UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 10-Q

 

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

 

For the quarterly period ended September 30, 2013

 

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

 

Commission file number 333-167853

 

ENERGY EDGE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

 

New Jersey		52-2439239
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

 

433 Plaza Real, Suite 275
Boca Raton, Florida		33432
(Address of principal executive offices)		(Zip Code)

 

(561) 962-4258

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the issuer (1) 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 of the Exchange Act.

 

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

 

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

 

The number of shares of Common Stock, $0.00001 par value, outstanding on November 14, 2013 was 202,373,829

 

ENERGY EDGE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

	Part I – Financial Information
Item 1	Financial Statements
	Consolidated Balance Sheets, September 30, 2013 and December 31, 2012 (Unaudited)	F-1
	Consolidated Statements of Operations for the three months and nine months ended September 30, 2013 and 2012 (Unaudited)	F-2
	Consolidated Statement of Changes in Equity (Deficit) for the nine months ended September 30, 2013 (Unaudited)	F-3
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (Unaudited)	F-4
	Notes to the Consolidated Financial Statements (Unaudited)	F-5
Item 2	Management’s Discussion and Analysis or Plan of Operation	3
Item 3	Quantitative and Qualitative Disclosures about Market Risk	6
Item 4	Controls and Procedures	7
	Part II – Other Information
Item 1	Legal Proceedings	8
Item 2	Unregistered Sales Of Equity Securities And Use Of Proceeds	8
Item 3	Defaults Upon Senior Securities	8
Item 4	Mine Safety Disclosures	8
Item 5	Other Information	9
Item 6	Exhibits	9

 

 

 

PART 1, FINANCIAL STATEMENTS

 

ENERGY EDGE TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012

(Unaudited)

 

ASSETS		September 30, 2013				December 31, 2012
Current Assets
Cash and cash equivalents		$	54,986			$	18,553
Accounts receivable, net			28,835				348
Prepaid expenses			314,592				300,442
Total current assets			398,413				319,343
Property and equipment, net			3,758				5,045
Other assets			12,729				—
TOTAL ASSETS		$	414,900			$	324,388
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities
Accounts payable		$	184,365			$	343,334
Accrued expenses and other current liabilities			98,076				125,830
Due to related parties			18,534				30,696
Total current liabilities			300,975				499,860
Long Term Liabilities
Convertible note payable, net of discounts of $93,625			9,375				—
Derivative liability			136,271				—
Total long term liabilities			145,646				—
Total Liabilities			446,621				499,860
Equity (Deficit)
Common stock, $.00001 par value, 250,000,000 shares authorized, 155,373,009 and 78,167,872 shares issued and outstanding, respectively			1,554				782
Additional paid-in capital			3,780,781				2,616,359
Subscription receivable			(1,000	)			(1,000	)
Treasury stock, 500,000 shares, at cost			(5,000	)			(5,000	)
Accumulated deficit			(3,711,976	)			(2,746,648	)
Total Stockholders’ Equity (Deficit)			64,359				(135,507	)
Non-controlling interests			(96,080	)			(39,965	)
Total Equity (Deficit)			(31,721	)			(175,472	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$	414,900			$	324,388

 

 

The accompanying notes are an integral part of these financial statements. 

ENERGY EDGE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(Unaudited)

 

