Item 1A. Risk Factors.
An investment in our common stock involves a number of very
significant risks. You should carefully consider the following risks and
uncertainties in addition to other information in this report in evaluating our
company before purchasing our securities. Our operating results and financial
condition could be seriously harmed as a result of the occurrence of any of the
following risks. You could lose all or part of your investment due to any of
these risks.
Risks Related to Our Business
The sale of fabric is a new operation of ours with a limited
operating history and history of business, revenue generation or production
history.
We have never been engaged in the sale of fabric. There could
be limited value to the current portfolio of technologies and raise significant
doubt about our commercial viability. Our future operations are dependent upon
many factors, including the ability to create sales from its current portfolio
of technology.
Operating results may fluctuate depending on a number of
factors which may cause the value of our shares to decrease significantly.
Operating results may fluctuate as a result of a number of
factors, many of which will be outside of our control. As a result of these
fluctuations, financial planning and forecasting may be more difficult and
comparisons of operating results on a period-to-period basis may not necessarily
be meaningful. Our business can be seasonal in nature, reflecting overall
economic conditions as well as client budgeting and buying patterns in the
textile and technical apparel industries. This may result in the fluctuation of
operating results. Further, the cyclicality and seasonality of our business
could become more pronounced and may cause operating results to fluctuate more
widely.
Additional funds for our planned operations will be
required.
We will need substantial funding for our planned operations. No
assurances can be given that we will be able to raise the additional funding
that will be required for such activities. To meet such funding requirements, we
will be required to undertake additional equity financing, which would be
dilutive to shareholders. Debt financing, if available, may also involve
restrictions on financing and operating activities. There is no assurance that
additional financing will be available on terms acceptable to us or at all. If
we are unable to obtain additional financing as needed, we will be required to
reduce the scope of our operations.
Third-party technology licenses may not continue to be
available to us in the future.
We will rely on certain technology that we license from GTBC.
These third-party technology licenses may not in the future be available to us
on commercially reasonable terms, or at all. The loss of any of these technology
licenses could result in delays in performance of work until our company
identifies, licenses and integrates equivalent technology, and it may not be
able to identify, license or integrate any such equivalent technology in a
timely manner or at all. Any resulting delays in performance could damage our
reputation, which could materially adversely affect our business, operating
results or financial condition.
Others may assert intellectual property infringement claims
against us.
Infringement or misappropriation claims (or claims for
indemnification resulting from such claims) against us may be asserted or
prosecuted, regardless of their merit, and any such assertions or prosecutions
may adversely affect our business and/or operating results. Irrespective of the
validity or the successful assertion of such claims, we would incur significant
costs and diversion of resources relating to the defense of such claims, which
could have an adverse effect on our business, operating results or both.
If any claims or actions are asserted against us, we may seek to obtain a license of a third-party’s intellectual property rights; however, under such circumstances such a license may not be available on reasonable terms or at all. Any such
litigation could result in a material adverse effect on the business, prospects, and financial results of our company.
Adverse economic conditions may have an adverse effect on the business and financial results of our company.
Textiles and garments may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, particularly those in Canada and the United States, and
other factors such as consumer confidence in future economic conditions, fears of recession, the availability of consumer credit, level of unemployment, tax rates and the cost of consumer credit. As global economic conditions continue to be volatile
or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable. The current volatility in the United States economy in particular has resulted in an overall slowing in growth in the retail sector because of
decreased consumer spending, which may remain depressed for the foreseeable future. These unfavorable economic conditions may lead consumers to delay or reduce purchase of fabric products and therefore have a material adverse effect on our financial
condition.
Unpredictability of demand could negatively influence our product offerings, plans operations and strategies.
Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demands in a timely manner. All of our future products are subject to changing consumer preferences that cannot be
predicted with certainty. If we are unable to introduce new products or novel technologies in a timely manner or our new products or technologies are not accepted by our customers, our competitors may introduce similar products in a timelier
fashion, which could hurt our goal to be viewed as a leader in performance fabric innovation. Our new products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of performance fabrics or away from
these types of products altogether, and our future success depends in part on our ability to anticipate and respond to these changes. Failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other
things, lower sales and excess inventory levels. Even if we are successful in anticipating consumer preferences, our failure to effectively introduce new products that are accepted by consumers could result in a decrease in net revenue and excess
inventory levels, which could have a material adverse effect on our financial condition.
A growing competitive market in technologically advanced textiles could affect our ability to gain market share.
