 that global demand for prefabricated housing is will increase 2.7 percent per year through 2019 to 3.4 million units, with “the vast majority” concentrated in the Asia-Pacific region. Global Industry Analysts Inc projected in May 2015 that demand in the Asia-Pacific region would reach a compound annual growth rate of 9.3% through 2020.
IDVC holds distribution rights for the Wing House in Southeast Asia, a region that the OECD expects to maintain a “robust” average of 5.5% over the next five years. Southeast Asian nations have abundant use for rapidly deployable, easily moveable prefabricated structures: large infrastructure projects, mining and other resource-extraction industries, mobile classrooms, disaster relief, refugee housing, and temporary offices are among the niches open for the Wing House in Southeast Asia. Southeast Asia’s rapid growth and multiple product niches make the region IDVC’s primary target for marketing the Wing House.
The North American market for modular, transportable, prefabricated structures is dominated by workforce housing for the energy and mining industries. Lower oil prices and commodity prices in 2015 resulted in less demand from these industries for mobile structures, a situation that is expected to continue through the medium term future. US marketing for the Wing House will in the meantime focus on mining, logging, and other resource exploitation industries, and on disaster relief, where the mobility and rapid deployment capacity of the Wing House are significant competitive advantages.
IDVC holds distribution rights for the Wing House in the Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE). The current environment of low world oil prices has resulted in a dramatic retrenchment in spending on both energy development and major construction projects. The Company has decided to curtail marketing efforts in this region until economic conditions are more favorable.
Wing House Competition
The Wing House mobile shelter faces no direct competition as a prefabricated expandable container-based mobile shelter system, although a variety of site-built shelter options provide indirect competition. Typical portable cabins used as temporary offices in some regions are much cheaper than the Wing Houses, but they (i) have a life span of much less than half that of a Wing House, (ii) cannot be moved and re-used without virtually rebuilding the units, (iii) can only be trucked as 35 square meters of cabin space per truck (as opposed to Wing House 80 square meter per truck folded in), and (iv) have inferior wiring, lighting, bath fixtures, and insulation. The Wing Houses are competitively priced in certain markets, and for certain users that are looking for more modern and efficient workforce accommodation as opposed to the more utilitarian pre-fabricated structures used in the past.
A number of US and Canadian companies compete in the high quality prefabricated structure market, notably Sunbelt Modular, Pacific Mobile Structures, Mobile Modular, Satellite Shelters, Williams Scotsman, M Space Modular Buildings, and ModSpace. These companies use a variety of systems, typically “panelized”, to install mobile structures in various configurations. Many of these structures are designed to be semi-permanent, and fill a distinctly different niche from the Wing House. They offer greater flexibility in terms of size, with larger and more open floor plans available. They are also typically more expensive and require more time to install. While these structures will continue to dominate the market for larger structures, the Company believes that the Wing House will fill an underserved niche demand for high quality structures offering a far higher degree of mobility and far faster installation than current offerings.
The Company will also compete with companies focused on the leasing of modular workforce housing and the management of workforce housing facilities. Companies engaged in this business include Black Diamond Group Limited, Target Logistics, Atco Structures and Logistics, Rapid Camp Ltd, Guerdon Modular Buildings, Williams Scotsman, Stock Modular, Wilmot Modular Structures, and many others. While some of these companies do produce their own modular housing units, their primary business lies in leasing, installation, and management of workforce camps. The rapid growth of this sector is demonstrated by the recent results of the Black Diamond Group, a publicly traded industry leader with operations focused on Western Canada, which as more than tripled it income since 2009.
The Company recognizes these companies as competitors but also sees them as potential customers. If the Company can provide these companies with a facility option that is more economical, more efficient, and more easily portable than the structures they currently use, we believe that a significant number of these companies would adopt the Wing House as part of their leasing fleet.
Solar Energy Systems
IDVC holds a marketing license agreement with First Energy Solutions Provider Inc (FESPI), a Canadian-owned provider of alternative energy solutions headquartered in the Philippines. The Company is focusing on marketing medium scale residential, commercial, and industrial solar power and battery backup systems in the Philippines and Cambodia, where conditions ore uniquely suitable for rapid growth in the solar industry. Both countries are experiencing rapid economic growth with consequent high growth in electricity demand. Both countries have a high degree of solar irradiation, combined with inadequate conventional generating capacity, high electricity costs, and inadequate and unreliable distribution grids, a situation which has made both grid-tied and off-grid solar installations extremely competitive. Both countries offer substantial government incentives for solar power installations, an additional competitive advantage.