		Three months ended September 30, 2013				Three months ended September 30, 2012				Nine months ended September 30, 2013				Nine months ended September 30, 2012
REVENUES		$	—			$	93,902			$	2,040			$	447,947
COSTS OF REVENUES			—				65,874				2,471				301,484
GROSS PROFIT (LOSS)			—				28,028				(431	)			146,463
OPERATING EXPENSES
Compensation			26,663				—				532,105				6,089
Consulting services			47,746				16,678				251,197				74,859
Professional fees			23,000				5,767				55,041				37,835
Director fees			—				—				2,400				—
General & administrative expenses			5,380				15,529				133,093				53,944
TOTAL OPERATING EXPENSES			102,789				37,974				973,836				172,727
LOSS FROM OPERATIONS			(102,789	)			(9,946	)			(974,267	)			(26,264	)
OTHER INCOME (EXPENSE)
Interest expense			(6,694	)			(5,419	)			(11,355	)			(8,193	)
Other expense			(1,262	)			(430	)			(2,550	)			(1,289	)
Change in fair value of derivative liability			7,906				—				(33,271	)			—
TOTAL OTHER EXPENSE			(50	)			(5,849	)			(47,176	)			(9,482	)
LOSS BEFORE INCOME TAXES AND NON-CONTROLLING INTERESTS			(102,839	)			(15,795	)			(1,021,443	)			(35,746	)
PROVISION FOR INCOME TAXES			—				—				—				—
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS			—				—				56,115				—
NET LOSS ATTRIBUTABLE TO ENERGY EDGE TECHNOLOGIES CORPORATION SHAREHOLDERS		$	(102,839	)		$	(15,795	)		$	(965,328	)		$	(35,746	)
LOSS PER COMMON SHARE:BASIC AND DILUTED		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:BASIC AND DILUTED			155,373,009				96,627,872				128,270,125				89,228,115

 

 

 

The accompanying notes are an integral part of these financial statements. 

ENERGY EDGE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013

(Unaudited)

 

 

 

																															Total
											Additional												Non-								Stockholders’
			Common Stock								Paid in				Subscription				Treasury				Controlling				Accumulated				Equity
			Shares				Amount				Capital				Receivable				Stock				Interests				Deficit				(Deficit)
Balances, December 31, 2012			78,167,872			$	782			$	2,616,359			$	(1,000	)		$	(5,000	)		$	(39,965	)		$	(2,746,648	)		$	(175,472	)
Issuance of shares for cash			18,533,334				185				288,928				—				—				—				—				289,113
Issuance of shares for services			56,200,000				562				718,714				—				—				—				—				719,276
Issuance of shares for cancellation of debts			2,472,623				25				156,780				—				—				—				—				156,805
Net loss			—				—				—				—				—				(56,115	)			(965,328	)			(1,021,443	)
Balances, September 30, 2013			155,373,829			$	1,554			$	3,780,781			$	(1,000	)		$	(5,000	)		$	(96,080	)		$	(3,711,976	)		$	(31,721	)

 

  

The accompanying notes are an integral part of these financial statements. 

ENERGY EDGE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(Unaudited)

 

		Nine months ended September 30
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(1,021,443	)		$	(35,746	)
Adjustments to reconcile net loss to net cash used in operating activities:
Shares issued for services			719,276				26,779
Change in fair value of derivative liability			33,271				—
Depreciation and amortization			12,000				1,289
Changes in operating assets and liabilities:
Accounts receivable			—				(832,878	)
Costs and estimated earnings in excess of billings on uncompleted contracts			—				19,321
Accounts receivable			(28,487	)			7,789
Prepaid expenses			(14,150	)			(13,499	)
Accounts payable			(2,163	)			40,392
Billings in excess of costs and estimated earnings on uncompleted contracts			—				759,320
Accrued expenses and other current liabilities			(27,754	)			(9,145	)
Cash flows used in operating activities			(329,452	)			(36,378	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangible assets			(3,566	)			—
Cash flows used in investing activities			(3,566	)			—
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of related party advances			(12,162	)			(3,138	)
Proceeds from issuance of debt			92,500				—
Proceeds from the sale of common stock			289,113				62,500
Purchase of treasury shares at cost			—				(5,000	)
Cash flows provided by financing activities			369,451				54,362
Net increase in cash and cash equivalents			36,433				17,984
Cash and cash equivalents, beginning of the period			18,553				3,243
Cash and cash equivalents, end of the period		$	54,986			$	21,227
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid		$	11,355			$	8,193
Income taxes paid		$	—			$	—
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issues for prepaid consulting services		$	—			$	9,700
Shares issued for settlement of payable		$	156,805			$	—

 

 

The accompanying notes are an integral part of these financial statements.

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE PERIODS ENDED SEPTEMBER 30, 2013

(Unaudited)

 

NOTE 1 – NATURE OF OPERATIONS

 

Energy Edge Technologies Corporation (“EEDG”)was incorporated in New Jersey in January 2004. Energy Edge Technologies Corporation is comprised of two operating subsidiaries: Energy Edge Solutions (“EES”) and The Gourmet Wing Company, Inc.

