Readers should carefully consider the risk factors set out below and consider all other information contained herein and in the Company’s other public filings before making an investment decision in the Ordinary Shares. There are numerous market risks to the Company’s business. A list of the prominent market risks is listed here. The below list of factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. These factors, and others, may in the future materially affect the financial performance of the Company. No issue of shares by the Company carry any guarantee with respect to the payment of dividends, returns of capital or the market value of those shares.
|Key personnel risk||Incepts operations are dependent upon the continued performance, efforts, abilities and expertise of its key Board and management personnel. The inability of Incept to attract and retain such people may adversely impact their ability to adequately meet project demands and fill roles in existing operations. Skills shortages in mining, engineering, technical service, construction and maintenance may also impact Incepts activities. The loss of services of such personnel could have a materially adverse operational and financial impact on Incept.|
|Compensation risk||Incept seeks to provide competitive compensation to retain and attract highly skilled personnel that are important to its business, including salaries, bonus arrangements and share incentive arrangements. The Directors believe that Incept compensation arrangements are competitive and adequate to allow Incept to retain and attract the necessary calibre of employees. The loss of any board member, senior manager or other key personnel, as well as the inability to retain and/or attract new highly skilled personnel, could have a material adverse effect on the Incept business.|
|Failure to attain goals||There can be no assurance that all of Incepts initiatives will be completed as anticipated or that Incept will be able to successfully realize these goals at the targeted levels or by the projected dates.|
|Partnerships and alliances may not be successful||Incept is participating in a number of arrangements across its projects and may enter into other similar arrangements in the future. Although Incept has sought to protect its interests, joint ventures and strategic alliances necessarily involve special risks including financial, operational or business issues.|
|Conflicts of interest||The Company’s directors and officers may serve as directors or officers of other companies or have significant shareholdings in other companies and, to the extent that such other companies may participate in ventures in which the Company may participate, the directors of the Company may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of the Company’s directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. The directors of the Company are required to act honestly, in good faith and in the best interests of the Company.|
|Breach of confidentiality||While discussing potential business relationships or other transactions with third parties, the Company may disclose confidential information relating to the business, operations or affairs of this Company. Although confidentiality agreements are signed by third parties prior to the disclosure of any confidential information, a breach could put the Company at competitive risk and may cause significant damage to its business. The harm to the Company’s business from a breach of confidentiality cannot presently be quantified, but may be material and may not be compensable in damages. There is no assurance that, in the event of a breach of confidentiality, the Company will be able to obtain equitable remedies, such as injunctive relief, from a court of competent jurisdiction in a timely manner, if at all, in order to prevent or mitigate any damage to itsbusiness that such a breach of confidentiality may cause.|
|Implementation risk||Due to the scope and complexity of the technology solutions that we provide, our implementation cycle can be lengthy and unpredictable. Our technologies may require modification or customization and must integrate with many existing computer systems and software programs and other platforms of our customers and their trading partners. This can be time-consuming and expensive for our customers and can result in delays in the implementation and deployment of our technologies. Furthermore, our implementation capacity may be constrained during periods of high customer demand. As a result, some customers may in the future have, difficulty implementing our products successfully or otherwise achieving the expected benefits of our products. Delayed or ineffective implementation or upgrades of our technology may limit our future sales opportunities, impact revenue, result in customer dissatisfaction and harm our reputation.
While Incept has full operational control of its various technologies, and although Incept believes that the track record and testing of its technologies to date has been proven to work, there can be no assurance that such technologies will be commercially feasible.
|Incept may fail to make successful acquisitions or fail to integrate acquisitions effectively||The Incept business model utilises partnerships and acquisitions to facilitate growth in the Company. Business combinations entail a number of risks, including the ability of Incept to integrate effectively the businesses acquired with their existing operations (including the realisation of synergies, significant one-time write-offs or restructuring charges, difficulties in achieving optimal tax structures and unanticipated costs). All of these may be exacerbated by the diversion of the Directors’ attention away from other ongoing business concerns.
Incept may also be liable for the past acts, omissions or liabilities of companies or businesses it has acquired, which may be unforeseen or greater than anticipated at the time of the relevant acquisition.
|The Company and its operating subsidiaries and associates may be unable to pay dividends||Incepts results of operations and financial condition are entirely dependent on the financial performance of members and associates of the Incept other than the Company. The Company’s ability to pay dividends will depend, among other things, on the level of distributions, if any, received from the Company’s operating subsidiaries and interests, and its level of cash balances. Certain of the Company’s operating subsidiaries may, from time to time, be subject to restrictions on their ability to make distributions to the Company or return cash to it by other means, and there can be no assurance that such restrictions will not have a material adverse effect on the market price of the Ordinary Shares. The Company has never declared or paid any dividends, and there is currently no policy in place relating to dividends or other distributions.|
|Changes in business of financial risk of customers||A significant downturn or further deterioration in the business or financial condition of a key customer or customers supplied by Incept could affect Incept results of operations in a particular period.