The Asian Development Bank has stated that “Cambodia has the highest energy prices in Southeast Asia, ranging from $0.18/kWh to $1/kWh in the rural areas… Cambodia has substantial solar resources that could be harnessed on a competitive basis.” In the Philippines, widespread dissatisfaction with a primitive distribution grid, the high cost of grid power, and the difficulty of reliable distribution in an archipelagic country have driven intense interest in solar power as a decentralized, independent option for powering both rural and urban residences, businesses, and industries.
Terje Osmundsen, Senior Vice President of Norway’s Scatc Solar ASA, recently commented that “The Philippines has huge potential for generating unsubsidized solar power as the cost of producing solar power has fallen by 60% since 2009, when the current Power Development Plan was approved. This has made solar power increasingly price-competitive with fossil fuel-based power plants”.
IDVC is a licensed marketing agent for solar energy systems designed and sold by First Energy Systems Provider Inc in the Philippines, Cambodia, and the United Arab Emirates. These systems are fully integrated use-ready installations, and prices include installation and system design tailored to the user’s needs. All the system owner needs to do is turn the system on and watch energy costs shrink. Most users will find that the cost of the installation can be recovered in five years… after that, power is essentially free.
The solar power systems marketed by IDVC may be generally divided into three types: grid-tied, hybrid, and off-grid. A grid-tied solar system retains a connection to the electrical grid, allowing the user to fall back on grid power when the solar system is unable to generate the needed power. This is by far the most popular form of installation, and offers a high degree of flexibility to users.
The simplest form of grid-tied system uses solar power to supplement grid power. Essentially this system relies on solar power when generation from the solar panels is sufficient to meet the demand from the installation, and automatically switches back to main power when solar power is insufficient. These systems are relatively inexpensive to install and can significantly reduce electricity costs, especially for users that have significant daytime consumption. These systems consist simply of solar panels, an inverted to convert the solar power from DC to AC and synchronize the phase and frequency with the electrical grid, and the switching hardware needed to move between solar and main power.
The hybrid system retains the connection to main power, but introduces a charge controller and battery bank, allowing reliance on solar power to extend into periods of low or absent sunshine. Since many solar systems provide surplus power during periods of peak sunshine, these systems provide a way to capture that surplus for later use. Some hybrid systems use sufficient battery power to run an installation for 24 hours, and rely on grid power only for backup. Others use smaller battery banks that are designed to provide more limited coverage, relying on grid power during off-peak hours, usually late at night, when electricity is typically cheaper. Hybrid systems represent a higher up-front cost, but can also generate more significant savings. For example, a power user with high demand in the evening would be well served by a hybrid system with sufficient battery power to provide 4-6 hours of backup power and reverting to grid power only during the night and early morning hours.
An off-grid solar system is designed for users who have no access to an electrical grid or prefer to be completely independent of grid power. Typically the off-grid system is identical to the hybrid system, but with a larger battery bank and a generator for backup power. These systems represent a considerable investment, but for many users, for example an island resort or remote business site that is fully dependent on a generator for power, they remain cost-effective and economical.
IDVC, in cooperation with FESPI, provides all of these system types in a complete, fully integrated package including professional installation, allowing the client to take over a fully operable system with a single complete, reliable price quotation for a system tailored to their specific needs.
IDVC will be aggressively marketing its integrated solar power systems in these markets, both for existing structures and in conjunction with the Wing House, which is ideally suited to solar power.
Additional Operational Opportunities
The Company has been involved in managing design/build construction projects in the past in Southeast Asia, namely barracks and other facilities managed for the US Navy. Operational opportunities in this industry are still being pursued.
The Company signed an agreement in October 2015 with EverForce Energy, Inc., a Toronto Canada based company that produces high capacity magnetic transducer generators, for distributing and installing power plants in various countries in the Middle East and Africa. This business is expected to develop into a revenue stream for the Company in 2017.
