Item 1. Business.
Overview
On April 24, 2013, the Company was informed that Mr. Michael Sullivan received notice on the same day from the Division of Procurement and Contracts of the California Department of Transportation (“Caltrans”) that Caltrans is terminating the nine Caltrans contracts (the “Caltrans Agreements”), dated as of June 1, 2011, between Michael J. Sullivan Communications and Caltrans effective upon receipt of the notice pursuant to its right to terminate the Caltrans Agreements upon thirty (30) days notice (the “Termination”). On June 21, 2011, the Company purchased the Caltrans Agreements from Mr. Sullivan. Pursuant to the Caltrans Agreements, the Company provided on-call, as needed, maintenance and repair of Caltrans’ Traffic Operations System Network.
As a result of the Termination, the Company is negotiating with Caltrans to enter into a new agreement to perform the same services as agreed upon in the CaltTrans Agreements. However, as of the date hereof, the Company has not entered into an agreement and cannot make any assurance that an agreement will be executed.
On August 22, 2013 (the “Effective Date”), the Company entered into a distribution agreement (the “Distribution Agreement”) with SCS Lighting Solutions Inc. (“SCS”), whereby SCS appointed the Company as its exclusive distributer of SCS products in Sacramento, California and other locations, as determined by both parties in the future. The SCS products include standard lighting solutions, as well as custom lighting products for indoor and outdoor applications. If the Company does not make sales in the first year with revenues to SCS in the amount of Three Million dollars ($3,000,000), then the Distribution Agreement will become non-exclusive.
The Distribution Agreement’s initial term is for one (1) year from the Effective Date and will automatically renew for additional one (1) year increments, unless either party elects to terminate the Agreement by giving not less than sixty (60) days notice prior to the end of the current term.
Expatriate Corporation Status and Eligibility to Bid and Receive California Contracts
California Public Contract Code Section 10286 (the “Code”) disallows any California state agency to enter into any contract with an Expatriate Corporation. Section 10286.1 of the Code defines Expatriate Corporation. The definition of Expatriate Corporation includes foreign incorporated entities that publicly trade in the United States. However, foreign incorporated entities are entities that are created or organized under the laws of a foreign country or reside in a foreign country. We do not believe we are an Expatriate Corporation within the definition expressed in the Code.
In addition, the Company possesses a C-10 Electrical License from the Contractors State License Board from the State of California and is licensed as a small business with the State of California. This license allows us to contract with the State and grants us a five percent bidding preference over non-qualified entities.
Given that we are not an Expatriate Corporation, we possess a C-10 Electrical License, and we are licensed as a small business with the State of California, we believe that we are qualified to bid on, receive and enter into contracts with the State of California.
Going Concern
Based on our financial history since inception, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company that has generated very little revenue and have limited tangible assets. Our company has a limited operating history and must be considered in the development stage. Our company’s operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to on a profitable basis. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.
Our Corporate History and Background
Devon Jones and Philip Kirkland have worked together for several years as independent electrical contractors involved with a number of contracts associated within the transportation sector. These contracts included, but were not limited to, the pulling of fiber optic cable, installation of video equipment, and the service, maintenance and installation of traffic operations systems for Caltrans. After over five years of working in the transportation industry, they decided to pool their talents and contacts and the two formed a new company to expand beyond a services based business and introduce new technology to the transportation market.
In April 2011, Jones and Kirkland re-organized their operations under Intelligent Highway Solutions, Inc.
Services
Intelligent Highway Solutions, Inc. provides services on an on-call basis and/or as instructed by our customer. These services include all labor, materials, tools, equipment, and incidentals necessary for the corrective and preventive maintenance. The CEVs allow for the operation of sensitive communication equipment in adverse weather conditions. Hubs/Mini Hubs are the connection points or control boxes that serve as the termination points for the wiring associated with the ramp metering systems, closed circuit TV, electronic messaging signs, and environmental sensing units.
The intent and purpose of these contracts is to perform necessary maintenance required to keep the CEVs/Hubs fully functional at all times. The CEVs/Hubs shall remain fully integrated at all times with all of the component items in the Traffic Operations Systems Networks (TOSNET) system.
On the Effective Date, the Company entered into the Distribution Agreement with SCS whereby SCS appointed the Company as its exclusive distributer of SCS products in Sacramento, California and other locations, as determined by both parties in the future. The SCS products include standard lighting solutions, as well as custom lighting products for indoor and outdoor applications. If the Company does not make sales in the first year with revenues to SCS in the amount of Three Million dollars ($3,000,000), then the Distribution Agreement will become non-exclusive.
The Distribution Agreement’s initial term is for one (1) year from the Effective Date and will automatically renew for additional one (1) year increments, unless either party elects to terminate the Agreement by giving not less than sixty (60) days notice prior to the end of the current term.
Growth Strategy
IHS plans on expanding beyond the service business and plans to become more involved with all aspects of the ITS sector. Beginning in the fourth quarter of 2014, the Company plans to introduce a self-sufficient, battery-less and wireless traffic detector that will eliminate the need for wired, energy-consuming loop detection systems. The Company also intends to expand into neighboring states.
Phase One: The TOSNET contract with our customer will be closing on May 2014; there will be another bid cycle for a new (3) year agreement. We plan to expand this segment of the business to include similar agreements with counties and local districts throughout California, as well as expand to neighboring states.
Phase Two: Growth will occur in the installation division: this includes but is not limited to the installation of the new technology that IHS has licensed, acquired and/or developed. It also includes expansion beyond the borders of California.
Phase Three: Introduction of the Company’s proprietary technology, including, but not limited to a new wireless and battery-less traffic sensor that can be embedded in the road and used to measure traffic flow, speed, and approximate vehicle weight.
Research and Development
Development of an alternative to inductive loop system
The Company’s objective is to develop a new inductive loop system to gather data relevant to traffic flow and reduce the power required to maintain the system and use a wireless transmitter to transmit the data.
This project will present a battery-less wireless sensor that can be embedded in the road and used to measure traffic flow rate, speed and approximate vehicle weight. Compared to existing inductive loop based traffic sensors, the new sensor is expected to provide increased reliability, easy installation and low maintenance costs. The sensor uses power only for wireless transmission and has zero idle power loss. The sensor is expected to be extremely energy efficient. Energy to power this sensor is harvested entirely from the short duration vibrations that results when an automobile passes over the sensor.
A significant portion of the project focuses on developing low power control algorithms that can harvest energy efficiently from the short duration vibrations that result when a vehicle passes over the sensor.
The objective would to use existing sensor technology, existing wireless technology to reduce the development time of this project.
We expect that once fully developed and tested, the new system would replace traditional inductive loop systems. To install a loop detector and calibrate it, it is sometimes necessary to shut down traffic on the road for as much as 2 days. The new sensors can be installed by drilling a slot across the lane in the road surface of 1 inch width and 2 inches depth. Most importantly, no wiring is needed from the traffic lane to the roadside data acquisition unit. It is expected that the installation will only take a few minutes.
The new sensor on the roadway require no external power supply while inductive loop detectors have to be continuously powered all the time, even during the night when traffic flow might be really low.