Incepts customers may experience delays in the launch of new products, labour strikes, diminished liquidity or credit unavailability, weak demand for their products, or other difficulties in their businesses. If Incept is not successful in replacing business lost from such customers, profitability may be adversely affected. This will adversely affect the value of Incepts investment.
|Unforeseen expenditure risk||Incepts forecasts are based on certain assumptions in relation to the level of capital expenditure required to complete the prototype technology. If the level of capital expenditure required is higher or is needed sooner than anticipated, if capital expenditure required to generate forecast earnings is not undertaken or if there is a significant operational failure requiring unplanned capital expenditure, the financial performance of Incept may be adversely affected.|
|Liquidity and financing risk||Liquidity, or ready access to funds, is essential to the Incepts business. Liquidity risk is the risk that Incept is unable to meet its payment obligations when due, or that it is unable, on an on-going basis, to borrow funds in the market on an unsecured or secured basis at an acceptable price to fund actual or proposed commitments. A lack of liquidity may mean that Incept will not have funds available to grow its business as planned or take advantage of other opportunities that may arise.
Incepts projects and commercial activities are capital intensive and the continued funding of such activities is critical to maintain its ownership interests in its projects and to increase production levels in the future in accordance with its business plan or grow through the acquisition of new assets.
Borrowings from banks, the issuance of notes in debt capital markets and raising of capital will supplement the funding position.
An inability to raise money or have access to debt to finance its activities could impair its operational capability. There can be no guarantee that financial institutions will support Incept in the future.
Future debt financing may result in increased borrowing costs, increased financial leverage and decreased income available to fund further acquisitions.
|Risk of delays and execution of planned projects||Incept has a number of significant expansions planned for its projects, which the Company estimates will require significant substantial capital expenditure.
The timing, implementation and cost of Incepts expansion and development projects are subject to a number of risks, including:
Any future upward revisions in estimated project costs, delays in completing planned expansions, cost overruns, suspension of current projects or other operational difficulties after commissioning, as a result of the above factors or otherwise, may have a material adverse effect on Incepts business.
|Litigation||In the normal course of the Company’s operations, it may become involved in, named as a party to, or be the subject of, various legal proceedings, including regulatory proceedings, tax proceedings and legal actions, related to personal injuries, property damage, property tax, land rights, the environment and contract disputes. The outcome of outstanding, pending or future proceedings cannot be predicted with certainty and may be determined adversely to the Company and as a result, could have a material adverse effect on the Company’s assets, liabilities, business, financial condition and results of operations. The Company is currently subject to certain litigation and regulatory actions.|
|Accidents at Incept commercial sites could result in injuries and fatalities||Any accidents or hazardous incidents causing personal injury or death or property or environmental damage at or to Incept mines, smelters, or related facilities (such as logistics and storage facilities) or surrounding areas may result in significant losses, interruptions in production, expensive litigation, imposition of penalties and sanctions or suspension or revocation of permits and licences.
Risks associated with the logistics and storage operations may include the risk of ruptures from product carriers; seepage of tailings or other hazardous substances found in storage or disposal facilities; and failure of tailings dams during the operating life of the mines or after closure. Injuries to and deaths of workers and contractors at mines have occurred in the past in the mining industry and may occur in the future.
|Cyclical industry and changes in global economy||The resources industry generally remains highly cyclical and can be subject to fluctuations in commodities prices, economic conditions generally and resource end-use markets. The global economic downturn that occurred in 2008 and 2009, coupled with the global financial and credit market disruptions, had a historic, negative impact on the resources industry. Market fluctuations in 2012 may also impact the industry in general.
The Company is unable to predict the future course of industry variables or the strength, pace or sustainability of the economic recovery and the effects of government intervention. There is no assurance that any action Incept has taken or may take, will be sufficient to counter any future economic or industry disruptions.
|Geopolitical risks||Incept is exposed to significant geopolitical risk. Incept is in partnership or has projects in place which are in a large number of geographic regions and countries and, as a result, is exposed to a wide range of political, regulatory and tax environments.
These environments are subject to change in a manner that may be materially adverse for Incept, including changes to government policies and regulations governing industrial production, foreign investors, price controls, export controls, tariffs, income and other forms of taxation (including policies relating to the granting of advance rulings on taxation matters), nationalisation or expropriation of property, repatriation of income, royalties, the environment and health and safety.
