UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended April 30, 2012
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to__________
	Commission File Number: 333-145794

 

 

 

Harmonic Energy, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada	26-0164981
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

3rd Floor, 207 Regent Street, London, United Kingdom, W1B 3HH

(Address of principal executive offices)

 

+44 (0) 207-617-7300

(Registrant’s telephone number)

________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

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 [X] Yes [ ] No

 

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). [X] Yes [ ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[ ] Large accelerated filer Accelerated filer	[ ] Non-accelerated filer
[X] Smaller reporting company

 

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

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 63,037,262 as of June 12, 2012.

 

	TABLE OF CONTENTS
		Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	6
Item 4:	Controls and Procedures	6
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	7
Item 1A:	Risk Factors	7
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3:	Defaults Upon Senior Securities	7
Item 4:	Mine Safety Disclosures	7
Item 5:	Other Information	7
Item 6:	Exhibits	8

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1	Balance Sheets as of April 30, 2012 and July 31, 2011 (unaudited)
F-2	Statements of Operations for the three and nine months ended April 30, 2012 and 2011 and period from May 1, 2007 (Inception) to April 30, 2012 (unaudited)
F-3	Statements of Cash Flows for the nine months ended April 30, 2012 and 2011 and period from May 1, 2007 (Inception) to April 30, 2012 (unaudited)
F-4	Notes to Financial Statements

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended April 30, 2012 are not necessarily indicative of the results that can be expected for the full year.

HARMONIC ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS (unaudited)

As of April 30, 2012 and July 31, 2011

 

ASSETS		April 30, 2012				July 31, 2011
Current Assets
Cash		$	255,504			$	—
Total Current Assets			—				—
License fee			525,000
TOTAL ASSETS		$	780,504			$	—
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities
Current Liabilities
Accrued expenses		$	48,081			$	43,582
Accrued interest-related party			2,254				1,354
License fee payable			350,000				—
Note payable-related party			20,000				20,000
Total Liabilities			420,335				64,936
STOCKHOLDERS’ DEFICIT
Common stock, $.001 par value, 100,000,000 shares authorized, 62,370,595 shares issued and outstanding			12,474				54,724
Additional paid in capital			9,961				27,711
Share subscriptions received			500,000
Deficit accumulated during the development stage			(162,266	)			(147,371	)
Total Stockholders’ Deficit			360,169				(64,936	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	780,504			$	—

 

See accompanying notes to financial statements.

HARMONIC ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS ( Unaudited)

For the three months and nine months ended April 30, 2012 and 2011

For the period from May 1, 2007 (Date of Inception) through April 30, 2012

 

		Three months ended April 30, 2012				Three months ended April 30, 2011				Nine months ended April 30, 2012				Nine months ended April 30, 2011				Period from May 1, 2007 (Inception) to April 30, 2012
Revenues		$	—			$	—			$	—			$	—			$	200
General and administrative expenses:
Professional fees			4,200				1,000				7,700				9,382				226,347
Website development			—				—				—				—				9,000
Office and miscellaneous			6,295				93				6,295				950				11,403
Total general and administrative expenses			(10,495	)			1,093				13,995				10,332				246,750
Loss from operation			(10,495	)			(1,093	)			(13,995	)			(10,332	)			(246,750	)
Other expenses
Gain on settlement of accrued expense			—				—				—				—				86,748
Interest expense			(300	)			(300	)			(900	)			(892	)			(2,464	)
Total other income (expense)			(300	)			(300	)			(900	)			(892	)			84,284
Net income (loss) for the period		$	(10,795	)		$	(1,393	)		$	(14,895	)		$	(11,224	)		$	(162,266	)
Net loss per share:
Basic and diluted		$	0.00			$	0.00			$	0.00			$	0.00
Weighted average shares outstanding:
Basic and diluted, adjusted for effect of 5:1 forward stock split			62,370,595				273,570,595				203,203,928				273,570,595

 

See accompanying notes to financial statements.