The new sensors can measure number of axles and vehicle length, in addition to traffic flow rate. Thus they can be used for vehicle classification. With some further development, the sensors can likely also be used for weigh-in-motion.
The Company’s budget is $37,000 for the development including the initial beta product. We expect that this amount of money is sufficient to develop this product. We anticipate a field test in the fourth quarter of 2014. As of December 31, 2013, the Company has incurred research and development costs of $31,075.
Development Agreement with American Water Solutions, Inc.
On May 8, 2012, we entered into a development agreement (“Development Agreement”) with American Water Solutions (“AWS”). AWS is in the business of providing wireless products and solutions for customers. Pursuant to the Development Agreement, AWS will design and develop the battery-less wireless loop detection system for use in the Company’s proprietary wireless traffic flow monitoring system. The Company engaged AWS because of their expertise in alternative power solutions, as well as the development of wireless data collection systems. In consideration for the development of the product, IHS agreed to pay AWS i) $2,000 upon the execution of the Development Agreement, ii) $10,000 upon the release of initial drawings and specifications, iii) $12,000 upon the completion of the original design, and iv) $12,000 upon completion of the prototype.
On July 2, 2012, AWS delivered the first draft of the design and patent documents. As of the date hereof, the Company has delivered $3,000 to AWS pursuant to the Development Agreement, $2,000 was paid as a down payment and a $1,000 deposit to begin the drawing of the initial designs and specifications. On October 4, 2012, the Company entered into an addendum to the Development Agreement, which states that the Company will pay to AWS $2,700 within thirty (30) days of the execution of the amendment and $10,000 upon the Company’s approval of the initial drawings and specifications. As of the date hereof, the Company has paid AWS $2,700 pursuant to the addendum.
Future Products and Their Market
In the future, we plan to develop an intelligent traffic solution. Improving traffic flow, reducing emissions and synchronizing traffic signals for public safety and public transportation vehicle priority are just a few of the uses for intelligent transportation systems (ITS). Intelligent traffic solutions collect information at signals all around the city, correlate the real-time data and can automatically regulate traffic policies across a city. ITS includes a range of applications that can benefit cities such as:
● Intelligent Traffic Signal Management - Actively managed and coordinated traffic signals can reduce congestion and moderate traffic speeds, smoothing traffic flow and reducing auto emission levels.
● Video Analytics - Real-time video enables traffic controllers to identify problems, record and ticket red light runners, gather traffic analytics information and enforce special traffic zones. Public safety workers may also access the video to identify traffic conditions so they can route around congested roads when responding to an emergency.
● Information and Alerts - Variable message signs can quickly broadcast information such as weather, road conditions, stolen vehicle and other timely local information to drivers.
● Real-Time Public Transit Information - Up-to-the-minute information on busses and other public transportation vehicles can be published to the web and bus stations, improving schedule accuracy and helping increasing ridership.
The Company has started, in conjunction with American Water Solutions, to design and develop the battery-less wireless loop detection system. AWS has prepared the initial patent application and intends to move forward with the development of a prototype product. The estimated cost to design/develop a prototype will be $37,000. Currently, the Company does not have the necessary funds to develop the prototype product. The Company will have to obtain additional financing to pursue this opportunity. Compared to existing inductive loop based traffic sensors, the new sensor is expected to provide increased reliability, easy installation and low maintenance costs. The sensor uses power only for wireless transmission and has ZERO idle power loss. Thus, the sensor is expected to be extremely energy efficient. Energy to power this sensor is harvested entirely from the short duration vibrations that result when an automobile passes over the sensor. Transportation agencies all around the country monitor traffic flow rates on most major highways using inductive loop detectors (ILDs). Despite their popularity, ILDs are far from perfect and there has been considerable work to improve detection using better models, better filtering technology and by using better identification techniques such as Fuzzy Logic and Artificial Neural Networks (ANNs). Despite many improvements, the installation of the ILD involves cutting a large section of the roadway in each lane and therefore causes considerable traffic disruption. Owing to its operating principle, the ILD needs to be continuously powered resulting in considerable idle power loss. For example, an ILD needs to be continuously powered during the night, even if there is very little traffic flowing on a particular highway. The traffic sensor developed in this project is unique and different from all the sensor technologies described above. Its uniqueness comes from the fact that it is the first ever sensor that is battery-less, wireless and is powered entirely by harvesting energy from vibrations for its operation.
Customers
Currently, our only customer is Caltrans.
Competition
There are currently five contractors that compete against IHS on most Caltrans proposal requests. It is one of only a few firms experienced in all electrical disciplines required to compete in every sector of the Caltrans ITS programs.
Employees
We currently have 11 full time employees, consisting of three executives, two project managers and twenty-two technicians. Each technician has completed four years as an assistant technician with experience in the repair, maintenance and installation of voice, data and video telecommunications equipment and devices.
Item 1A.
Item 1A. Risk Factors.
Not applicable because we are a smaller reporting company.
Item 1B.
Item 1B. Unresolved Staff Comments.
Not applicable because we are a smaller reporting company.
Item 2.
Item 2. Properties.
Our principal executive office is located at 8 Sky Light Court, Sacramento, CA 95828, and our telephone number is (916) 379-0324. We lease our office space, which consists of 9,300 square feet of office and warehouse space and pay a monthly rent of $3,627. Our lease will expire on January 9, 2015.
Item 3.
Item 3. Legal Proceedings.
We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting our company, our common stock, any of our company’s officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock trades on the OTCQB and OTCBB under the symbol “IHSI”. The OTCQB and OTCBB are quotation services that display real-time quotes, last-sale prices, and volume information in over-the-counter (“OTC”) equity securities. The closing price of the common stock on April 30, 2014 was $0.28 per share. As our stock started trading on April 24, 2013, the high and low bid prices for trading of our stock for each of the second, third, and fourth quarters of 2013 was as follows:
Approximate Number of Equity Security Holders
As of April 30, 2014, there were approximately 51 stockholders of record.
Dividends
Holders of our common stock are entitled to receive dividends if, as and when declared by the Board of Directors out of funds legally available therefore. We have never declared or paid any dividends on our common stock. We intend to retain any future earnings for use in the operation and expansion of our business. Consequently, we do not anticipate paying any cash dividends on our common stock to our stockholders for the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
We do not have in effect any compensation plans under which our equity securities are authorized for issuance.
Item 6.
Item 6. Selected Financial Data.
Not applicable because we are a smaller reporting company.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Overview
Intelligent Highway Solutions, Inc. (the “Company” or “IHS”) was formed in April 22, 2011; IHS is a technology based intelligent highway solutions contractor. The Company’s primarily focus is in the California transportation market providing services that range from providing labor, materials, and related equipment for corrective service and maintenance services for the States transportation infrastructure. Additionally, the Company intends to develop transportation technology services that enable vehicles, roads, traffic lights, message signs, and other elements to become “intelligent” by embedding them with microchips and sensors and by empowering them to communicate with each other via wireless technologies. The acceleration of data collection and communication will allow state governments to improve transportation system performance by reducing congestion and increasing both traveler safety and convenience.
Plan of Operations
The Company provides service and maintenance for California’s transportation sector. The Company plans to seek further contracts in counties and municipalities throughout California and expand to neighboring states.
