PFO Global, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - PFO Global, Inc.	Financial_Report.xls
EX-32.01 - CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. - PFO Global, Inc.	ex32-01.htm
EX-31.01 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - PFO Global, Inc.	ex31-01.htm
EX-31.02 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - PFO Global, Inc.	ex31-02.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________ to _________

Commission file number: 333-167380

ENERGY TELECOM, INC.

(Exact name of registrant as specified in its charter)

Florida		65-0434332
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3501-B N. Ponce de Leon Blvd., #393

St. Augustine, Florida 32084

(Address of principal executive offices) (zip code)

(904) 819-8995

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.

As of May 3, 2012, there were 8,495,248 and 200,000 shares of registrant’s class A and B common stock outstanding, respectively.

ENERGY TELECOM, INC.

INDEX

PART I.	FINANCIAL INFORMATION

	ITEM 1	Financial Statements
		Condensed balance sheets as of March 31, 2012 (unaudited) and December 31, 2011	3

		Condensed statements of operations for the three months ended March 31, 2012 and 2011 (unaudited)	4

		Condensed statement of changes in stockholders’ equity (deficiency) for the three months ended March 31, 2012 (unaudited)	5

		Condensed statements of cash flows for the three months ended March 31, 2012 and 2011 (unaudited)	6

		Notes to condensed financial statements (unaudited)	7-10

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11-17

	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	16

	ITEM 4.	Controls and Procedures	16

PART II.	OTHER INFORMATION

	ITEM 1.	Legal Proceedings	18
	ITEM 1A.	Risk Factors	18
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
	ITEM 3.	Defaults Upon Senior Securities	18
	ITEM 4.	Mine Safety Disclosures	18
	ITEM 5.	Other Information	18
	ITEM 6.	Exhibits	18

	SIGNATURES		19

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENERGY TELECOM, INC.
CONDENSED BALANCE SHEETS

	March 31,			December 31,
	2012			2011
	(unaudited)
ASSETS

CURRENT ASSETS
Cash	$	416,218		$	138,712
Accounts receivable, net		11,440			-
Total current assets		427,658			138,712

Property and equipment, net		4,710			3,378

Total assets	$	432,368		$	142,090

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	70,036		$	40,481
Stockholder notes payable		18,486			18,486

Total current liabilities		88,522			58,967

STOCKHOLDERS' EQUITY
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 8,432,748 and 7,432,748 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively		843			743
Class B common stock, no par value, 10,000,000 shares authorized, 200,000 shares issued and outstanding as of March 31, 2012 and December 31, 2011		-			-
Additional paid in capital		5,417,592			4,989,537
Accumulated deficit		(5,074,589	)		(4,907,157	)
Total stockholders' equity		343,846			83,123

Total liabilities and stockholders' equity	$	432,368		$	142,090

The accompanying notes are an integral part of these unaudited condensed financial statements

ENERGY TELECOM, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)

	Three months ended March 31,
	2012			2011
REVENUE:
Sales	$	13,719		$	950
Royalties		3,032			-
Total revenue		16,751			950

COST OF GOODS SOLD		11,217			-

Gross profit		5,534			950

OPERATING EXPENSES:
Selling, general and administrative expenses		171,431			93,292
Depreciation		310			-
Total operating expenses:		171,741			93,292

Loss from operations		(166,207	)		(92,342	)

OTHER INCOME (EXPENSE):
Interest income		70			80
Interest expense		(1,295	)		(1,355	)

Total other income (expense):		(1,225	)		(1,275	)

Net loss before provision for income taxes		(167,432	)		(93,617	)

PROVISION FOR INCOME TAXES
Income tax (benefit)		-			-

NET LOSS	$	(167,432	)	$	(93,617	)

Net loss per common share, basic and fully diluted	$	(0.02	)	$	(0.01	)

Weighted average number of common shares outstanding, basic and fully diluted		7,645,825			6,678,841

The accompanying notes are an integral part of these unaudited condensed financial statements

ENERGY TELECOM, INC.