 

The Company acquired a 51% interest in Energy Edge Solutions in 2012. Energy Edge Solutions provides energy engineering and services specializing in the development and implementation of advanced turnkey projects to reduce energy losses and increase the efficiency of new and existing buildings.  The Company is comprised of professional and industrial engineers, Leadership in Energy and Environmental Design (“LEED”) Accredited Professionals, and Green Building Coalition Certifying Agents.  Energy Edge is a Clean Energy Pay for Performance Partner and a Smart Start Building Trade Ally.  EES’ custom designed projects are developed using proprietary methods and maximize energy savings by treating an entire facility based on its unique features and electricity and gas usage.

 

EES applies a whole facility approach to energy cost reduction by applying different technologies and engineering approaches to treat most of the various electrical and gas consuming loads across facility such as lighting, HVAC, refrigeration, and production equipment.  The energy projects developed and implemented by EES are ideal for virtually any type of facility and have successfully resulted in tremendous savings in manufacturing plants, hospitals, entertainment venues, office buildings, restaurants, warehouses, etc.

 

EES’ revenues come primarily from engineering survey work and turnkey energy projects where EES takes responsibility for equipment procurement, installation labor, utility rebates, tax incentives, pre and post survey work, waste removal, certifications, and ongoing measurement and verification of results. 

 

During 2012, the Company acquired sixty-five percent (65%) of the capital stock of The Dry Fried Wing Company. On March 31, 2013, the Company acquired the remaining thirty-five percent (35%) of such stock. On April 5, 2013, the Company officially changed the name of The Dry Fried Wing Company to The Gourmet Wing Company, Inc. (“TGWC”).

 

TGWC is a newly formed combined fast casual restaurant company in the chicken wing segment and restaurant management company. TGWC is primarily engaged in the business of managing, licensing, operating, developing and franchising a system of distinctive quick-service and fast casual restaurants in the chicken wing segment.

 

TGWC revenues will primarily be derived from management fees, royalty fees, licensing fees and franchise fees.  TGWC will also sell food, sauces, mixes and other supplies to its franchisees/licensees.

 

On June 10, 2013, TGWC entered into a joint venture agreement to develop, own and operate in Atlanta one or more fast casual restaurants featuring seasoned chicken wings. The culinary style for the restaurant concept was originally developed by TGWC’s chief executive.

 

 

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited interim consolidated financial statements of the Company 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 Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations 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. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2013 as reported in the Form 10-K have been omitted.

 

Reclassifications

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

 

Recent Accounting Pronouncements

Energy Edge 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 flows.

 

 

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE PERIODS ENDED SEPTEMBER 30, 2013

(Unaudited)

 

NOTE 3 – GOING CONCERN

 

The Company has limited working capital, and has suffered significant losses from operations. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

 

The ability of Energy Edge Technologies Corporation to continue as a going concern is dependent on the Company generating cash from the sale of its common stock, obtaining debt financing, attaining future profitable operations, acquiring or merging with a profitable company, and/or developing successful business operations in other industries through investment in related party ventures. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirements; however, there can be no assurance the Company will be successful in these efforts.

 

NOTE 4 – PREPAID EXPENSES

 

Prepaid expenses consisted of the following at September 30, 2013 and December 31, 2012:

 

		September 30, 2013				December 31, 2012
Prepaid project expenses		$	29,950			$	29,950
Prepaid consulting expense			284,642				270,492
Total prepaid expenses		$	314,592			$	300,442

 

Prepaid Project Expenses

Prepaid project expenses consist of monies expended for project equipment for a project temporarily put on hold.

 

Prepaid Consulting

The Company has retained a number of consultants. These consultants are paid in cash and/or issuance of Company stock. Consultants were issued 2,500,000 shares of stock valued at $37,676 for the nine months ended September 30, 2013. The consulting fees are being amortized over the terms of the contracts.