Additionally, the Company intends to expand to provide full service turn-key electrical services for the expanding intelligent highway services market sector. These contracts are typically bid on through the State and municipal entities. Typically, they involve the installation and purchase of materials and labor to provide a complete, operational system. Our primary focus will be in systems that are related to the intelligent highway sector, such as, but not limited to: (1) installation and materials for the installation of fiber optic cables; (2) installation and distribution of materials for the video monitoring systems deployed on the highway corridors; and (3) the distribution and installation of monitor devices and signage used in conjunction with the transportation network.
As an additional step, the Company, building off its experience in the service and maintenance of traffic monitoring systems, intends to develop wireless systems to replace existing hardwire loop detection systems, video monitoring systems, etc. The Company, in the fourth quarter of 2014, intends to introduce a wireless/battery-less loop detection system. The Company has received the approval of two service districts in California to deploy the new technology in a real-time, real-world application. The application of this new technology can be used on any freeway entrance ramps; freeway lanes to monitor traffic flow; at intersections to monitor traffic and send information to traffic signals and alert management of congestion.
On the Effective Date, the Company entered into the Distribution Agreement with SCS whereby SCS appointed the Company as its exclusive distributer of SCS products in Sacramento, California and other locations, as determined by both parties in the future. The SCS products include standard lighting solutions, as well as custom lighting products for indoor and outdoor applications. If the Company does not make sales in the first year with revenues to SCS in the amount of Three Million dollars ($3,000,000), then the Distribution Agreement will become non-exclusive.
The Distribution Agreement’s initial term is for one (1) year from the Effective Date and will automatically renew for additional one (1) year increments, unless either party elects to terminate the Agreement by giving not less than sixty (60) days notice prior to the end of the current term.
Results of Operations
Comparison of the year ended December 31, 2013 and 2012
Revenue
We generate revenue through servicing contracts with Caltrans for the maintenance of the Tosnet system within certain areas of California. The contracts with Caltrans accounted for 100% of revenue during the years ended December 31, 2012 and 2013.
Revenues for the year ended December 31, 2013 were $833,528 compared to $1,795,702 for the year ended December 31, 2012. The decrease of $962,174 or 54% is the result of the Company no longer servicing the contracts to maintain the Tosnet systems effective in the second quarter of 2013. The contracts with Caltrans to maintain the Tosnet systems comprised 100% of our revenues during the years ended December 31, 2013 and 2012. The loss of these contracts during the year ended December 31, 2013 eliminated our revenue from the termination date forward.
Cost of Goods Sold
Cost of goods sold consist of the costs associated with maintaining the Tosnet systems. Such costs consist of direct labor and vehicle related costs including maintenance, rental, fuel, insurance and depreciation.
Cost of goods sold for the year ended December 31, 2013 were $778,139 compared to $1,548,442 during the year ended December 31, 2012. The decrease of $770,303 or 50% is the result of the loss of our contracts with Caltrans to maintain the Tosnet system. As a result of the loss of these contracts, we terminated the employment of the employees previously maintaining the system and incurred no other costs to maintain these contracts as we were no longer servicing them.
Operating Expenses
Operating expenses for the year ended December 31, 2013 were $1,491,919 compared to $1,244,055 for the year ended December 31, 2012. The increase of $247,864 or 20% is the result of generally lower costs associated with operating the business after the loss of the Caltrans contracts offset by an increase in professional services of $642,611. Excluding professional services, operating expenses decreased $394,747. The increase in professional services is attributable to the costs we incurred to obtain $900,000 of convertible notes and common stock issued for services during the year ended December 31, 2013. These costs were incremental to those incurred during the year ended December 31, 2012 as there were no such loan agreements entered into during the prior period.
Other Income and Expenses
Other income and expenses consist of interest expense on our notes payable net of interest income and fair value adjustments to our derivative liability.
Other income and expenses during the year ended December 31, 2013 were $549,986 compared to $50,873 during the year ended December 31, 2012. The increase of $499,113 or approximately 981% was the result of additional non-cash interest expense recognized on the amortization of debt discounts and original issuance discounts totaling $240,925 during the year ended December 31, 2013 compared to $0 during the year ended December 31, 2012. Additionally, we experienced a loss on the extinguishment of debt arising from the issuance of common stock related to such debt for which no comparable events existed during the year ended December 31, 2012. The $27,428 increase in gain on derivative fair value adjustment during the year ended December 31, 2013 is the result of the change in the fair value of the derivative associated with a convertible note that was not present in 2012.
Net loss
Net loss for the year ended December 31, 2013 was $1,986,516, or 238% of revenue, compared to $1,047,668, or 58% of revenue, for the year ended December 31, 2012 . The decrease of $938,848 is the result of reduced revenues from the loss of the Tosnet systems maintenance contracts, increased professional fees as described above and the recognition of non-cash operating and interest expenses associated with debt discounts and derivative liability on certain convertible notes.
Liquidity and Capital Resources
As of December 31, 2013, we had cash of $28,664, total current assets of $405,469 and total current liabilities of $1,440,603 creating a working capital deficit of $1,035,134. Current assets consisted of $28,664 in cash, $194,481 in prepaid expenses and $182,324 in deferred loan costs. Current liabilities consisted of a bank overdraft of $40, accounts payable $89,562, current notes payable of $252,274, current convertible notes payable of $30,000, a derivative liability of $46,023, accrued interest of $113,599 and accrued expenses and other liabilities of $909,105.
Cash Flows from Operating Activities
Net cash used in operating activities during the year ended December 31, 2013 was $710,006 which consisted of a net loss of $1,986,516, non-cash expenses of $1,035,539 and positive changes in working capital of $240,971. Net cash used in operating activities during the same period in 2012 was $100,565 which consisted of a net loss of $1,047,668, non-cash expenses of $140,242 and positive changes in working capital of $806,861. The change in net cash used in operating activities was primarily due to an increase in net loss of $926,348, a greater change in other receivables and accrued expenses and a lesser change in accounts payable.
We expect our cash used in operating activities will increase over the next twelve months as we are uncertain of our opportunities to generate revenue in the near term while we will still recognize significant non-cash expenses.
Cash Flows from Investing Activities
We did not use, nor were provided, any cash from investing activities during the year ended December 31, 2013 or 2012. We expect this to continue during the next twelve months.
Cash Flows from Financing Activities
Cash flows from financing activities during the year ended December 31, 2013 were $738,670 compared to $64,761 during the same period in 2012. Cash provided by financing activities during the year ended December 31, 2013 consisted of proceeds from convertible notes payable of $760,836, proceeds from notes payable of $20,000, repayments of notes payable of $40,528, the repayment of a bank overdraft of $1,678 and proceeds from a separate bank overdraft of $40. Cash provided by financing activities during the same period in 2012 consisted of $1,678 in proceeds from a bank overdraft, proceeds from a convertible note payable of $30,000, repayments on notes payable of $8,917 and cash proceeds from the issuance of common stock totaling $42,000.
During the next twelve months, we anticipate generating additional cash from financing activities from entering into additional debt agreements and the additional issuance of common stock for cash as these activities will be required to fund operations.