Analysis of Financial Condition and Results of Operations
For the three month period ended September 30, 2016, the Company generated no income from operations. We generated general and administrative expenses and direct expenses related to marketing efforts and overhead.
Net losses for the three month period ended September 30, 2016, was $13,537 as compared to net income of $16,421 in the three months ending June 30, 2016, and net losses of $66,610 in the three months ending September 30, 2015. The transition to net losses from net income in the current period was due to no sales of Wing Houses in the current three month period. The Company is confident that it will return to profitability in the next twelve months based on the anticipated development of its Wing House and alternative energy businesses.
Net revenue for the three month period ended September 30, 2016 was $0 as compared to $90,000 in the three month period ending June 30, 2016 and $0 in the three month period ending September 30, 2015. We expect net revenues to increase over the next twelve months as a result of development of our Wing House and alternative energy businesses.
Gross profit for the three month periods ended September 30, 2016 and September 30, 2015 was $0. We expect gross profit to increase over the next twelve months as our business develops.
Operating expense for the three month period ended September 30, 2016 was $13,537 as compared to $10,231 for the three month period ended June 30, 2016 and $66,610 in the three month period ending September 30, 2015. Operating expenses decreased in the 2016 three month period due to lower direct expense and overhead.
Oher income for the three month periods ended September 30, 2016 was $0, as compared to other income of $1,729 in the three months ending September 30, 2015.
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, 2016 we had a working capital deficit of $14,123, compared to a working capital deficit of $196,342 as of December 31, 2015.
Cash flows used in operating activities for the nine month period ended September 30, 2016 was $264,204, as compared to $155,486 used by operating activities in the nine months ending September 30, 2015. Cash flow used in operating activities increased in the current year to date period due to substantial decrease in liabilities, and an increase in accounts payable.
There was $68,000 in cash flow generated by investing activities in the nine month period ending September 30, 2016, from the sale of the wing house in the period. Cash flow generated by financing activities was $189,403 in the current nine month period from conversion of notes payable to common stock. We expect to use cash flow in investing activities over the next twelve months as we develop our businesses.
Our current assets are insufficient to meet the Company’s business objectives over the next twelve months. We need a minimum of $100,000 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, with the exception of adding performance based compensated sales staff to expand the Bidlive business model.
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 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.
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 quarterly 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 quarterly 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.
Our auditors included an explanatory statement in their report on the Company’s consolidated financial statements for the years ended December 31, 2015 and 2014, 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 2016 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 3 to our consolidated financial statements for recent accounting pronouncements.
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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this quarterly report, 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 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 not effective 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 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 June 30, 2016, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
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 December 31, 2015 and 2014, stating that there are certain factors which raise substantial doubt about the Company’s ability to continue as a going concern. These factors include a working capital deficit, negative cash flows, and accumulated losses.
We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could seriously harm our business.
Due to the specialized nature of our businesses, our future performance is highly dependent upon the continued services of our key personnel and executive officers, the development of additional management personnel, and the recruitment and retention of new qualified engineering, manufacturing, marketing, sales, and management personnel for our operations. Competition for personnel is intense, and we may not be successful in attracting or retaining qualified personnel. In addition, key personnel may be required to receive security clearances and substantial training in order to work on government sponsored programs or perform related tasks. The loss of key employees, our inability to attract new qualified employees or adequately train employees, or the delay in hiring key personnel could impair our ability to prepare bids for new projects, fill orders, or develop new products.
International and political events may adversely affect our operations.
To date our revenue is derived entirely from non-United States operations, which exposes us to risks inherent in doing business in each of the countries in which we transact business. The occurrence of any of the risks described below could have a material adverse effect on our results of operations and financial condition. Operations in countries other than the United States are subject to various risks peculiar to each country. With respect to any particular country, these risks may include:
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;
currency fluctuations, devaluations, and conversion restrictions;
confiscatory taxation or other adverse tax policies;
governmental activities that limit or disrupt markets, restrict payments, or limit the movement of funds;
governmental activities that may result in the deprivation of contract rights; and
governmental activities that may result in the inability to obtain or retain licenses required for operation.
Risks Relating to Our Common Stock
Our stock price is volatile.