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

Related party payables and loans totaling $18,534 and $30,696 at September 30, 2013 and December 31, 2012, respectively, are owed to various related parties of the Company for reimbursement of expenses incurred on behalf of the Company.

 

Related party loans are unsecured, non-interest bearing and have no specific terms of repayment.

 

NOTE 6– CONVERTIBLE NOTE PAYABLE AND DERIVATIVE LIABILITY

 

On May 13, 2013, the Company issued a convertible promissory note to a third party, with a principal amount of $50,000.  This note is due and payable in full on May 14, 2015, and bears interest at 6% per annum.  At any time prior to the payment in full of the entire balance of the note, the creditor has the option of converting all or any portion of the unpaid balance of the note into shares of common stock at a conversion price equal to seventy percent of the lowest closing bid price of the common stock for any of the five trading days prior to and including the conversion date.

 

The Company evaluated the terms of the note and concluded that since the conversion price was not fixed, and the number of shares of the Company’s common stock that are issuable upon the conversion of the convertible promissory note is indeterminable until such time as the Creditor elects to convert to common stock, the Company concluded that the embedded conversion option created a derivative liability. The Company measured the derivative liability using the input attributes disclosed below and recorded a derivative liability of $53,348 as of May 13, 2013. On September 30, 2013 the Company remeasured the derivative liability using the input attributes below and determined the derivative liability value to be $47,341. Other income of $6,007 was recorded as of September 30, 2013 and included in the statement of operations in order to adjust the derivative liability to the remeasured value.

 

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE PERIODS ENDED SEPTEMBER 30, 2013

(Unaudited)

 

		May 13, 2013				September 30, 2013
Stock price		$	.0099			$	.0124
Exercise price		$	.009044			$	.013020
Shares issuable upon conversion			5,528,527				3,840,246
Expected dividend yield			0.00	%			0.00	%
Expected life (years)			2.00				1.62
Risk-free interest rate			.24	%			.33	%
Expected volatility			313.5	%			434.42	%

 

A debt discount of $50,000 related to the embedded conversion option was recorded at date of note issuance, and is being expensed over the life of the loan. For the nine months ended September 30, 2013, amortization of $9,375 has been recorded, resulting in a remaining unamortized discount of $40,625 at September 30, 2013.

 

On September 30, 2013, the Company issued a convertible promissory note to a third party, with a principal amount of $53,000.  This note is due and payable in full on June 24, 2014, and bears interest at 8% per annum.  At any time beginning on the date that is 180 days after the note date and until the maturity date, the creditor has the option of converting all or any portion of the unpaid balance of the note into shares of common stock at a conversion price equal to fifty eight percent of the average of the three lowest closing bid price of the common stock for any of the ten trading days prior to the conversion date.

 

The Company evaluated the terms of the note and concluded that since the conversion price was not fixed, and the number of shares of the Company’s common stock that are issuable upon the conversion of the convertible promissory note is indeterminable until such time as the Creditor elects to convert to common stock, the Company concluded that the embedded conversion option created a derivative liability. The Company measured the derivative liability using the input attributes disclosed below and recorded a derivative liability of $88,930 as of September 30, 2013.

 

		September 30, 2013
Stock price		$	.0124
Exercise price		$	.007057
Shares issuable upon conversion			7,510,628
Expected dividend yield			0.00	%
Expected life (years)			.75
Risk-free interest rate			.07	%
Expected volatility			434.42	%

 

A debt discount of $53,000 related to the embedded conversion option was recorded at date of note issuance, and is being expensed over the life of the loan. For the nine months ended September 30, 2013, amortization of $0 has been recorded, resulting in a remaining unamortized discount of $53,000 at September 30, 2013.

 

NOTE 7– BUSINESS SEGMENTS

 

The Company is made up of three entities in which Energy Edge Technologies Corporation is the parent entity. The Company owned a sixty-five percent interest in The Gourmet Wing Company during the first quarter, but acquired the remaining thirty-five percent of the stock of The Gourmet Wing Company as of March 31, 2013. Fifty-one percent of the outstanding stock of Energy Edge Solutions, Inc. is owned by the Company. Energy Edge Solutions, Inc. had no operating activity during the current quarter.