Outstanding Loans
On June 17, 2011, the Company received a loan in the amount of $65,000 from Innovest, LLC (“Innovest”).The loan is unsecured, bears a simple interest of 1.5% per month to be paid monthly for the previous month’s outstanding principal, and required the issuance of 40,000 shares of the Company’s common stock. The loan was originally due on December 17, 2011. The note was then extended to June 17, 2012 in exchange for 20,000 shares of the Company’s common stock. The note was then extended to December 17, 2012 and the Company issued Innovest 20,000 shares of the Company’s common stock as extension fees. The note was then extended to March 17, 2013. The loan was fully paid in the first quarter of 2014 and is no longer outstanding. The Our Chief Executive Officer, Devon Jones, and our Chief Financial Officer and Chief Operating Officer, Philip Kirkland, had personally guaranteed this loan.
On April 29, 2011, the Company received a loan in the amount of $100,000 from Kenneth K. Polk. The loan is secured by the Caltrans agreements and bears a simple interest of 2.5% per month to be paid monthly for the previous month’s outstanding principal. The loan was originally due on March 30, 2012, was extended to September 30, 2012, and the Company further extended the term of the note to February 28, 2013. This loan was settled for 50% of the amount due in April 2014 and is no longer outstanding. Kenneth K. Polk purchased 10,000 shares of the Company’s common stock pursuant to a private placement subscription agreement issued under an exemption to registration.
On November 21, 2011 the Company received a loan in the amount of $27,000 from Byrd & Company LLC, Emerging Markets Consulting LLC, and Douglas S. Hackett ($9,000 from each party). The loan is unsecured and bears a simple interest of 12% per annum to be amortized in 6 equal installments of principal and interest commencing January 1, 2012 through June 1, 2012. Our Chief Executive Officer, Devon Jones, and our Chief Financial Officer and Chief Operating Officer, Philip Kirkland, have personally guaranteed this loan. On March 1, 2012, the Company issued Emerging Markets Consulting, LLC shares of common stock equivalent to $19,000, $10,000 for cash and $9,000 in satisfaction of the outstanding loan. Accordingly, the loan from Emerging Markets Consulting, LLC is no longer outstanding. Byrd & Company was repaid $3,803 and $3,917 during the years ended December 31, 2013 and 2012 with the remaining balance of $1,200 being forgiven during the year ended December 31, 2013.Also, the Company is negotiating to amend or extend the terms of the remaining amount of the note from Douglas S. Hackett.
On December 15, 2011 the Company received a loan in the amount of $100,000 from O.K. and B. The loan is unsecured and bears a simple interest of 5% per annum. The Company is negotiating to further extend its maturity date. The Company made principal payments totaling $16,726 and $5,000 during the years ended December 31, 2013 and 2012. The loan was originally due on March 15, 2012, however the note’s maturity was extended to September 17, 2012. The Company is negotiating to further extend its maturity date.
On October 26, 2012, the Company received $30,000 related to one convertible note purchased by Ruth Shepley. The term of the note is 6 months. Interest is computed at 10% based on a 360 day year and is payable on the maturity date. Interest is due and payable only if the notes are repaid in cash. These notes may be converted to common stock at a conversion rate of $.30 per share at any time after 30 days. Accordingly, the amount of common stock underlying the $30,000 convertible note is 100,000 shares.
During the year ended December 31, 2013, the Company entered into debt agreements with various individuals to borrow a total of $900,000, of which $55,664 went directly to third parties to pay off amounts owed by the Company, $83,500 went to the placement agent and were recorded as debt issuance costs to be amortized over the life of the note, leaving the Company with net proceeds of $760,836. The notes accrue interest at 10% per annum and are due in are due in full between January and December 2015 with no repayments due before maturity. The principal and accrued interest may be converted at the option of the holder to common stock at $0.30.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable because we are a smaller reporting company.
Item 8.
Item 8. Financial Statements and Supplementary Data.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
FINANCIAL STATEMENTS
December 31, 2013 and 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Intelligent Highway Solutions, Inc.
We have audited the accompanying balance sheet of Intelligent Highway Solutions, Inc. (the Company) as of December 31, 2013 and the related statements of operations, stockholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of Intelligent Highway Solutions, Inc. as of December 31, 2013, and the results of their operations and cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the Note 2 to the financial statements, the Company has recurring net losses, an accumulated deficit of $3,391,427 and a working capital deficit, all of which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in the Note 2 to the financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Sadler, Gibb & Associates, LLC
Salt Lake City, UT
May 1, 2014
INTELLIGENT HIGHWAY SOLUTIONS
BALANCE SHEETS
See accompanying notes to financial statements.
INTELLIGENT HIGHWAY SOLUTIONS
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements.
INTELLIGENT HIGHWAY SOLUTIONS
STATEMENT OF STOCKHOLDERS' DEFICIT
See accompanying notes to financial statements.
INTELLIGENT HIGHWAY SOLUTIONS
STATEMENT OF CASH FLOWS
See accompanying notes to financial statements.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization, Nature of Business and Trade Name
Intelligent Highway Solutions, Inc. (the “Company” or “IHS”) was formed in April 22, 2011; IHS is a technology based intelligent highway solutions contractor. The Company’s primarily focus is in the California transportation market providing services that range from providing labor, materials, and related equipment for corrective service and maintenance services for the States transportation infrastructure. Additionally, the Company intends to develop transportation technology services that enable vehicles, roads, traffic lights, message signs, and other elements to become “intelligent” by embedding them with microchips and sensors and by empowering them to communicate with each other via wireless technologies. The acceleration of data collection and communication will allow state governments to improve transportation system performance by reducing congestion and increasing both traveler safety and convenience.
2012 Financial statements
Sam Kan & Company (“Sam Kan”) was our Independent Registered Public Accountant for the fiscal year ended December 31, 2012 and issued an audit report for that year. On February 20, 2014, however, the SEC denied Sam Kan the privilege of appearing or practicing before the SEC as an accountant. We, therefore, are no longer allowed to include any audit report issued by Sam Kan in any filing with the SEC on or after February 20, 2014. Accordingly, we have engaged our newly appointed accounting firm, Sadler Gibb & Associates, LLC (“Sadler”) to re-audit our fiscal year ended December 31, 2012, however, as of the date of this Annual Report on Form 10-K, such re-audit had not yet been completed.
NOTE 2 - GOING CONCERN
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern, has recurring net losses, an accumulated deficit of $3,391,427 and a working capital deficit, all which raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on the Company’s financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Accounts Receivable
Accounts receivable are carried at the expected net realizable value. The allowance for doubtful accounts, is based on management's assessment of the collectability of specific customer accounts and the aging of the accounts receivables. If there were a deterioration of a major customer's creditworthiness, or actual defaults were higher than historical experience, our estimates of the recoverability of the amounts due to us could be overstated, which could have a negative impact on operations. The Company had bad debt expense of $1,607 and $0 during the years ended December 31, 2013 and 2012, respectively.
Property, Plant and Equipment
Property and equipment are carried at cost. Expenditures for maintenance and repairs are charged against operations. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.