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(unaudited)


														Total
									Additional					Stockholders'
	Class A Common Stock				Class B Common Stock				Paid in		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Deficit			(Deficiency)
Balance, December 31, 2011		7,432,748	$	743		200,000	$	-	$	4,989,537	$	(4,907,157	)	$	83,123
Sale of common stock		960,000		96		-		-		349,694		-			349,790
Common stock issued for services rendered		40,000		4		-		-		27,861		-			27,865
Common stock issuable as officer compensation		-		-		-		-		50,500		-			50,500
Net loss		-		-		-		-		-		(167,432	)		(167,432	)
Balance, March 31, 2012		8,432,748	$	843		200,000	$	-	$	5,417,592	$	(5,074,589	)	$	343,846

The accompanying notes are an integral part of these unaudited condensed financial statements

ENERGY TELECOM, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)


	Three months ended March 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(167,432	)	$	(93,617	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		310			-
Common stock issued for services rendered		27,865			15,600
Common stock issuable for officer compensation		50,500			-
Changes in operating assets and liabilities:
Increase in accounts receivable		(11,440	)		-
Increase (decrease) in accounts payable and accrued liabilities		29,555			(1,601	)
Net cash used in operating activities		(70,642	)		(79,618	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(1,642	)		-
Net cash used in investing activities		(1,642	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		349,790			209,958
Repayments of shareholder loans		-			(20,000	)
Net cash provided by financing activities		349,790			189,958

Net increase in cash		277,506			110,340

Cash beginning of period		138,712			87,643
Cash end of period	$	416,218		$	197,983

Supplemental disclosures of cash flow information:
Interest paid	$	-		$	-
Taxes paid	$	-		$	-

The accompanying notes are an integral part of these unaudited condensed financial statements

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011

(unaudited)

NOTE 1 — NATURE OF OPERATIONS/BASIS OF PRESENTATION

Energy Telecom, Inc. (the “Company”), formerly The Energy Corp., is an intellectual property exploitation company providing patent protection to its manufacturing business partners so they may manufacture, market, distribute and sell worldwide a family of eyewear products delivering a full range of audio and optical information to mobile workers and recreational eyewear users. The Company also manages and coordinates the process of its manufacturing business partners in manufacturing the product. The Company’s Class A common stock trades from time to time on the over-the-counter-bulletin-board under the symbol “ENRG.OB”.

During year ended December 31, 2011, the Company transitioned from a development stage enterprise to an operating company, as the Company’s manufacturing partner, Samsin USA, began producing the telecom eyewear product for delivery to a consumer-retail distributor for resale. The Company recognizes revenue when the product is sold and shipped by the distributor. The consumer-retail model of the eyewear is being sold through print and online advertising.

The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim condensed financial information and Rule 8-03 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.

All adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included in these unaudited interim condensed financial statements. Operating results for the three month period presented are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2011 has been derived from audited financial statements. The unaudited interim condensed financial statements should be read in conjunction with the financial statements and footnotes thereto for the year ended December 31, 2011.

NOTE 2 — LIQUIDITY

The Company transitioned from a development stage enterprise in 2011. As of March 31, 2012 upon completion of the sale of the Company's common stock, the Company's working capital was $339,136. Management believes that the Company will continue to develop its business plan which will allow the Company to continue to improve its working capital and has sufficient capital resources to meet projected cash flow requirements through March 2013. However, there can be no assurance that the Company will be successful completing its business development plan.

NOTE 3 — SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of these unaudited interim condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures in the financial statements. Accordingly, actual results could differ from these estimates

REVENUE RECOGNITION

The Company recognizes revenue on four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (4) is based on management’s judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectability of those fees. Revenue is earned for product shipped and sold by our distributor on a per unit basis or as royalties upon shipment by the manufacturer as third party sales.

Revenue recognized in the three months ended March 31, 2012 relate to sales of product of $13,719 and royalties earned of $3,032.

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011

(unaudited)

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of three to five years.