 

HARMONIC ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS (unaudited)

For the nine months ended April 30, 2012 and 2011

For the period from May 1, 2007 (Date of Inception) through April 30, 2012

 

		Nine months ended April 30, 2012				Nine months ended April 30, 2011				Period from May 1, 2007 (Inception) to April 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) and comprehensive loss		$	(14,895	)		$	(9,831	)		$	(162,266	)
Change in non-cash working capital items
Conversion of related party accrued interest			—				—				210
Gain on settlement of debt			—				—				(86,748	)
Changes in operating assets and liabilities:
Increase in accounts payable and accrued expenses			4,499				99				134,829
Increase in accrued interest-related party			900				592				2,254
CASH FLOWS USED IN OPERATING ACTIVITIES			(9,496	)			(9,140	)			(111,721	)
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of license agreement			(525,000	)			—				(525,000	)
CASH FLOWS USED IN INVESTING ACTIVITIES			(525,000	)							(525,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock			500,000				—				581,225
Stock offering costs			(60,000	)							(60,000	)
Increase in license fee payable			350,000								350,000
Proceeds from note payable-related party			—				—				21,000
CASH FLOWS FROM FINANCING ACTIVITIES			790,000				—				892,225
NET INCREASE (DECREASE) IN CASH			255,504				(9,140	)			255,504
Cash, beginning of period			—				10,983				—
Cash, end of period		$	255,504			$	1,843			$	255,504
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid		$	—			$	—
Income taxes paid		$	—			$	—
NON-CASH FINANCING ACTIVITIES
Contributed capital		$	—			$	—

 

See accompanying notes to financial statements.

HARMONIC ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

April 30, 2012

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

Harmonic Energy, Inc. (the Company), formerly known as Aviation Surveillance Systems, Inc. and Fairytale Ventures, Inc., was incorporated in the State of Nevada on May 1, 2007.  The Company is currently seeking to acquire oil and gas prospects and/or producing oil and gas properties in the United States and internationally.  The Company has not realized significant revenues to date and therefore is classified as a development stage company.

 

Development Stage Company

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to development-stage companies.  A development-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.

 

Basis of Presentation

 

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the period ended July 31, 2011. In the opinion of management, all adjustments necessary for the financial statements to be not misleading for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The Company has adopted a July 31 fiscal year end.

 

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accrued expenses and accrued interest – related party. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

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 of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

HARMONIC ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

April 30, 2012

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Basic (Loss) per Common Share

Basic (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of April 30, 2012.

 

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

Advertising Costs

The Company’s policy regarding advertising is to expense advertising when incurred. The Company has not incurred any advertising expense as of April 30, 2012 and 2011.

 

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.

 

Reclassifications

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.

 

Income Taxes

Income taxes are computed using the asset and liability method.  Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.  A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

HARMONIC ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

April 30, 2012

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718.  To date, the Company has not adopted a stock option plan and has not granted any stock options. As of July 31, 2011, the Company has not issued any stock-based payments to its employees.

 

Recent Accounting Pronouncements

Harmonic Energy does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

NOTE 2 – LOAN PAYABLE – RELATED PARTY

 

The Company had a loan of $1,000 outstanding to an officer as of July 31, 2009.  The loan was unsecured, due on demand with an interest rate of 8%.  The loan and accrued interest were converted to capital during the year ended July 31, 2010.  The total amount recorded as contributed capital was $1,210.  Interest expense on the above loan was $47 for the year ended July 31, 2010.

 

On June 14, 2010, the Company signed a promissory note for $20,000 with an officer.  The loan was due on June 14, 2011, bears 6% interest and is unsecured.  The terms of the loan were revised to adjust maturity to due on demand during the year ended July 31, 2011. Interest expense on this loan was $900 and $892 for the periods ended April 30, 2012 and 2011.