Depreciation is computed over the estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:
Estimated Useful Life
Furniture and fixtures 5 years
Machinery and equipment 5 years
For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. For financial statements purposes, depreciation is computed under the straight-line method. Balances of each asset class as of December 31, 2013 and 2012 were:
Depreciation expense for the years ended December 31, 2013 and 2012 was $672 and 672, respectively.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following at December 31, 2013 and 2012:
Revenue Recognition
Service revenue is recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured. The Company’s service revenue is largely attributable professional engineering services where the fee is based on the billable rate of the employees.
Cost of Sales
Cost of sales comprises of costs associated with providing services related to the Company’s contracts including direct labor costs, job materials, automobile fuel, insurance, maintenance and operating leases. Cost of sales totaled $788,139 and $1,548,442 for the years ended December 31, 2013 and 2012, respectively.
Reclassifications
Certain prior-year amounts have been reclassified in order to conform to the current-year presentation. These reclassifications related to notes payable where prior periods had incorrectly shown certain notes as being related party, when in fact they were not.
Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
Convertible debt
The Company records a beneficial conversion feature related to the issuance of convertible debts that have conversion features at fixed or adjustable rates. The beneficial conversion feature for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The beneficial conversion feature will be accreted by recording additional non-cash interest expense over the expected life of the convertible notes.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
Net Loss Per Share
Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the specified period. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares and potential common shares during the specified period. For the year ended December 31, 2013 and 2012, potential common shares are not included in the diluted net loss per share calculation as their effect would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. There were 3,274,868 and 101,807 such potentially dilutive shares excluded as of December 31, 2013 and 2012, respectively.
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.
NOTE 4 - FAIR VALUE MEASUREMENTS
On a recurring basis, we measure certain financial assets and liabilities based upon the fair value hierarchy. The following table presents information about the Company’s liabilities measured at fair value as of December 31, 2013 and 2012:
The changes in the fair value of recurring fair value measurements are measured using the Black Scholes valuation model, and relate solely to the derivative liability as follows:
NOTE 5 - NOTES PAYABLE
On June 17, 2011 the Company received a loan in the amount of $65,000 from Innovest, LLC (“Innovest”). The loan is unsecured and bears a simple interest of 1.5% per month to be paid monthly for the previous month’s outstanding principal. The loan was due on June 17, 2012; however, the Company negotiated to extend the maturity date to June 17, 2013. The Company negotiated further to extend the maturity date through the repayment of the note in full during 2014. Our Chief Executive Officer, Devon Jones, and our Chief Financial Officer and Chief Operating Officer, Philip Kirkland, have personally guaranteed this loan. There was $65,000 in principal plus accrued interest of $18,015 and $6,315 due at December 31, 2013 and 2012, respectively.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 5 - NOTES PAYABLE (CONTINUED)
On October 30, 2011 the Company received a loan in the amount of $100,000 from Kenneth K. Polk. The loan is unsecured and bears simple interest of 2.5% monthly. The loan was originally due on March 30, 2012; however, the note’s maturity was extended until September 30, 2012. The Company is negotiating to further extend its maturity date. There was $100,000 in principal plus accrued interest of $35,376 and $15,475 due at December 31, 2013 and 2012, respectively.
On November 21, 2011 the Company received a loan in the amount of $27,000 from Byrd & Company LLC, Emerging Markets Consulting LLC, and Douglas S. Hackett ($9,000 from each party). The loan is unsecured and bears a simple interest of 12% per annum to be amortized in 6 equal installments of principal and interest commencing January 1, 2012 through June 1, 2012. Our Chief Executive Officer, Devon Jones, and our Chief Financial Officer and Chief Operating Officer, Philip Kirkland, have personally guaranteed this loan. On March 1, 2012, the Company issued Emerging Markets Consulting, LLC shares of common stock equivalent to $19,000, $10,000 for cash and $9,000 in satisfaction of the outstanding loan. Accordingly, the loan from Emerging Markets Consulting, LLC is no longer outstanding. Byrd & Company was repaid $3,803 and $3,917 during the years ended December 31, 2013 and 2012 with the remaining balance of $1,200 being forgiven during the year ended December 31, 2013. Also, the Company is negotiating to amend or extend the terms of the remaining amount of the note from Douglas S. Hackett. There was $9,000 and $14,083 in principal plus accrued interest of $2,278 and $1,220 due at December 31, 2013 and 2012.
On December 15, 2011 the Company received a loan in the amount of $100,000 from O.K. and B. The loan is unsecured and bears a simple interest of 5% per annum. The loan was originally due on March 15, 2012, however the note’s maturity was extended to September 15, 2013. The Company is negotiating to further extend its maturity date. The Company made principal payments totaling $16,726 and $5,000 during the years ended December 31, 2013 and 2012. There was $78,274 and $95,000 in principal plus accrued interest of $2,323 with prepaid interest of $1,266 at December 31, 2013 and 2012.
During the year ended December 31, 2013, the Company received a short term loan from Craig Spivey totaling $20,000. The loan was unsecured and bore no interest. The Company made principal payments of $20,000 during the year ended December 31, 2013, repaying the note in full. There was no balance due at December 31, 2013.
NOTE 6 - CONVERTIBLE NOTES PAYABLE	
On October 26, 2012, the Company received a loan totaling $30,000 from an unrelated party. The note bears interest at 10% per annum and had an original maturity date of April 26, 2013; however, the Company is in negotiations to extend the maturity date. There was $30,000 in principal plus accrued interest of $4,627 and $542 at December 31, 2013 and 2012. The principal and accrued interest may be converted at the option of the holder to common stock at $0.30 (see Note 10).
During the year ended December 31, 2013, the Company entered into debt agreements with various individuals to borrow a total of $900,000, of which $55,664 went directly to third parties to pay off amounts owed by the Company, $83,500 went to the placement agent and were recorded as debt issuance costs to be amortized over the life of the note, leaving the Company with net proceeds of $760,836. The notes accrue interest at 10% per annum and are due in are due in full between January and December 2015 with no repayments due before maturity. The principal and accrued interest may be converted at the option of the holder to common stock at $0.30. The intrinsic value of the conversion feature in these notes resulted in debt discounts totaling $800,000 which will be amortized over the lives of the notes. $210,925 of the debt discounts were recognized in interest expense during the year ended December 31, 2013 leaving an unamortized discount of $589,075 at December 31, 2013. The following table depicts the amounts due for each note as of December 31, 2013:
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 6 - CONVERTIBLE NOTES PAYABLE (CONTINUED)
NOTE 7 - RELATED PARTY TRANSACTIONS
We have engaged an entity controlled by the director of the Company to perform consulting services related to the development of new technologies. Payments to this party totaled $12,625 and $24,091during the years ended December 31, 2013 and 2012.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company could become a party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters.
As of the date of this report, except as described below, there are no material pending legal proceedings to which the Company is a party or of which any of their property is the subject, nor are there any such proceedings known to be contemplated by governmental authorities.
As of December 31, 2013 and 2012, the Company had accrued $637,139 and $602,267 in payroll tax liabilities. The payment of these liabilities has not been made due to our limited profitability. Due to the uncertainty regarding our future profitability, it is difficult to predict our ability to pay these liabilities. As a result, a federal tax lien has been levied that will have to be satisfied.