The market for performance textiles is highly competitive. It includes increasing competition from established companies who are expanding their production and marketing of performance products, as well as from frequent new entrants to the market.
There can be no assurance that other companies with greater financial and technological resources will not develop similar scientifically advance fabric technologies similar to our company’s or with greater perceived benefits which would
affect our ability to compete successfully against existing competitors or future entrants into the market.
Raw materials required in the manufacture of products may be susceptible availability and pricing and quality fluctuations and may adversely affect our financial results.
Our business will rely on externally sourced raw materials in our manufacturing operations, and will business with a broad range of suppliers to ensure steady supplies of high-quality raw materials at competitive prices. Many of the parts or
materials used in manufacturing of our textiles are anticipated to be made from oil. If the price of crude oil rises, the purchase price of such parts or materials may increase as well. Further, unanticipated contingencies among these suppliers or
if parts and materials procured by these suppliers suffer from quality problems or are in short supply, we may be forced to discontinue production. Such events, if occurred, may adversely affect our financial position and results of operations.
Brand leaders are slow to adopt new technologies and the long business development cycle could delay the return on investment of resources required to develop our business.
Textile innovation for customized product development is a collaborative effort between suppliers, our company and the customer. All play a key role to ensure the functionality and performance of the products are developed to meet the
customer’s specific technical textile requirements. Technological advances in textiles are slow to be adopted by large multinational companies and approvals must be had at many stages of the buying process. As a result, the extended business
development cycle and delayed of return on investment may have an adverse effect our financial condition.
We have limited resources for marketing of our products and we may not be able to attract sufficient paying customers to make our business sustainable.
We have limited resources for marketing of our products. Our future sales will depend in large part on our ability to attract sufficient paying customers to make our business profitable and sustainable. Also, we may not be able to attract and retain
personnel or be able to build an efficient and effective marketing force, which could negatively impact sales of our products, and reduce our revenues and profitability.
Our ability to implement our business and marketing strategy.
The implementation of our business and marketing strategy will depend on a number of factors. These include our ability to (i) find and hire reliable and sufficiently skilled third-party marketing personnel, (ii) make our products known and
establish a trusted brand to our potential end user customers, (iii) establish a significant paying customer base, (iv) obtain adequate financing on favorable terms in order to fund our business, (v) maintain appropriate procedures, policies and
systems; (vi) hire, train and retain skilled employees, and (vii) operate successfully and profitably within an environment of increasing competition. Our inability
to manage any or all of these factors could impair our ability to
implement our business strategy successfully, which could have a material adverse effect on our business, financial condition and the results of our operations.
Our operating results may prove unpredictable.
Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which we have no control over. Factors that may cause our operating results to fluctuate significantly include: the level of commercial
acceptance by the public of our products; fluctuations in the demand for our products; the amount and timing of operating costs and capital expenditures relating to the operation of and/or expansion of our business, operations, infrastructure and
general economic conditions. If realized, any of these risks could have a material adverse effect on our business, financial condition and the results of operations.
The current
state of capital markets, particularly for small companies, is expected to reduce our ability to obtain the financing necessary to continue our business. If we cannot raise the funds that we need to continue acquisitions and
fund future business opportunities, we will go out of business and investors will lose their entire investment in our company.
Like other smaller companies, we face difficulties in raising capital for our continued operations and to consummate a business opportunity with a viable business. We may not be able to raise money through the sale of our equity securities or
through borrowing funds on terms we find acceptable.
Because James Bregani
controls a large percentage of our voting stock, he has the ability to influence matters affecting our stockholders.
James Bregani, a majority shareholder, owns over 40% of our common stock and controls a majority of the votes attached to our outstanding voting securities. As a result, he has the ability to influence matters affecting our stockholders, including
the election of directors, the acquisition of assets, and the issuance of securities. Because he controls a majority of votes, it would be very difficult for investors to replace our management if they disagree with the way our business is being
operated. Because the influence by Mr. Bregani could result in management making decisions that are in the best interest of Mr. Bregani and not in the best interest of the investors, you may lose some or all of the value of your investment in our
common stock.
Our Articles of Incorporation exculpate our officers and
directors from certain liability to our company or our stockholders.
Our Articles of Incorporation contain a provision limiting the
liability of our officers and directors for their acts or failures to act,
except for acts involving intentional misconduct, fraud or a knowing violation
of law. This limitation on liability may reduce the likelihood of derivative
litigation against our officers and directors and may discourage or deter our
stockholders from suing our officers and directors based upon breaches of their
duties to our company.