SHARE-BASED COMPENSATION

Share-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The Company measures the fair value of the share-based compensation issued to non-employees using the average stock price observed (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair value than the value of the services being rendered. The measurement date is the earlier of (1) the date at which commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

NET LOSS PER COMMON SHARE

Basic loss per share (“EPS”) is computed by dividing the net loss attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted loss per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options and warrants (using the “treasury stock” method), unless their effect on net loss per share is antidilutive. The effect of computing diluted loss per share is antidilutive and, as such, basic and diluted loss per share is the same for the three months ended March 31, 2012 and 2011.

RECENT ACCOUNTING PRONOUNCEMENTS

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.

NOTE 4 — FINANCIAL INSTRUMENTS

CONCENTRATIONS OF CREDIT RISK

The Company’s financial instrument that is exposed to a concentration of credit risk is cash. Effective December 31, 2010 and extending through December 31, 2012, all non-interest-bearing transaction accounts are fully insured by the Federal Deposit Insurance Corporation (FDIC), regardless of the balance of the account. On occasion, the Company’s cash and cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

NOTE 5 — STOCKHOLDER NOTES PAYABLE

The Company has received financing from the Company’s founder, Chief Executive Officer, President and majority stockholder (the “officer/director”). The stockholder notes bear interest of 10% per annum, compounding annually and are due on demand.

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011

(unaudited)

The following table summarizes stockholder notes payable as of March 31, 2012 (unaudited) and December 31, 2011:

	March 31, 2012		December 31, 2011
Loans payable, due on demand, interest at 10%	$	18,486	$	18,486
Accrued interest		34,736		33,441
	$	53,222	$	51,927

The Company recognized interest expense associated with the notes of $1,295 and $1,355 for the three months ended March 31, 2012 and 2011, respectively.

NOTE 6 — STOCKHOLDERS’ EQUITY

PRIVATE PLACEMENTS

During the three months ended March 31, 2012, the Company completed private placements of 960,000 shares of Class A common stock and has received proceeds totaling $349,790.

SHARES ISSUED TO CONSULTANTS

During the three months ended March 31, 2012, the Company issued an aggregate of 40,000 shares of Class A common stock to consultants in exchange for services rendered with a fair value totaling $27,865.

SHARES ISSUABLE AS COMPENSATION

During the three months ended March 31, 2012, the Company was obligated under an employment contract to issue 50,000 shares of Class A common stock as officer compensation with a fair value totaling $50,500 (see below).

NOTE 7 — COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENT-TOM RICKARDS

On May 3, 2011, the Company entered into a one year employment agreement with Tom Rickards, Chief Executive Officer, director and founder whereby Mr. Rickards shall receive an annual salary of $36,000, which may be increased up to $50,000 by mutual agreement by Mr. Rickards and the Board of Directors and dependent on the financial strength of the Company. In addition, Mr. Rickards is to receive 200,000 shares of series A common stock payable in equal installments at the end of each calendar quarter and a $600 per month car allowance.

LITIGATION

The Company may, from time to time, become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. The Company is currently not aware of any such legal proceedings that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.

NOTE 8— RELATED PARTY TRANSACTIONS

The Company has an operating lease agreement for office space with the Company's Chief Executive Officer and director who has agreed to sublet space to the Company for a fixed fee of $2,750 on a month-to-month basis. Total rent expense for the three months ended March 31, 2012 and 2011 was $8,250 and $5,250, respectively.

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011

(unaudited)

As discussed in Note 5, the Company has received financing from the Company’s Chief Executive Officer, director, founder and majority stockholder. The stockholder loans bear interest of 10% per annum, compounding annually and are due on demand.

NOTE 9 — DEPENDENCY ON KEY MANAGEMENT

The future success or failure of the Company is dependent primarily upon the continued services and efforts of its Chief Executive Officer, director and founder. The ability of the Company to pursue its business strategy effectively will also depend upon, among other factors, the successful recruitment and retention of additional highly skilled and experienced managerial, marketing, engineering and technical personnel. There can be no assurance that the Company will be able to retain or recruit such personnel.