Many of the commodities that Incept plans to produce can be considered strategic resources and governments may decide not to recognise previous arrangements if they regard them as no longer being in the national interest. Governments may also implement export controls on commodities regarded by them as strategic or place restrictions on foreign ownership of assets.
Incept will continue to do business in emerging markets where greater risk instability is present such as terrorism, civil war, guerrilla activities, military repression, civil disorder, crime, workforce instability, change in government policy or the ruling party, economic or other sanctions imposed by other countries, extreme fluctuations in currency exchange rates or high inflation.
The geopolitical risks associated with operating in a large number of regions and countries, if realised, could affect Incepts ability to manage or retain interests in its industrial activities and could have a material adverse effect on the profitability, ability to finance or viability of its projects.
|Reduction or elimination of investment incentives||Incept may claim significant tax incentives, which may not be available in the future that may have a material adverse effect on the Company’s results of operations.
The Company currently enjoys, in the form of tax holidays, exemptions and subsidies, the benefit of various tax incentives provided by the Indian federal and state governments designed to encourage investment in the resources sectors. These incentives have a material impact on the Company’s investment returns.
The Company’s results of operations and financial condition could be materially adversely affected if these benefits were amended or withdrawn or were to become unavailable or if the Company’s claim for these benefits were disputed or disallowed by the tax authorities.
Tax regulations have historically been subject to varying interpretations and applications by tax authorities, courts and tribunals. Incept cannot currently ascertain the impact that changes may have on the Company, and any change in tax laws or the interpretation and application of such laws could have a material adverse effect on the Company’s business, financial condition and results of operations.
|Patent and Intellectual Property risk||We believe that proprietary technology is essential to establishing and maintaining our leadership position. We seek to protect our intellectual property rights through trade secrets, copyrights, confidentiality, non-compete, nondisclosure and proprietary technology agreements, filing patent applications and seeking patent protection, trade-marks, domain names and other measures, some of which afford only limited protection. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our technology or to obtain and use information that we regard as proprietary. We may be required to spend significant resources to monitor and protect our proprietary rights, and we cannot assure you that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar or superior technology or design around our intellectual property. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of our local jurisdictions. Intellectual property protections may also be unavailable, limited or difficult to enforce in some countries, which could make it easier for competitors to capture market share. Our failure to adequately protect and enforce our intellectual property and proprietary rights could adversely affect our business, financial condition and results of operations.
By enforcing and/or asserting our intellectual property rights, such as our patent rights, there can be no assurance that our patents would be held valid or enforceable by a court of competent jurisdiction or that a court would rule that the competitor’s products or technologies constitute patent infringement.
Because intellectual property litigation, particularly software patent litigation, involves complex legal and factual questions, the issuance, scope, validity, and enforceability of patents cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. If our patents were invalidated or found to be unenforceable, we would lose the ability to exclude others from making, using or selling the inventions claimed. Moreover, an issued patent does not guarantee the right to use the patented technology or commercialize a product using that technology. Third parties may have blocking patents that could be used to prevent us from using technology claimed in our own patents. Thus patents that we own may not allow us to exploit the rights conferred by its intellectual property protection.
|Development phase technology||The Company is a technology development company and its products are at various stages of development and testing. There may be technical, legal or regulatory issues limiting the commercial viability of the products and full commercialisation may not be achieved.|
|Technological change and competition||Incept could face increased competition via both new and existing entrants into the market which could adversely affect its ability to attract customers to its Products. There can be no assurance that competitors of the Company will not succeed in developing technologies and products that are more effective than the Company’s products, or which would render the technology and products of the Company obsolete or non-competitive.
The future success of the Company may depend on its ability to adapt to rapidly changing technologies, evolving industry standards, introductions and enhancements and changing customer demands. The failure of the Company to adapt to such changes and evolution could have a material adverse effect on the business, results of operations and financial condition of the Company.