 

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE PERIODS ENDED SEPTEMBER 30, 2013

(Unaudited)

 

The balance sheet as of September 30, 2013 and December 31, 2012 and the income statement information  for the three and nine months ended September 30, 2013 and 2012 of each entity is presented in US Dollars as follows:

 

		30-Sep-13																31-Dec-12
		EEDG				TGWC				EES				Total				EEDG				TGWC				EES				Total
Current Assets			393,054				5,348				11				398,413				296,742				22,601				—				319,343
Fixed Assets			3,758				—				—				3,758				5,045				—				—				5,045
Other Assets			9,163				3,566				—				12,729				—				—				—				—
Total Assets			405,975				8,914				11				414,900				301,787				22,601				—				324,388
Current Liabilities			291,662				9,199				114				300,975				449,879				50,094				(113	)			499,860
Long Term Liabilities			145,646				—				—				145,646				—				—				—				—
Intercompany			(300,593	)			300,178				415				—				(91,610	)			91,100				510				—
Stockholders' Equity			269,260				(300,463	)			(518	)			(31,721	)			(56,482	)			(118,593	)			(397	)			(175,472	)
Total Liabilities and Stockholder's Equity			405,975				8,914				11				414,900				301,787				22,601				—				324,388
		For the Three Months Ended September 30, 2013																For the Three Months Ended September 30, 2012
		EEDG				TGWC				EES				Total				EEDG				TGWC				EES				Total
Revenues			—				—				—				—				93,902				—				—				93,902
Cost of Revenues			—				—				—				—				(65,874	)			—				—				(65,874	)
Gross Profit (Loss)			—				—				—				—				28,028				—				—				28,028
Operating Expenses			(102,789	)			—				—				(102,789	)			(37,974	)			—				—				(37,974	)
Other Expenses			(50	)			—				—				(50	)			(5,849	)			—				—				(5,849	)
Net Loss before Non-controlling Interest			(102,839	)			—				—				(102,839	)			(15,795	)			—				—				(15,795	)
Non-controlling Interest			—				—				—				—				—				—				—				—
Net Loss			(102,839	)			—				—				(102,839	)			(15,795	)			—				—				(15,795	)
		For the Nine Months Ended September 30, 2013																For the Nine Months Ended September 30, 2012
		EEDG				TGWC				EES				Total				EEDG				TGWC				EES				Total
Revenues			2,040				—				—				2,040				447,947				—				—				447,947
Cost of Revenues			(2,471	)			—				—				(2,471	)			(301,484	)			—				—				(301,484	)
Gross Profit (Loss)			(431	)			—				—				(431	)			146,463				—				—				146,463
Operating Expenses			(788,874	)			(184,962	)			—				(973,836	)			(172,727	)			—				—				(172,727	)
Other Expenses			(46,984	)			(192	)			—				(47,176	)			(9,482	)			—				—				(9,482	)
Net Loss before Non-controlling Interest			(836,289	)			(185,154	)			—				(1,021,443	)			(35,746	)			—				—				(35,746	)
Non-controlling Interest			56,115				—				—				56,115				—				—				—				—
Net Loss			(780,174	)			(185,154	)			—				(965,328	)			(35,746	)			—				—				(35,746	)

 

NOTE 8– CAPITAL STOCK

 

During the nine months ended September 31, 2013, the Company:

 

-

sold 18,533,334 shares of common stock for cash of $289,113;

-

issued 56,200,000 shares of common stock for services. These shares have a fair value of 719,276; and

-

issued 2,472,623 shares of common stock for settlement of payables of $156,805.

 

NOTE 9– SUBSEQUENT EVENTS 

 

On October 18,2013, the Company issued 50,000,000 shares of its common stock for services.

 

 

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

 

In this report, unless the context indicates otherwise, the terms “Energy Edge,” “Company,” “we,” “us,” and “our” refer to Energy Edge Technologies Corporation, a New Jersey corporation, and its wholly-owned subsidiaries.

 

Note regarding forward-looking statements

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934 or the “Exchange Act.” These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results.