NOTE 10 — SUBSEQUENT EVENTS

On April 25, 2012, the Company issued an aggregate of 12,500 shares of its Class A common stock to two consultants in exchange for services rendered at $8,750.

On April 30, 2012, the Company issued 50,000 shares of its common stock as officer compensation pursuant to an employment contract at $50,500.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.

Overview

We were incorporated on September 7, 1993 under the laws of the State of Florida as The Energy Corp. On April 24, 2004, we changed our name to Energy Telecom, Inc.

We hold U.S. and foreign patents allowing for the manufacture, marketing and distribution of a hands-free, wireless communication eyewear providing quality sound and noise attenuation.

During 2011, we transitioned from a development stage enterprise to an operating company, as our manufacturing partner, Samsin USA, begin producing our telecom eyewear product for delivery to Qmadix, a consumer-retail distributor, for resale. The consumer-retail model of the eyewear is being sold through print and online advertising, by Brookstone, and other online retailers, such as Abe’s of Maine, through their own online retail channel and online stores at Amazon.com. As such, we began recognizing revenues from sales of our product in the third quarter of 2011.

We recently entered into a Distributor Agreement with Honeywell. Honeywell intends to start selling sell our eyewear under its branded ‘ICOM’ name in multiple European countries and UVEX branded ‘AcccoustiMaxx’ in the United States.

We have developed the world's first hands-free two-way, sound attenuating wireless telecommunication eyewear. The eyewear is designed for use on a recreational and professional basis. Our recreational eyewear is equipped with wireless two-way Bluetooth voice communication that is compatible with any cellular telephone that is Bluetooth enabled and is capable of streaming stereo music from any Bluetooth enabled music device. In addition, our eyewear works with handheld Bluetooth- enabled VHF and UHF walkie-talkies and Bluetooth adaptors. It contains built-in dual microphones to cancel out background noise and noise-isolating ear plugs that reduce noise levels by up to 42 decibels. In addition, the safety lenses come in clear, gray and amber colors, allowing them to be used indoor and outside.

We have a professional model, which is similar to the recreational model, but contains additional safety features and is intended to be marketed to the Personal Protective Equipment markets (commonly expressed as PPE) for use by police, fire, rescue, military and security personnel as well as companies in bio-hazardous, mining, construction and heavy manufacturing that utilize VHF and UHF radio communication. We have obtained numerous certifications for our telecommunications eyewear. We have obtained the necessary certifications to sell our product as personal protective equipment. We contracted with Colts Laboratories, an independent testing facility that is accredited by the Safety Equipment Institute to complete and verify standard tests.

Within the PPE market, our telecommunication eyewear competes primarily in the markets represented by hearing and eye protection and communication headset products and will be targeted towards the following end-markets:

	●	Police and fire rescue, security services and military: To protect the eyes and ears during the use of firearms, explosives and other weaponry, to provide hands-free communication among personnel and allow for real-time viewing of intelligence;

	●	Manufacturing: To protect workers from plant hazards such as industrial noise and flying particles that may cause eye injuries; and

	●	Construction, Mining and Logging Operations: To protect workers from airborne dust and debris and construction equipment noise and to provide two-way, instant communication.

Current Operating Trends and Financial Highlights

Management currently considers the following events, trends and uncertainties to be important in understanding our results of operations and financial condition during the current fiscal year:

	●	In November 2011, Honeywell presented its ‘ICOM’ branded eyewear model at the A+A Safety, Security and Health at Work International Trade Fair in Dusseldorf, Germany and its ‘AcccoustiMaxx’ branded eyewear model at the National Safety Council Congress and Expo, in Philadelphia, Pennsylvania. With the recently executed distribution agreement with Honeywell, we anticipate that they will begin marketing and selling the eyewear in the near future;
	●	Qmadix presented our eyewear at the Consumer Electronics Show in Las Vegas, Nevada in January 2012. At the show, Qmadix presented the ready-to-market eyewear to various cellular network and cellular retail suppliers which expressed interest in selling the eyewear for business-to-business commercial customers;
	●	In an effort to proactively protect our intellectual property rights and to explore the possibility of strategic relationships, we recently contacted several global entertainment and communication companies showing interest in music, voice communication and gaming eyewear. Our utility patents provide exclusive rights for the use of integrated telecommunication eyewear, and we believe that these companies will be unable to develop products without entering into some sort of cooperation or licensing agreement with us;
	●	Samsin Innotec and Samsin USA are developing samples of polarized and 3D eyewear lenses for use with our telecom eyewear, which we anticipate will be ready for initial testing by the end of 2012. These new lenses would be able to be secured into place and removed at the user’s convenience;
	●	We expect that additional purchase orders for the telecom eyewear will be received in the next few months as Qmadix continues to feature the eyewear and discussions with interested retailers are completed;
	●	We have one patent application pending in the United States. We received comments from the United States Patent and Trademark Office (PTO) on January 26, 2012 and filed an amendment to the pending application on February 2, 2012. We believe that the amendment addresses the outstanding concerns of the PTO and anticipate that the pending application may be allowed by the PTO this year. In addition, we have made the necessary filings to allow us to file a patent application in certain European and Asian counties if our pending patent application is granted by the PTO; and
	●	Escalating tensions between North Korea and South Korea could disrupt our operations. The telecommunication eyewear frames are manufactured by Samsin Innotec, which has plants in South Korea. In addition, all the components are shipped to South Korea, where they are assembled and tested, and then shipped out as a product ready for sale.

Results of Operations

The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.

Three months ended March 31, 2012 compared to the three months ended March 31, 2011

Revenue

We generated $16,751 in revenues for the three months ended March 31, 2012 as compared to $950 for the three months ended March 31, 2011. Revenue for three months ended March 31, 2012 was comprised of sales of $13,719 and earned royalties of $3,032 as compared to $950 in sales made to customers on a limited basis for the same period last year. The primary increase in revenue was the result of our sales by a distribution partner in the personal protective equipment market. We expect to see further significant increases in revenue in 2012 as our primary research and development is completed, the product is ready for sale, and we have entered into two distribution agreements and have requests about our product from other national marketers that have expressed interest in making purchase orders.

Cost of goods sold

Cost of goods sold for the three months ended March 31, 2012 were $11,217 as compared to $-0- for the same period last year. Sales for the three months ended March 31, 2011 were from sample inventories previously expensed in prior periods. Gross profit for the three months ended March 31, 2012 was $5,534 compared to $950 for the same period last year.

Expenses

For the three months ended March 31, 2012 and 2011, selling, general and administrative expenses totaled $171,431 and $93,292, respectively.

A summary comparison for the three months ended March 31, 2012 and 2011 is as follows:

	2012		2011
Professional fees	$	78,759	$	55,253
Office and utilities		14,747		12,570
Travel and promotion		4,517		5,971
Salaries and related taxes		9,902		9,817
Equity based compensation		50,500		-
Patents and trademarks		12,971		6,651
Other		35		3,030
Total	$	171,431	$	93,292

The primary increase in selling, general and administrative is due to share based compensation for the three months ended March 31, 2012 of $50,500 as compared to nil for the same period last year, an increase of $50,500, our profession fees increased from $55,253 for the three months ended March 31,2011 to $78,759 for the current period, an increase of $23,506, and our patent and trademark expenses increased $6,320 to $12,971 for the three months ended March 31, 2012 as compared to $6,651 for the same period last year.

Depreciation

Deprecation for the three months ended March 31, 2012 as $310 as compared to nil for the same period last year. Subsequent to March 31, 2011 and in 2012, we acquired office furniture and equipment.

Other Income and Expenses

For the three months ended March 31, 2012, we incurred $1,295 in interest expense which was offset by $70 in interest income compared to $1,355 in interest expense which was offset by $80 in interest income for the three months ended March 31, 2011.