 

NOTE 3 – LICENSE AGREEMENT

 

On March 14, 2012, we entered into a License Purchase Agreement (the “Agreement”) with Kouei International, Inc. (“Kouei International”). Under the Agreement, we have acquired the exclusive rights in North America and Europe to use the Tyrolysis™ technology owned by Kouei Industries Co., Ltd. of Japan (“Kouei Industries”). Kouei International holds these rights under license from Kouei Industries and, pursuant to the Agreement, has assigned them to us. The Tyrolysis™ technology is a comprehensive ‘closed-loop’ solution for the management of scrap tires, which allows for all scrap tires to be either re-manufactured into new tires or reduced, through a carbonization process, into marketable chemical products such as diesel fuel, carbon black and syn-gas.

 

 Under the terms of the agreement, the Company is required to pay a total of $ 525,000 of which $ 175,000 was due within 90 days of the closing of the agreement ( which has been paid), as well as $ 175,000 90 days after the first payment and$ 175,000 90 days after the second payment has been made.

HARMONIC ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

April 30, 2012

 

NOTE 3 – LICENSE AGREEMENT (CONTINUED)

 

In addition, the Company is to pay a royalty of 3% of all revenues in respect of gross sales for a period of 5 years, and a royalty of $ 2.50 per remanufactured passenger tire and a royalty of $ 3.00 per remanufactured light truck and truck tire at the end of each month for a period of 5 years.

 

NOTE 4 – PREFERRED AND COMMON STOCK

 

The Company has 10,000,000 preferred shares and 90,000,000 common shares of $0.001 par value stock authorized.

 

On May 14, 2007, the Company received $4,000 from its founders for 7,374,252 shares of its common stock. On June 22, 2007, the Company completed an unregistered private offering under the Securities Act of 1933, as amended, relying upon the exemption from registration afforded by Rule 504 of Regulation D promulgated there under.  The Company sold 2,931,265 shares of its $0.001 par value common stock at a price of $0.004 per share for $11,925 in cash.

 

On July 21, 2008, the Company’s shares of common stock were forward split on the basis of 1.84356289 shares for 1.

 

On May 1, 2009, the Company’s shares of common stock were forward split on the basis of 1.6 shares for 1. The forward stock split has been recognized in the Company’s financial statements on a retroactive basis.

 

On March 15, 2010, the Company sold 38,235,294 shares of common stock for total cash proceeds of $65,000.

 

On November 3, 2011, a shareholder of the company voluntarily returned 250,000 shares of common stock to treasury for cancellation.

 

On February 22, 2012, a shareholder of the company voluntarily return 42,000,000 shares of common stock to treasury for cancellation On March 12, 2012, the Company authorized a 5:1 forward stock split.

HARMONIC ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

April 30, 2012

 

NOTE 4 – PREFERRED AND COMMON STOCK (CONTINUED)

 

On March 17, 2012, the Company received subscription proceeds of $ 500,000 related to a subscription agreement for 666,667 shares of common stock of the company at $.75 per share. The shares were issued on May 15, 2012. As of April 30, 2012, the Company has 64,288,262 shares of common stock issued and outstanding.

 

NOTE 5 – GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern.  However, the Company has accumulated deficit of $162,266 as of April 30, 2012.  The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.

 

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

 

NOTE 6 – INCOME TAXES

 

As of April 30, 2012, the Company had net operating loss carry forwards of approximately $162,600 that may be available to reduce future years’ taxable income in various amounts through 2031. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

 

The provision for Federal income tax consists of the following:

 

		April 30, 2012				April 30 , 2011
Federal income tax benefits attributable to:
Current Operations		$	5,064			$	3,820
Less: valuation allowance			(5,064	)			(3,820	)
Net provision for Federal income taxes		$	—			$	—

 

HARMONIC ENERGY, INC.

(formerly Aviation Surveillance Systems, Inc.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

April 30, 2012

 

NOTE 6 – INCOME TAXES (CONTINUED)

 

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:

 

		April 30, 2012				July 31, 2011
Deferred tax asset attributable to:
Net operating loss carryover		$	55,170			$	50,106
Less: valuation allowance			(55,170	)			(50,106	)
Net deferred tax asset		$	—			$	—

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $162,600 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years. 