 

In some cases, you can identify forward looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “potential,” or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management’s current expectations and belief, which management believes are reasonable.  In addition, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward looking statements.  You are cautioned not to place undue reliance on any forward-looking statements.  These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

·

new competitors are likely to emerge and new technologies may further increase competition;

·

our operating costs may increase beyond our current expectations and we may be unable to fully implement our current business plan;

·

our ability to obtain future financing or funds when needed;

·

our ability to successfully obtain and maintain our diverse customer base;

·

our ability to protect our intellectual property through patents, trademarks, copyrights and confidentiality agreements;

·

our ability to attract and retain a qualified employee base;

·

our ability to respond to new developments in technology and new applications of existing technology before our competitors;

·

acquisitions, business combinations, strategic partnerships, divestures, and other significant transactions may involve additional uncertainties; and

·

our ability to maintain and execute a successful business strategy.

 

Other risks and uncertainties include such factors, among others, as market acceptance and market demand for our products and services, pricing, the changing regulatory environment, the effect of our accounting policies, potential seasonality, industry trends, adequacy of our financial resources to execute our business plan, our ability to attract, retain and motivate key technical, marketing and management personnel, and other risks described from time to time in periodic and current reports we file with the United States Securities and Exchange Commission, or the “SEC.” You should consider carefully the statements under “Item 1A. Risk Factors” and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

 

Critical Accounting Policies and Estimates

 

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“US GAAP”). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expenses amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in our consolidated financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

  

We recognize revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 104. All of the following criteria must exist in order for us to recognize revenue:

 

1. Persuasive evidence of an arrangement exists;

2. Delivery has occurred;

3. The seller’s price to the buyer is fixed or determinable; and

4. Collectability is reasonably assured.

 

The majority of the Company’s revenue results from sales contracts with direct customers and revenues are generated upon the shipment of goods and/or delivery of services. The Company’s pricing structure is fixed and there are no rebate or discount programs. Management conducts credit background checks for new customers as a means to reduce the subjectivity of assuring collectability. Based on these factors, the Company believes that it can apply the provisions of SAB 104 with minimal subjectivity.

 

Recent Accounting Pronouncements

 

The Company does not expect that the adoption of any recent accounting pronouncements will have any material impact on its financial statements.

 

Results of Operations – Nine Months Ended September 30, 2013 as Compared to Nine Months Ended September 30, 2012 and Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

 

The following tables summarize the results of our operations during the nine-month and three-month periods ended September 30, 2013 and 2012, and provides information regarding the dollar and percentage increase (or decrease) from the respective periods.

 

		Nine Months ended September 30,
		2013				2012				Increase (decrease)				% Change
Revenues		$	2,040			$	447,947			$	(445,908	)			(100	)%
Cost of revenues			2,471				301,484				(299,013	)			(99	)%
Gross profit (loss)			(431	)			146,463				(146,894	)			(100	)%
General & Administrative & Professional Fees			190,534				93,068				97,466				105	%
Wages & Consulting Fees			783,302				80,948				702,354				868	%
Income (Loss) from operations			(974,267	)			(26,264	)			(948,003	)			(36,095	)%
Other expense			(47,176	)			(9,482	)			(37,694	)			(398	)%
Provision for taxation			—				—				—				—
Net loss		$	(965,328	)		$	(35,746	)		$	(929,582	)			26,000	%

 

 

		Three Months ended September 30,
		2013				2012				Increase (decrease)				% Change
Revenues		$	—			$	93,902			$	(93,902	)			(100	)%
Cost of revenues			—				65,874				(65,874	)			(100	)%
Gross profit (loss)			—				28,028				(28,028	)			(100	)%
General & Administrative & Professional Fees			28,380				21,726				6,654				31	%
Wages & Consulting Fees			74,409				16,248				58,161				358	%
Income (Loss) from operations			(102,789	)			(9,946	)			(92,843	)			(933	)%
Other expense			(50	)			(5,849	)			5,799				99	%
Provision for taxation			—				—				—				—
Net loss		$	(102,839	)		$	(15,795	)		$	(87,044	)			(551	)%

 

Revenues

 

Sales revenue decreased from $447,947 in the nine months ended September 30, 2012 to $2,040 in the same period in 2013, representing a 100% decrease.

