TPAC really knows how to cover there buts.. This is scary listed in there 10-k. I highlight a few very important outs..... I stopped reading, too much bullcht
Risks Relating to Our Company and Business
We do not have a significant operating history and, as a result, there is a limited amount of information about us on which to make an investment decision. We were incorporated in June 2007 to engage in the business of oil and gas exploration. We terminated that business line in February 2010 and since then have been engaged in the business of designing, manufacturing and selling aerospace quality component parts for commercial and military aircraft, space vehicles, power plants and surface and undersea vessels. To date, our operations have focused on the development of our production facility in China and the design and engineering of our initial product line of spherical bearings. While our chief executive officer, William McKay, has significant experience in the bearing manufacturing industry, our company has no prior operating experience in the manufacture or distribution of bearings. Accordingly, there is little operating history upon which to judge our current operations or future success. The likelihood of our success must be considered in light of the problems, expenses, complications and delays frequently encountered in connection with the development of a new business.
We are a development-stage business that has minimal revenue producing operations and expects to incur operating losses until such time, if ever, as we are able to develop significant revenue. To date, we have not commenced substantial commercial manufacture or sales of our aircraft component products. Accordingly, we have not generated significant revenues from these operations nor have we realized a profit from our operations, and there is little likelihood that we will generate significant revenues or realize any profits in the short term. As we try to build our aircraft component business, we expect a significant increase in our operating costs. Consequently, we expect to continue to incur operating losses and negative cash flow until we generate significant revenue from the sale of our products.
The report of our independent registered public accounting firm for the fiscal year ended October 31, 2015 states that due to our losses from operations and lack of working capital there is substantial doubt about our ability to continue as a going concern.
Our business is capital intensive and we will need additional capital to execute our business plan and fund operations, and we may not be able to obtain such capital on acceptable terms or at all. As of October 31, 2015, we had total assets of $13,705 and a working capital deficit of $401,796. Since October 31, 2015, our working capital has decreased as a result of continuing losses from operations. We estimate that we require approximately $2 million of additional working capital over the next 12 months in order to fund our marketing and distribution of the initial line of aircraft component products to be manufactured at our Dongguan facility and to fund our expected operating losses as we endeavor to build revenue and achieve a profitable level of operations. However, there are no commitments or understandings at this time with any third parties for their provision of capital to us.
The report of our independent registered public accounting firm for the fiscal year ended October 31, 2015 states that due to our losses from operations and lack of working capital there is substantial doubt about our ability to continue as a going concern.
We will endeavor to raise the additional required funds through various financing sources, including the sale of our equity and debt securities and, subject to our commencement of significant revenue producing operations, the procurement of commercial debt financing. However, there can be no guarantees that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to expand or continue our business as desired and operating results may be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced and the new equity securities may have rights, preferences or privileges senior to those of the holders of our common stock.
Our ability to obtain additional capital on acceptable terms or at all is subject to a variety of uncertainties, including:
· our ability to generate revenue and net income;
· investors' perceptions of, and demand for, aircraft component products;
· conditions of the U.S. and other capital markets in which we may seek to raise funds;
· our future results of operations, financial condition and cash flows;
· governmental regulation; and
· economic, political and other conditions in the United States and other countries.
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THIS IS THE BIG RED FLAG
Our products are subject to certain approvals and qualification, and the failure to obtain such approvals and qualification would materially reduce our revenues and profitability. Obtaining product approvals from regulatory agencies and customers is essential to servicing the aerospace market. Qualification standards are rigorous and parts manufactured at such facilities must meet various qualification testing criteria. We received final approval from NAVAIR on March 5, 2013, which allows us to manufacture and sell SAE-AS81820 and 81934 bearings and bushings. However, we expect that we will need to raise at least $1 million of capital or to develop a strategic partnership, through which the partner will contribute working capital, in order to better develop international marketing and production.
Our business strategy is dependent on our ability to establish local market joint ventures outside the United States. A critical element of our business strategy is to establish joint venture or other business relationships with local partners in markets outside the United States who will provide manufacturing and sales capabilities. We established our initial operations through our 55%-owned subsidiary, Godfrey (China) Limited, a Hong Kong corporation located in Dongguan, China. However, there is no assurance that we will be successful in establishing additional joint venture or other business relationships with local partners on terms acceptable to us. In addition, our reliance on local market partners and joint venture structures will expose us to several risks, including:
· limited or reduced operational control over foreign market operations;
· limited or reduced ability to control capital requirements of or cash flows from foreign operations;
· risks associated with doing business in certain foreign markets where the legal system is less developed or subject to corrupt influences, resulting in uncertainties affecting our ability to protect our interest or pursue dispute resolution;
· logistical and communications challenges posed by under-developed infrastructures;
· changes in local government policies, such as changes in laws and regulations (or the interpretation thereof), restrictions on imports and exports, sources of supply, duties or tariffs, the introduction of measures to control inflation and changes in the rate or method of taxation; and
· where our international operations utilize a local currency as its functional currency, changes in currency exchange rates between the U.S. dollar and functional other currencies will likely have an impact on our earnings.