Vehicle Leases
The Company has entered into twelve separate month to month leases on various vehicles. The leases do not qualify as capital leases and are accounted for as operating leases as a result. Monthly payments total $3,971 for these leases.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Office and Warehouse Lease
The Company is required under the terms of the rental lease to make monthly lease payments.
The Company’s property lease is for an initial period of thirteen months from October 2011 and may be extended in two separate thirteen-month increments for up to a total term of 39 months. The Company may not terminate this lease prior to the agreed upon termination date. The minimum future annual rental commitments are as follows:
NOTE 9 - SIGNIFICANT TRANSACTIONS
On April 24, 2013, Intelligent Highway Solutions, Inc. (the “Company”) was informed that Mr. Michael Sullivan received notice on the same day from the Division of Procurement and Contracts of the California Department of Transportation (“Caltrans”) that Caltrans was terminating the nine Caltrans contracts (the “Agreements”), dated as of June 1, 2011, between Michael J. Sullivan Communications and Caltrans effective upon receipt of the notice pursuant to its right to terminate the Agreement upon thirty (30) days notice (the “Termination”). On June 21, 2011, the Company purchased the Agreements from Mr. Sullivan. Pursuant to Agreements, the Company provided on-call, as needed, maintenance and repair of Caltrans’ Traffic Operations System Network.
As a result of the Termination, the Company is negotiating with Caltrans to enter into a new agreement to perform the same services as agreed upon in the Agreements. However, as of the date hereof, the Company has not entered into an agreement and cannot make any assurance that an agreement will be executed. CalTrans accounted for 100% of our revenues during the years ended December 31, 2013 and 2012.
No material relationship exists between the Company and Caltrans, except in connection with the Agreements.
NOTE 10 - DERIVATIVE LIABILITY
As of December 31, 2013 the Company had a $46,023 derivative liability balance on the balance sheet, and for the year ended December 31, 2013, the Company recorded a $27,428 gain from derivative liability fair value adjustment. The derivative liability activity comes from convertible notes payable as follows:
As discussed in Note 5 - “Notes Payable”, during 2012, the Company issued an aggregate of $30,000 Convertible Promissory Notes to an unrelated party that matured on April 26, 2013. The Company is currently negotiating an extension of the maturity date and anticipates to successfully do so. The note bears interest at a rate of 10% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rates of $0.30 per share. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 10 - DERIVATIVE LIABILITY (CONTINUED)
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the inception dates of the note was $73,451. Of the total, $30,000 was recorded as a debt discount, which is up to but not more than the net proceeds of the notes. $43,451 was charged to operations as non-cash interest expense. The fair value of $73,451 was recorded as a derivative liability on the balance sheet.
The debt discount for the note was amortized over the term of our stock’s opening trading day to the original maturity, or two days. On December 31, 2013, the Company marked-to-market the fair value of the derivative liabilities related to note and determined an aggregate fair value of $46,023 and recorded a $27,428 gain from change in fair value of derivatives for year ended December 31, 2013. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 113%, (3) risk-free interest rate of 0.07%, (4) expected life of 0.57 of a year, and (5) estimated fair value of the Company’s common stock of $0.87 per share.
NOTE 11 - INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended December 2013 or 2012 applicable under FASB ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns for the Company remain open.
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:
Changes in the net deferred tax assets consist of the following:
A reconciliation of income taxes computed at the statutory rate is as follows:
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 11 - INCOME TAXES (CONTINUED)
The net federal operating loss carry forward will expire in 2031. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.
NOTE 12 - COMMON STOCK
The Company is authorized to issue up to 100,000,000 shares of $0.00001 par value common stock.
During the year ended December 31, 2012, the Company issued 330,000 shares for services valued at $82,500; 200,000 shares for a prepaid expense valued at $50,000; 20,000 shares as a loan fee valued at $5,000; 355,263 shares in connection with a note conversion of $9,000; 25,000 shares as a loan origination fee valued at $6,250 and 549,403 shares for total cash proceeds of $42,000.
During the year ended December 31, 2013, the Company issued a total of 1,104,000 shares for services valued at $744,615 and 100,000 shares valued at $88,500 as consideration of an extension of a note payable.
There were 11,933,666 and 10,729,666 common shares issued and outstanding at December 31, 2013 and 2012, respectively.
NOTE 13 - RESTATEMENT
During our audit for the year ended December 31, 2013, certain information arose which created the need to restate certain balances as of and for the year ended December 31, 2012. The adjustments were related to the timing of the recognition of certain expenses, stock issuances, the misclassification of operating leases as capital leases, and correcting an accrued interest calculation. These adjustments had the following impacts during the unaudited year ended December 31, 2012:
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2013 and 2012
NOTE 13 - RESTATEMENT (CONTINUED)
NOTE 14 - SUBSEQUENT EVENTS
On January 29, 2014, the Company entered into a note payable with an unrelated party totaling $335,000 of which $35,000 is considered an original issue discount. The note is interest free if repaid in full within ninety (90) days with a onetime charge of 12% on the unpaid balance on the ninety first (91st) day and is due on January 29, 2016. Additionally, the note may be converted to common stock at the option of the holder at a rate equal to the lesser of $0.65 or 60% of the lowest trade price in the twenty five (25) trading days prior to conversion. The note requires a minimum of two million five hundred thousand (2,500,0000) to be held in reserve in the instance of conversion.
On February 27, 2014, the Company entered into a note payable with an unrelated party totaling $126,500. The note bears interest of 10% per annum and is due on February 27, 2015 with any amounts owing beyond that date carrying interest at 22% per annum. Additionally, the note may be converted to common stock at the option of the holder at a rate equal to a 35% discount from the lowest daily volume weighted average price in the five days prior to conversion.
On February 28, 2014, the Company entered into a note payable with an unrelated party totaling $212,526. The note bears interest of 10% per annum and is due on February 27, 2015 with any amounts owing beyond that date carrying interest at 22% per annum. Additionally, the note may be converted to common stock at the option of the holder at a rate equal to a 35% discount from the lowest daily volume weighted average price in the five days prior to conversion, but not less than $0.00004.
On February 1, 2014, the Company issued a total of 100,000 common shares to a consultant upon the renewal of our agreement dated October 1, 2013. Additionally, on March 5, 2014, the Company entered into a separate agreement requiring 75,000 shares of common stock to be issued to the consultant. Lastly, the Company issued 500,000 shares to Seton Securities Group as fulfillment of performance based awards earned in connection with our advisory agreement.
On various dates in 2014, the Company was notified by three separate convertible note holders of their intention to convert their notes to common stock at $0.30 in accordance with the conversion rights stipulated in the note. These conversions resulted in 464,497 common shares being issued for $135,000 of principal plus accrued interest of $4,349.