The market price of our common stock is highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
services offered by us or our competitors;
additions or departures of key personnel;
our ability to execute its business plan;
operating results that fall below expectations;
loss of any strategic relationship;
economic and other external factors; and
period-to-period fluctuations in our financial results.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
We incur significant expenses as a result of the Sarbanes-Oxley Act of 2002, which expenses may continue to negatively impact our financial performance.
We incur significant legal, accounting and other expenses as a result of the Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission, which control the corporate governance practices of public companies. Compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, as discussed in the following risk factor, has increased our expenses, including legal and accounting costs, and made some activities more time-consuming and costly.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
The Financial Industry Regulatory Authority (“FINRA”) has adopted rules that relate to the application of the Commission’s penny stock rules in trading our securities and require that a broker/dealer have reasonable grounds for believing that the investment is suitable for that customer, prior to recommending the investment. Prior to recommending speculative, low priced securities to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative, low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker/dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock.
Our internal controls over financial reporting are not considered effective, which conclusion could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 we are required to furnish a report by our management on our internal controls over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. For the period ending March 31, 2016, we were unable to assert that our internal controls were effective. Accordingly, our shareholders could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.
Our past capital funding needs have resulted in dilution to existing shareholders.
We have realized funding from Asher Enterprises, Inc. ("Asher"), in the form of convertible notes, which has been converted into shares of our common stock. Additionally, we will need to realize capital funding over the next year to further our business plan. We intend to raise this capital through equity offerings, debt placements or joint ventures. Should we secure a commitment to provide us with capital, such commitment may obligate us to issue shares of our common stock, warrants or create other rights to acquire our common stock. Any new issuances of our common stock result in a dilution of our existing shareholders interests.
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.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
DEFAULTS ON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page 27 of this Form 10-Q, and are incorporated herein by this reference.
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.
/s/ Eric Montandon
March 27, 2017
By: Eric Montandon
Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer and Director
INDEX TO EXHIBITS
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.
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.
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.
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.
Certificate of Amendment filed with the Nevada Secretary of State on June 23, 2014. Incorporated by reference to the Company's Form 8-K/A-2 filed with the Commission on November 12, 2014.
Bylaws. Incorporated by reference to the Company’s Registration Statement on Form SB-1 filed with the Commission on May 11, 2007.
Securities Purchase Agreement, dated July 1, 2008, between Interspec, Interspec LLC and Tom Morgan. Incorporated by reference to our current Report on Form 8-K as filed with the Commission on April 26, 2010.
Employment Agreement, dated August 1, 2008, between Interspec 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.
Share Exchange Agreement dated April 1, 2010, between the Company and Interspec. Incorporated by reference to the Company’s current Report on Form 8-K as filed with the Commission on April 8, 2010.
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.
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.
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.
Accord and Satisfaction with Thomas R. Morgan. Incorporated by reference to the Company’s Form 10-Q filed with the Commission on November 18, 2011.
Share Exchange Agreement with InterMedia Development Corporation (dated January 11, 2012) entered into on February 1, 2012. Incorporated by reference to the Company’s Form 8-K filed with the Commission on February 13, 2012.
Debt Settlement Agreement with Morningstar Corporate Communications (dated April 11, 2012). Incorporated by reference to the Company's Form 10-Q filed with the Commission on May 15, 2012.
Debt Settlement Agreement with Cleanfield Communications (dated June 4, 2012). Incorporated by reference to the Company's Form 10-Q filed with the Commission on August 20, 2012.
Acquisition Agreement with Sagar Joseph Choran dated April 1, 2014. Incorporated by reference to the Company's Form 8-K/A-2 filed with the Commission on November 12, 2014.
Orbis Lease. Incorporated by reference to the Company's Form 8-K/A-2 filed with the Commission on November 12, 2014.
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.
Subsidiaries. Incorporated by reference to the Company’s current Report on Form 8-K as filed with the Commission on April 26, 2010.
Certification of the Chief Executive Officer and 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).
Certification of the Chief Executive Officer and 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).
XBRL Instance Document†
XBRL Taxonomy Extension Presentation Linkbase†
XBRL Taxonomy Extension Label Linkbase†
XBRL Taxonomy Extension Label Linkbase†
XBRL Taxonomy Extension Label Linkbase†
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.