Interest expense decreased by $60, primarily due to reduction in notes payable in 2011.

Net Loss

For the three months ended March 31, 2012, we incurred a net loss of $167,432 ($0.02 per share of common stock) as a result of the foregoing, compared to a net loss of $93,617 ($0.01 per share of common stock) for the three months ended March 31, 2011.

Liquidity and Capital Resources

As of March 31, 2012, we had working capital of $339,136. For the three months ended March 31, 2012, we generated a net cash flow deficit from operating activities of $70,642 consisting primarily of a year to date loss of $167,432. Non cash adjustments included $310 for depreciation, $78,365 for share based compensation and an increase in accounts payable and accrued liabilities of $29,555 offset by an increase in accounts receivable of $11,440. Cash used in investing activities totaled $1,642 from the purchase of property and equipment. Cash provided by financing activities totaled $349,790 from the sale of common stock. From time to time since our formation in 1993, we have sold shares to investors in private placement transactions. For the three months ended March 31, 2012, we sold an aggregate of 960,000 shares of our common stock for $349,790 in two different transactions. Except for anti-dilution protection provided to one shareholder in connection with investments made in 2007 and 2008, our financing transactions have not contained additional equity components (such as warrants) nor provide the investors with rights (such as piggyback or demand registration rights).

On March 12, 2012, we sold 960,000 shares of our common stock for cash proceeds of approximately $350,000. As a result, we have sufficient funds to conduct our proposed operations for at least 12 months. We expect capital expenditures during the next 12 months for marketing, advertising, inventory, equipment and overhead. We anticipate that, as necessary, we will continue to raise additional funds through the sale of securities. During the year ended December 31, 2011, we raised $329,958 from the sale of securities compared with $294,100 for the year ended December 31, 2010. The private placements that occurred since January 2011 were with accredited investors that contacted us, either because they previously invested with us or were referred to us by word of mouth from existing investors. For each private placement, we negotiate the price per share with such potential investor, based upon the amount of money the potential investor desires to invest and recent trading activity and price of our common stock. Other than one significant investor who received anti-dilution protection (which protection terminated in 2010) and the purchase price per share, we have not granted any investors any sort of different terms in our private placements.

Other than possible family relationships between the existing and new investors, we are not aware of any material relationships between new and existing investors. We have not engaged in any sort of solicitation of potential investors. None of our advisors or consultants have been involved in any sort of fundraising activities on our behalf.

As of March 31, 2012, we had working capital of $339,136. At our current rate, we use about $23,500 per month for continuing operations, which includes general operating expenses (office lease, utilities, salary and insurance), promotion and marketing (travel, entertainment, meals and website development), research and development (parts, engineering and testing), and professional services (accounting, legal, professional and state fees and intellectual property fees). We expect that our burn rate will increase to $30,000 per month by the end of the 2012, as we anticipate increased promotion and marketing expenses as we promote and market our products, including the attendance at approximately three to five industry trade shows and events.

If we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, it could have a material adverse effect on our business, results of operations, liquidity and financial condition.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief history and historical operating losses, our operations have not been a source of liquidity. We may seek additional capital in order to develop operations and become profitable. In order to obtain capital, we may need to sell additional shares of common stock or borrow funds from private lenders pursuant to instruments which are junior to our outstanding secured debt instruments. There can be no assurance that we will be successful in obtaining additional funding.

Loans Payable to Related Party

From time to time, we have received financing from Thomas Rickards, our Chief Executive Officer and sole Director. The stockholder loans bear interest of 10% per annum, compounding annually and are due on demand.