EXPLANATORY NOTE
Sam Kan & Company (“Sam Kan”) was our Independent Registered Public Accountant for the fiscal year ended December 31, 2012 and issued an audit report for that year. On February 20, 2014, however, the SEC denied Sam Kan the privilege of appearing or practicing before the SEC as an accountant. We, therefore, are no longer allowed to include any audit report issued by Sam Kan in any filing with the SEC on or after February 20, 2014. Accordingly, we have engaged our newly appointed accounting firm, Sadler Gibb & Associates, LLC (“Sadler”) to re-audit our fiscal year ended December 31, 2012, however, as of the date of this Annual Report on Form 10-K, such re-audit had not yet been completed.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
As previously disclosed in Amendment Number 1 to Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on April 11, 2014 (the “8-K/A”), the Company accepted the resignation of Sam Kan & Company (“Sam Kan”) as Independent Registered Public Accountants on August 6, 2013. Sam Kan advised the Audit Committee that their firm will no longer be servicing public clients. On August 6, 2013, the Board of Directors of the Company accepted such resignation.
During the fiscal years ended December 31, 2011 and 2012 and through Sam Kan’s resignation on August 6, 2013, there were (1) no disagreements with Sam Kan on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Sam Kan, would have caused Sam Kan to make reference to the subject matter of the disagreements in connection with its reports, and (2) no events of the type listed in paragraphs (A) through (D) of Item 304(a)(1)(v) of Regulation S-K. The report of Sam Kan on the Company's financial statements for the years ended December 31, 2011 and 2012 did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.
On February 20, 2014, the SEC denied Sam Kan the privilege of appearing or practicing before the SEC as an accountant. A copy of the order can be found at http://www.sec.gov/litigation/admin/2014/34-71585.pdf. We, therefore, are no longer allowed to include any audit report issued by Sam Kan in any filing with the SEC on or after February 20, 2014. Accordingly, we have engaged our newly appointed accounting firm, Sadler Gibb & Associates, LLC (“Sadler”) to re-audit our fiscal year ended December 31, 2012, however, as of the date of this Annual Report on Form 10-K, such re-audit had not yet been completed.
On April 9, 2014, we furnished Sam Kan with a copy of the disclosure in the 8-K/A, providing Sam Kan with the opportunity to furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by us in the 8-K/A in response to Item 304(a) of Regulation S-K and, if not, stating the respect in which it does not agree. A copy of Sam Kan’s letter to the SEC is filed as Exhibit 16.1 to this Annual Report on Form 10-K and is hereby incorporated by reference.
Engagement of New Independent Registered Public Accounting Firm
Concurrent with the acceptance of Sam Kan’s Resignation as our independent registered public accounting firm, the Board of Directors of the Company appointed Sadler as our independent registered public accounting firm.
During the years ended December 31, 2012 and 2011 and through the date hereof, neither the Company nor anyone acting on its behalf consulted Sadler with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company or oral advice was provided that Salder concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issues; or (ii) any matter that was the subject of a disagreement or reportable events set forth in Item 304(a)(1)(iv) and (v), respectively, of Regulation S-K.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that: (1) information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (2) that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our CEO and Interim CFO have determined and concluded that, as of December 31, 2013, the Company’s internal control over financial reporting was not effective.
As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board ("PCAOB"), a material weakness is a deficiency or combination of deficiencies that result in a more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of December 31, 2013:
(1) Lack of an independent audit committee or audit committee financial expert. Although our board of directors serves as the audit committee it has no independent directors. Further, we have not identified an audit committee financial expert on our board of directors. These factors are counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management.
(2) We do not have sufficient experience from our accounting personnel with the requisite U.S. GAAP public company reporting experience that is necessary for adequate controls and procedures.
Our management determined that these deficiencies constituted material weaknesses.
Due to our small size, we were not able to immediately take any action to remediate these material weaknesses but plan to address these items in the near future. Notwithstanding the assessment that our Internal Controls over Financial Reporting was not effective and that there were material weaknesses identified herein, we believe that our consolidated financial statements contained in this Annual Report fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm as we are a smaller reporting company and not required to provide the report.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the name and age of officers and director as of April 30, 2014.
Name
Age
Position
David D. Singer
President, Chief Technology Officer and Director
Devon Jones
Chief Executive Officer and Director
Philip Kirkland
Chief Financial Officer, Chief Operating Officer and Director
Set forth below is a brief description of the background and business experience of our executive officer and director for the past five years.
David D. Singer is the President and Chief Technology Officer (CTO) of the Intelligent Highway Solutions, Inc. From 2009 to 2011, he served as the CEO of American Control Technologies, a privately held company. From 2007 to 2009 he was President of Homeland Security Corporation (OTC: HSCC). From 2004 to 2007, he served as the COO of Tarallax, a privately held company. Mr. Singer’s service as President of Homeland Security Corporation has given him the requisite experience needed to serve as an officer and director of the Company.
Devon Jones is the Chief Executive Officer (CEO) of the Company. From June 2002 to November 2006, Mr. Jones served as the CEO of Connect One Communications, a telecom provider. He has a variety of electrical service certifications and has the requisite knowledge and skill in the electrical service industry which led to the conclusion that he should serve as a director of the Company.
Philip Kirkland is the Chief Operating Officer (COO) and Chief Financial Officer (CFO) of the Company. He founded Kid Conduit, Inc., a privately held business in 1996. He has a variety of electrical service certifications including an electrical contractor’s license which led to the conclusion that he should serve as a director of the Company.
Family Relationships
There are no family relationships among any of our officers or directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
● been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Code of Ethics
We do not have a code of ethics that applies to our officers, employees and directors.
Corporate Governance
The business and affairs of the company are managed under the direction of our board. In addition to the contact information in this annual report, each stockholder will be given specific information on how he/she can direct communications to the officers and directors of the corporation at our annual stockholders meetings. All communications from stockholders are relayed to the members of the board of directors.
Role in Risk Oversight
Our board of directors is primarily responsible for overseeing our risk management processes. The board of directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The board of directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent with the board’s appetite for risk. While the board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, our directors and certain of our officers, and persons holding more than 10 percent of our common stock are required to file forms reporting their beneficial ownership of our common stock and subsequent changes in that ownership with the United States Securities and Exchange Commission.
Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that as of the date of this report, our executive officers, directors and greater than 10 percent beneficial owners complied on a timely basis with all Section 16(a) filing requirements.
Item 11.
Item 11. Executive Compensation.
The following executives of the Company received compensation in the amounts set forth in the chart below for the fiscal years ended December 31, 2013 and 2012. No other item of compensation was paid to any officer or director of the Company other than reimbursement of expenses.
Summary Compensation Table
1. This amount is for consulting services that were paid to Mr. Singer’s entity AWS Services, Inc..
2. This amount includes the following: (i) $126,720 pursuant to Mr. Jones’ consulting agreement and (ii) $30,000 for his yearly car allowance. Compensation in the amount of $87,531 has accrued, but has not been paid.
3. This amount includes the following: (i) $116,220 pursuant to Mr. Kirkland’s consulting agreement and (ii) $30,000 for his yearly car allowance. Compensation in the amount of $71,558 has accrued, but has not been paid.
Outstanding Equity Awards at Fiscal Year-End Table
There were no outstanding equity awards for the year ended December 31, 2013.
Compensation of Directors
The Company has not compensated any of its directors for service on the Board of Directors. Management directors are not compensated for their service as directors; however they may receive compensation for their services as employees of the Company. The compensation received by our management directors is shown in the “Summary Compensation Table” above.