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Harmonic Energy neither owns nor leases any real or personal property. An officer has provided office services without charge.  There is no obligation for this arrangement to continue.  Such costs are immaterial to the financial statements and accordingly are not reflected herein.  The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

 

NOTE 8 – SUBSEQUENT EVENTS

 

On May 15, 2012 the Company issued 666,667 shares related to a subscription agreement at $.75 as further noted in Note 4.

 

Management has evaluated subsequent events through the date these financial statements were issued, and has determined it does not have any additional material subsequent events to disclose.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Company Overview

 

We are a Nevada corporation, formed May 1, 2007.  We are currently developing a new business which will provide a comprehensive solution for the disposition and recycling of scrap tires through tire re-manufacturing and carbonization of scrap tire components. Tire re-manufacturing is a process that takes high quality used tires, removes the old tread and sidewall markings, and then applies new rubber to the tread and sidewall. The used casing along with the new rubber is vulcanized under high pressure and heat to produce a new tire. This is the same process used by new tire manufacturers except that they make the casing (the most costly part of the tire). Carbonization is a technology that heats tires in an oxygen free environment and turns spent tire casings into diesel fuel, carbon black and syn-gas.

 

On March 14, 2012, we entered into a License Purchase Agreement (the “Agreement”) with Kouei International, Inc. (“Kouei International”). Under the Agreement, we have acquired the exclusive rights in North America and Europe to use the Tyrolysis™ technology owned by Kouei Industries Co., Ltd. of Japan (“Kouei Industries”). Kouei International holds these rights under license from Kouei Industries and, pursuant to the Agreement, has assigned them to us. The Tyrolysis™ technology is a comprehensive ‘closed-loop’ solution for the management of scrap tires, which allows for all scrap tires to be either re-manufactured into new tires or reduced, through a carbonization process, into marketable chemical products such as diesel fuel, carbon black and syn-gas.

 

Under the Agreement, we have agreed to pay Kouei International a total purchase price of $525,000 as follows:

 

• $175,000 – due within ninety (90) days of closing (which has been paid)
• $175,000 – due within ninety (90) days after the due date of the first payment
• $175,000 – due within ninety (90) days after the due date of the second payment

In addition, the Agreement calls for Kouei International to be paid ongoing royalties for the next five (5) years as follows:

 

• 3% of gross sales
• $2.50 per remanufactured passenger tire
• $3.50 per remanufactured light truck and truck tire

The Agreement provides us with full access to Kouei International’s properties, books, records, information, technical drawings, contacts and equipment supplied by Kouei Industries. In addition, Kouei International will be contracted for a two year period to help with the transaction and successful implementation of the technology transfer. During this term, Kouei International may be required to provide its engineering expertise and/or participate in industry technology presentations.

Management is currently evaluating facilities locations in Europe and North America. We plan for our facilities to collect scrap tires and produce both re-manufactured tires and commodity chemicals produced through the Tyrolysis™ carbonization technology. We hope to have 6 to 10 plants operational in Europe and North America within the next 5 years.

 

Our planned facilities will need to be located near suitable sources of scrap tires and other scrap rubber materials. In preparation for a potential recycling plant to be located in Michigan, we entered into a Tire Feedstock Agreement (the “Agreement”) with Enertech R.D., LLC (“Enertech”) on April 11, 2012. Under the Agreement, we have agreed o purchase all of Enertech’s output of scrap tires and other low-value rubber-based materials (referred to as “Feedstock”) for a term of ten (10) years. We intend to use the Feedstock to supply a planned tire recycling facility. Enertech’s estimated daily output of Feedstock is approximately 200 tons per day, though actual output will fluctuate in response to Enertech’s flow of business operations. The maximum daily output that we are required to accept under the Agreement is 300 tons. If Enertech’s output diminishes to less than 100 tons on each of five successive days, we may rescind the Agreement on 20 days written notice.