Because we have few proprietary rights, others can provide products substantially equivalent to ours. We hold no patents. Although we have developed designs and processes for our line of spherical bearing products, we believe that most of the technology used by us in the design of our products is generally known and available to others. Consequently, others can develop spherical bearing products similar to ours. We rely on a combination of confidentiality agreements and trade secret law to protect our confidential information. In addition, we restrict access to confidential information on a ‘‘need to know’’ basis. However, there can be no assurance that we will be able to maintain the confidentiality of our proprietary information. If our proprietary rights are violated, or if a third party claims that we violate their proprietary rights, we may be required to engage in litigation. Proprietary rights litigation tends to be costly and time consuming. Bringing or defending claims related to our proprietary rights may require us to redirect our human and monetary resources to address those claims.
The bearing industry is highly competitive, and competition could reduce our profitability or limit our ability to grow. The global bearing industry is highly competitive, and we compete with several U.S. and non-U.S. companies. We compete primarily based on product qualifications, product line breadth, service and price. Virtually all of our competitors are presently better able to manage costs than us and many have greater financial resources than we have. Due to the competitiveness in the bearing industry we may not be able to increase prices for our products to cover increases in our costs, and we may face pressure to reduce prices, which could materially reduce our revenues, gross margin and profitability. Competitive factors, including changes in market penetration, increased price competition and the introduction of new products and technology by existing and new competitors could materiality affect our ability to build revenue and achieve profitability.
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Weakness in the commercial aerospace industry, as well as the cyclical nature of our customers' businesses generally, could materially reduce our revenues and profitability. The commercial aerospace industry is cyclical and tends to decline in response to overall declines in industrial production. Margins are highly sensitive to demand cycles, and our potential customers historically have tended to delay large capital projects during economic downturns. As a result, our business also will be cyclical, and the demand for our products by these customers depends, in part, on overall levels of industrial production, general economic conditions and business confidence levels. Downward economic cycles have affected our customers and historically reduced sales of our aircraft component products. Any future material weakness in demand in the commercial aerospace industry could materially reduce our revenues and profitability.
Fluctuating supply and costs of raw materials and energy resources could materially reduce our revenues, cash flow from operations and profitability. Our business will be dependent on the availability and costs of energy resources and raw materials, particularly steel, generally in the form of specialty stainless and chrome steel, which are specialized steel products used almost exclusively in the aerospace industry. The availability and prices of raw materials and energy sources may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers' allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and worldwide price levels. Accordingly, our business is subject to the risk of price fluctuations and periodic delays in the delivery of certain raw materials. Disruptions in the supply of raw materials and energy resources could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices in order to obtain these raw materials or energy resources from other sources, which could thereby affect our net sales and profitability.
Unexpected equipment failures, catastrophic events or capacity constraints may increase our costs and reduce our sales due to production curtailments or shutdowns. Our manufacturing processes will be dependent upon critical pieces of equipment, such as presses, turning and grinding equipment, as well as electrical equipment, such as transformers, and this equipment may, on occasion, be out of service as a result of unanticipated failures. In addition to equipment failures, our facilities also will be subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions, earthquakes or violent weather conditions. In the future, we may experience material plant shutdowns or periods of reduced production as a result of these types of equipment failures or catastrophes. Interruptions in production capabilities will inevitably increase our production costs and reduce sales and earnings for the affected period.
We may incur material losses for product liability and recall related claims. Our aircraft component part business is subject to a risk of product and recall related liability in the event that the failure, use or misuse of any of our products results in personal injury, death, or property damage or our products do not conform to our customers' specifications. If one of our products is found to be defective or otherwise results in a product recall, significant claims may be brought against us. To date, we have not had significant commercial sales of our products and we do not currently maintain product liability insurance coverage for product liability. Any product liability or recall related claims may result in material losses related to these claims and a corresponding reduction in our cash flow and net income.
Environmental regulations may impose substantial costs and limitations on our operations. We are subject to various federal, state and local environmental laws and regulations, including those governing discharges of pollutants into the air and water, the storage, handling and disposal of wastes and the health and safety of employees. These laws and regulations could subject us to material costs and liabilities, including compliance costs, civil and criminal fines imposed for failure to comply with these laws and regulatory and litigation costs.
Risks Relating to Our Common Stock
Provisions of our articles of incorporation, our bylaws and Nevada law could delay or prevent a change in control of us, which could adversely affect the price of our common stock. Our articles of incorporation, our bylaws and Nevada law could delay, defer or prevent a change in control of us, despite the possible benefit to our stockholders, or otherwise adversely affect the price of our common stock and the rights of our stockholders. For example, our articles of incorporation permit our board of directors to issue one or more series of preferred stock with rights and preferences designated by our board of directors. We are also subject provisions of the Nevada control share laws that may limit voting rights in shares representing a controlling interest in us. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors other than the candidates nominated by our board.