|Risks relating to the Ordinary Shares|
|Risk related to dilution||Future capitalization measures could lead to substantial dilution of existing shareholders’ interests in the Company. If the transactions contemplated under the Sovereign MOU and Sovereign Deed and the CRFG MOU are consummated (see “Carbon Efficient Operations – Joint Venture with Sovereign Green” and “Industrial & Energy Technologies Projects – Memorandum of Agreement with China Railway Financial Group”), a significant number of additional Ordinary Shares will be issued resulting in excessive dilution. Moreover, in connection with the transactions contemplated by the Smart Grow Agreement and the GEM Subscription Agreement, a significant number of additional Ordinary Shares may be issued resulting in significant dilution.|
|Major shareholders may exercise significant influence over the Group||The founders owns approximately 29.6% of the Company’s issued and outstanding Ordinary Shares and is entitled to a 25% interest in the Company’s subsidiary undertakings. Major shareholders, including these principal shareholders, may exercise significant influence over the Group.|
|An active market for the Ordinary Shares may not develop, which may affect the shareholder’s ability to dispose of Ordinary Shares||There is currently no market through which the Ordinary Shares of the Company may be resold and shareholders may not be able to sell the Ordinary Shares owned by them. This may affect the price of the securities in the secondary market, the transparency and availability of trading prices, the liquidity of the securities and the extent of issuer regulation.
The Company has submitted an application to list its Ordinary Shares on the Canadian Stock Exchange (the “CSE”). Listing will be subject to the Company fulfilling all of the listing requirements of the CSE.
The Company is filing this Prospectus in the Province of Ontario in order to obtain “reporting issuer” status which is a pre-condition to listing the Ordinary Shares on the CSE. There can be no assurance that the Company will attain “reporting issuer” status or if it does that it will be able to fulfil all of the listing requirements of the CSE or any other stock exchange or that its Ordinary Shares will be listed on any stock exchange. Even if the Company is successful in obtaining a listing on the CSE or any other stock exchange, there may not be a liquid market for the Ordinary Shares and any market price for the Ordinary Shares may not reflect the underlying value of the Company’s business.
|Risks relating to the Company and/or the Group’s structure|
|The holding company structure means that the Company’s ability to pay dividends will be dependent on distributions received from its subsidiaries||Since the Company is a holding company, its operating results and financial results will be dependent on the performance of members of the Group. The Company’s ability to pay dividends will depend on the level of distributions, if any, received from the Company’s subsidiaries. The ability of the Company’s subsidiaries to make distributions to the Company may, from time to time, be restricted as a result of several factors, including restrictive covenants in loan agreements, foreign exchange limitations, the requirements of applicable law and regulatory, fiscal or other restrictions. The Company’s rights to participate in a distribution of its subsidiaries’ assets upon their liquidation, reorganisation or insolvency is generally subject to prior claims of the subsidiaries’ creditors, including any trade creditors and, if any, preferred shareholders. The Company has never declared or paid any dividends, and there is currently no policy in place relating to dividends or other distributions.|
|Tax charges may affect distributions and returns to Shareholders||Tax charges may affect the level of distributions made to the Company by the Group companies and accordingly by it to shareholders. The Group will, in structuring its investments, seek to maximise after tax distributable cash in a manner consistent with its business operations. However, any change in the Company’s tax status, domicile, taxation rates or in taxation legislation could affect the profits of the Group and, in turn, the return to Shareholders.|
|Forward-looking information may prove inaccurate||Shareholders and prospective investors are cautioned not to place undue reliance on the Company’s forward-looking information. By its nature, forward-looking information involves numerous assumptions, known and unknown risk and uncertainties, of both a general and specific nature, that could cause actual results to differ materially from those suggested by the forward-looking information or contribute to the possibility that predictions, forecasts or projections will prove to be materially inaccurate.|
|Reduction in demand||The Chinese market is a significant source of global demand for commodities. A sustained slowdown in China’s economic and commodities demand growth that is not offset by increased commodities demand growth in other emerging economies can materially affect the Company’s business, financial results, operations or cash flow, and consequently impact the value of Incepts investment.|
|Currency, Exchange Rates, Inflation, and risks in countries in which Incept operates||The significant majority of transactions undertaken are denominated in U.S. dollars. Foreign exchange rates have seen significant fluctuation in recent years and depreciation in the value of the U.S. dollar against one or more of currencies will therefore result in an increase in the cost of these operations in U.S. dollar terms and could adversely affect financial results.
For financial reporting purposes, transactions in foreign currencies are converted into the functional currency of each entity using the exchange rate prevailing at the transaction date. Monetary assets and liabilities outstanding at year end are converted at year-end rates. The resulting exchange differences are recorded in the consolidated statement of income. The exchange rates between relevant local currencies and the U.S. dollar have historically fluctuated.
Incepts exposure to changes in interest rates results from investing and borrowing activities undertaken to manage its liquidity and capital requirements. Broadly, economic factors, including inflation and fluctuations in foreign currency exchange rates and interest rates, competitive factors in the countries in which Incept operates, and continued volatility or deterioration in the global economic and financial environment could affect Incepts revenues, expenses and results of operations.