Employment Agreements
On January 1, 2012, we entered into an employment agreement with our Chief Financial Officer, Philip Kirkland. Pursuant to the agreement, Mr. Kirkland’s employment will be for a term of three (3) years, unless removed earlier, and be compensated with an annual base salary of $50,000.
On January 1, 2012, we entered into an employment agreement with our Chief Executive Offier, Devon Jones. Pursuant to the agreement, Mr. Jones’s employment will be for a term of three (3) years, unless removed earlier, and be compensated with an annual base salary of $50,000.
Consulting Agreements
On April 22, 2011, we entered into a consulting agreement with Philip Kirkland to provide advisory, consulting and other services in relation to the Company’s operations. Pursuant to the agreement, Mr. Kirkland was paid a monthly consulting fee of $10,560, which continued until the termination of the agreement on December 31, 2012. The agreement was renewed on January 1, 2013 to extend through December 31, 2013.
On April 22, 2011, we entered into a consulting agreement with Devon Jones to provide advisory, consulting and other services in relation to the Company’s operations. Pursuant to the agreement, Mr. Jones was paid a monthly consulting fee of $9,685, which continued until the termination of the agreement on December 31, 2012. . The agreement was renewed on January 1, 2013 to extend through December 31, 2013.
We do not have any other employment agreements with our officers or directors.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding our shares of common stock beneficially owned as of April 30, 2014, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of April 30, 2014. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of April 30, 2014 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise specified, the address of each of the persons set forth below is care of the company at the address of: 8 Sky Light Court, Sacramento, CA 9582.
(1) Based on 13,073,163 shares of common stock outstanding as of April 30, 2014.
(2) The beneficial owner of SCS, LLC is Devon Jones.
(3) The beneficial owner of LRK Holdings, LLC is Philip Kirkland.
(4) The beneficial owner of AWS Services, Inc. is David D. Singer.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
We have engaged an entity controlled by David Singer, a director of the Company to perform consulting services related to the development of new technologies. Payments to this party totaled $12,625and $24,091 during the periods ended December 31, 2013 and 2012.
The Company hired Michael J. Sullivan to be the Contract Coordinator for the Transportation Operations System Network (the “Employment Agreement”). The Company will issue Mr. Sullivan 100,000 shares in consideration for his work as Contract Coordinator. Prior to Mr. Sullivan’s employment, the Company awarded 10,000 shares of the Company’s common stock to Mr. Sullivan for his services rendered prior to the execution of the Employment Agreement.
Director Independence
We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
● the director is, or at any time during the past three years was, an employee of the company;
● the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
● a family member of the director is, or at any time during the past three years was, an executive officer of the company;
● the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
● the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
● the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
Messrs. Jones, Singer, and Kirkland are not considered independent because they are employees of the Company.
We do not currently have a separately designated audit, nominating or compensation committee.
Item 14.
Item 14. Principal Accounting Fees and Services.
Audit Fees
For the Company’s fiscal years ended December 31, 2013 and 2012, we were billed approximately $24,000 and $16,000 for professional services rendered for the audit and review of our financial statements.
Audit Related Fees
There were no fees for audit related services for the years ended December 31, 2013 and 2012.
Tax Fees
We were billed $450 and $250 during the years ended December 31, 2013 and 2012 for tax compliance, advice and filings.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2013 and 2012.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
- approved by our audit committee; or
- entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees was pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
(a) The following documents are filed as part of this report:
(1) Financial Statements and Report of Independent Registered Public Accounting Firm, which are set forth in the index to Consolidated Financial Statements on pages through of this report.
(2) Financial Statement Schedule: None.
(3) Exhibits
EXHIBIT
NUMBER
DESCRIPTION
3.1
Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on June 25, 2012.
3.2
By-Laws, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on June 25, 2012.
4.1
Promissory Note dated June 17, 2011, with three addendums, incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on October 18, 2012.
4.2
Promissory Note dated April 29, 2011 with Addendum, incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on May 15, 2012.
4.3
Promissory Note dated November 21, 2011, for Byrd & Company, LLC, incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on October 18, 2012.
4.4
Promissory Note dated December 15, 2011, incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on May 15, 2012.
4.5
Promissory Note dated December 15, 2011 Addendums, incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on October 18, 2012.
4.6
Promissory Note dated April 29, 2011 Addendum, incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on May 15, 2012.
4.7
Promissory Note dated April 29, 2011 Second and Third Addendum, incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on November 9, 2012.
4.8
Convertible Debenture dated October 19, 2012, incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on November 9, 2012.
10.1
Nine Cover Pages to the Standard Agreement with the State of California, incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on October 18, 2012.
10.2
Development Agreement between American Water Solutions, Inc. and Intelligent Highway Solutions, Inc., dated May 8, 2012, incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on June 25, 2012.
10.3
Copy of Intelligent Highways Solutions, Inc. C-10 Electrical Contractor License, incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on June 25, 2012.
10.4
Copy of Standard Industrial/Commercial Multi-Tenant Lease, incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on June 25, 2012.
10.5
Copy of California Small Business, incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on September 17, 2012.
10.6
Copy of Philip Kirkland Employment Agreement, incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on September 17, 2012.
10.7
Copy of Devon Jones Employment Agreement, incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on September 17, 2012.
10.8
Copy of Philip Kirkland Consulting Agreement, incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on September 17, 2012.
10.9
Copy of Devon Jones Consulting Agreement, incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on September 17, 2012.
10.10
Addendum to Development Agreement between American Water Solutions, Inc. and Intelligent Highway Solutions, Inc. dated October 4, 2012 incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on November 9, 2012.
10.11
Copy of Michael J. Sullivan Employment Agreement dated October 4, 2012 incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1/A, filed with the Securities and Exchange Commission on November 9, 2012.
10.12
Distribution Agreement between SCS Lighting Solutions Inc. and Intelligent Highway Solutions, Inc. dated August 22, 2013 incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 11, 2013.
16.1
Letter from Sam Kan & Company incorporated by reference to Exhibit 16.1 to the Company’s Amendment No. 1 to Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 11, 2014.
21.1
List of Subsidiaries - None.
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Schema
101.CAL*
XBRL Taxonomy Calculation Linkbase
101.DEF*
XBRL Taxonomy Definition Linkbase
101.LAB*
XBRL Taxonomy Label Linkbase
101.PRE*
XBRL Taxonomy Presentation Linkbase
In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of this annual report or purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTELLIGENT HIGHWAY SOLUTIONS, INC.
Date: May 6, 2014 By: /s/ Devon Jones
Devon Jones
Chief Executive Officer
(Principal Executive Officer)
Date: May 6, By: /s/ Philip Kirkland
Philip Kirkland
Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Devon Jones
Chief Executive Officer and Director
May 6, 2014
Devon Jones
(Principal Executive Officer)
/s/ David D. Singer
President and Director
May 6, 2014
David D. Singer
/s/ Philip Kirkland
Chief Financial Officer, Chief Operating Officer and Director
May 6, 2014
Philip Kirkland
(Principal Financial and Accounting Officer)