The following table summarizes stockholder notes payable as of March 31, 2012 (unaudited) and December 31, 2011:

	March 31, 2012		December 31, 2011
Loans payable, due on demand, interest at 10%	$	18,486	$	18,486
Accrued interest		34,736		33,441
	$	53,222	$	51,927

Critical Accounting Policies

The accounting policies identified as critical are as follows:

Revenue Recognition

We recognize revenue on four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (4) is based on management’s judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectability of those fees. Revenue is earned for product shipped and sold by our distributor on a per unit basis or as royalties upon shipment by the manufacturer as third party sales.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

Share-Based Compensation

Share-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. We measure the fair value of the share-based compensation issued to non-employees using the stock price observed in the arms-length private placement transaction nearest the measurement date (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair value than the value of the services being rendered. The measurement date is the earlier of (1) the date at which commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

Net Loss per Common Share

Basic loss per share computed by dividing the net loss attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted loss per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options and warrants (using the “treasury stock” method), unless their effect on net loss per share is antidilutive. The effect of computing diluted loss per share is antidilutive and, as such, basic and diluted loss per share is the same for the three months ended March 31, 2012 and 2011.

Recently Issued Accounting Pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our financial position, results of operations or cash flows.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required under Regulation S-K for “smaller reporting companies.”

ITEM 4 - CONTROLS AND PROCEDURES

a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses described below, as of March 31, 2012, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

a)	We did not have sufficient personnel in our accounting and financial reporting functions. As a result we were not able to achieve adequate separation of duties and were not able to provide for adequate reviewing of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis; and

b)	We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of U.S. GAAP commensurate with out complexity and our financial accounting and reporting requirements. This control deficiency is pervasive in nature. Further, there is a reasonable possibility that material misstatements of the financial statements including disclosures will not be prevented or detected on a timely basis as a result.

We are committed to improving our accounting and financial reporting functions. As part of this commitment, we will create a segregation of duties consistent with control objectives and will look to increase our personnel resources and technical accounting expertise within the accounting function by the end of fiscal 2012 to appropriately address non-routine or complex accounting matters. In addition, we have engaged an outside consultant to provide additional knowledgeable personnel with technical accounting expertise to further support the current accounting personnel at the Company.

Management believes that hiring additional knowledgeable personnel with technical accounting expertise will remedy the following material weaknesses: (A) lack of sufficient personnel in our accounting and financial reporting functions to achieve adequate segregation of duties; and (B) insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of US GAAP commensurate with our complexity and our financial accounting and reporting requirements.

Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole. Due to the fact that our accounting staff consists of a Chief Financial Officer and an accounting consultant, additional personnel will also ensure the proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support us if personnel turnover issues within the department occur. We believe this will greatly decrease any control and procedure issues we may encounter in the future.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

(b) Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not a party to any material legal proceedings or claims.

Item 1A. Risk Factors

Not required under Regulation S-K for “smaller reporting companies.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On March 12, 2012, we sold 960,000 shares of our Class A common stock for cash proceeds of $349,790. The shares were issued in a transaction pursuant to Rule 506 of Regulation D under the Securities Act of 1933, as amended.

During the three month period ended March 31, 2012, we issued an aggregate of 40,000 shares of Class A common stock to consultants in exchange for services rendered with an aggregate fair value of $27,865. The securities were issued in transactions pursuant to Section 4(2) and/or Regulation D under the Securities Act of 1933, as amended.

* All of the above offerings and sales were deemed to be exempt under either rule 506 of Regulation D and Section 4(2) or Rule 902 of Regulation S of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of Energy Telecom or executive officers of Energy Telecom, and transfer was restricted by Energy Telecom in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Except as expressly set forth above, the individuals and entities to whom we issued securities as indicated in this section are unaffiliated with us.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits

31.01

Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02

Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.01

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 INS

XBRL Instance Document*

101 SCH

XBRL Schema Document*

101 CAL

XBRL Calculation Linkbase Document*

101 LAB

XBRL Labels Linkbase Document*

101 PRE

XBRL Presentation Linkbase Document*

101 DEF

XBRL Definition Linkbase Document*

The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ENERGY TELECOM, INC.

Date: May 4, 2012	By:	/s/ THOMAS RICKARDS
		Thomas Rickards
		Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Attached files

PFO Global, Inc. Reports

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