 

The Agreement requires us to pay Enertech a fee of $30 per ton for chipped, two-inch-minus scrap tires which are 90% to 95% steel free. The price per ton will be adjusted annually in accordance future negotiations between the parties. The Feedstock will be delivered to us at a distance of up to 2 miles from Enertech’s facility in Michigan. We will be required to pay for delivery costs for distances beyond two miles.

 

The Agreement is conditional upon:

 

1.

Our building and operating a tire recycling facility, located within 2 miles of Enertech’s facility in Michigan, that is capable of processing Enertech’s total Feedstock output, and

2.

Our registering with the Michigan Environmental Protection Agency and complying with all permit and license requirements for the tire recycling facility which will accept Enertech’s output of Feedstock.

 

Management estimates that approximately $50 million in new equity will be required in order to procure the necessary equipment, facilities, and supplies for our planned business and to commence our planned tire recycling operations. We currently do not have any firm arrangements for equity or debt financing and we may not be able to obtain financing when required, in the amount necessary to commence our planned operations, or on terms which are feasible in the opinion of management.

 

Results of operations for the three and nine months ended April 30, 2012 and 2011, and for the period from May 1, 2007 (date of inception) through April 30, 2012.

 

We have not earned significant revenues since the inception of our business and we earned no revenues during the three and nine months ended April 30, 2012 and 2011.  We are presently in the development stage of our business and we can provide no assurance that we will produce significant revenues or, if revenues are earned, that we will be profitable.

 

We have incurred net losses in the amount of $162,266 from our inception on May 1, 2007 through the period ending April 30, 2012.  During the three months ended April 30, 2012, we incurred expenses and a net loss of $10,795, compared to expenses and a net loss of $1,393 for the three months ended April 30, 2011. We experienced expenses and a net loss of $14,895 during the nine months ended April 30, 2012, compared to expenses and a net loss of $11,224 for the nine months ended April 30, 2012. Our losses are attributable to our operating expenses combined with a lack of significant revenues during our current stage of development.

 

Liquidity and Capital Resources

 

As of April 30, 2012, we had current assets of $255,504, consisting entirely of cash, and current liabilities of $420,335.  Thus, we had a working capital deficit of $164,831 as of April 30, 2012. The largest component of our current liabilities is a $350,000 license fee payable under our License Purchase Agreement with Kouei International. This represents the second and third installment payments due under the agreement.

On May 15, 2012, we raised a total of $500,000 in a private offering of common stock and warrants. Our efforts to secure equity financing for our planned operations is ongoing. We will need additional funding in order to complete our payments under the License Purchase Agreement with Kouei International. We have not established profitable operations and will be dependent upon obtaining financing to pursue a long-term business plan. As discussed above, we will also require substantial new equity financing in order to pursue our planned tire recycling operations. We currently do not have any arrangements for financing and we may not be able to obtain financing when required. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.

 

Off Balance Sheet Arrangements

 

As of April 30, 2012, there were no off balance sheet arrangements.

 

Going Concern

 

We have negative working capital, have incurred losses since inception, and not yet established a source of revenues. These factors create substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 31, 2011. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Jamie Mann. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of April 30, 2012, our disclosure controls and procedures are not effective. There have been no changes in our internal controls over financial reporting during the quarter ended April 30, 2012.

 

Management determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation and control procedures not regularly performed due to the lack of staff and resources.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

 

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error.   Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

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

 

On June 1, 2012, we closed a private offering made under Rule 506 of Regulation D.  A total of $500,000 was raised in the offering, which consisted of Units priced at $0.75 per Unit.  Each Unit consisted of one share of common stock and one warrant to purchase one share of common stock at a price of $1.12 per share for a period of up to forty-eight (48) months.  The offering was made exclusively to accredited investors, and the company did not engage in any general solicitation or advertising regarding the offering.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification 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

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.

 

	Harmonic Energy, Inc.
Date:	June 14, 2012
By:	/s/ Jamie Mann
Title:	Jamie Mann, Chief Executive Officer