 

Sales revenue decreased from $93,902 in the three months ended September 30, 2012 to $-0- in the same period in 2013, representing a 100% decrease.

 

The decreases in revenue were mainly due to potential projects from the current sales pipeline not closing in the third quarter.

 

Cost of revenues

 

Cost of sales decreased from $301,484 in the nine months ended September 30, 2012 to $2,471 in the same period in 2013, representing a 100% decrease.

 

Cost of sales decreased from $65,874 in the three months ended September 30, 2012 to $-0- in the same period in 2013, representing a 100% decrease.

 

The decreases were mainly attributable to the absence of projects sold in the third quarter of 2013. The gross profit percent decreased from 32.7% in the nine months ended September 30, 2012 to (21.1)% in the same period in 2013.

 

 

Wages and consulting fees

 

Wages and consulting fees were $783,302 in the nine months ended September 30, 2013 as compared to $80,948 in the nine months ended September 30, 2012.

 

Wages and consulting fees were $74,409 in the three months ended September 30, 2013 as compared to $16,248 in the three months ended September 30, 2012.

 

The increases were due to the amortization of prepaid consulting fees for fiscal 2013 were higher.

 

General and administrative and professional fees

 

General and administrative and professional fees increased from $93,068 in the nine months ended September 30, 2012 to $190,534 for the same period in 2013, representing an increase of $97,466 or 105%.

 

General and administrative and professional fees increased from $21,726 in the three months ended September 30, 2012 to $28,380 for the same period in 2013, representing an increase of $6,654 or 31%.

 

The increases were mainly attributable to additional professional fees for the 2013 periods.

 

Net loss

 

Net loss for the nine months ended September 30, 2013 was $965,328 as compared to a net loss of $35,746 in the same period of 2012.

 

Net loss for the three months ended September 30, 2013 was $102,839 as compared to a net loss of $15,795 in the same period of 2012.

 

The increases in net loss were mainly attributable to increased professional fees and to the lack of revenue in 2013.

 

Liquidity and Capital Resources

 

For the nine months ended September 30, 2013, we used $329,452 in cash flows for operating activities compared to the use of $36,378 in cash flows for the nine months ended September 30, 2012. This increase in operating cash requirements occurred for a number of reasons. The Company recorded no change in contract receivables, in billings in excess of costs, or accounts receivable-other. The Company also recorded an increase of $14,150 in prepaid expenses, a decrease of $2,163 in accounts payable, and a decrease of $27,754 in other current liabilities, all of which impacted cash used by operating activities. Financing activities generated $92,500 from the proceeds from the promissory note, and $289,113 proceeds from the sale of common stock.

 

On May 13, 2013, the Company entered into a 6% convertible redeemable note payable of $50,000 with a maturity date of May 14, 2015. Loan costs associated with securing the loan were capitalized and amortized over the loan period.

 

On September 30, 2013, the Company entered into an 8% convertible redeemable note payable of $53,000 with a maturity date of June 24, 2014. Loan costs associated with securing the loan were capitalized and will be amortized over the loan period.

 

Cash and cash equivalents were $54,986 as of September 30, 2013 compared to $18,553 as of December 31, 2012.

 

We have no material commitments for capital expenditures and know of no trends, demands, commitments, or events that will result in our liquidity changing in a material way for the foreseeable future.

 

Off Balance Sheet Arrangements

 

We do not have any off balance sheet arrangements

 

Inflation

 

Inflation has not had a material impact on our business and we do not expect inflation to have an impact on our business in the near future

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

This item is not applicable as we are currently considered a smaller reporting company.

 

 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) as of the end of the period covered by this report.  Based on that evaluation, our principal executive and principal financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Internal Control over Financial Reporting

 

Management’s Report on Internal Control over Financial Reporting  

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) for the Company.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.  Because of its inherent limitations, internal control over financial reporting may not prevent nor detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

 

Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and includes those policies and procedures that: (i) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Based on such criteria, our management, with the participation of our principal executive and principal financial officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of September 30, 2013, and concluded that, as of September 30, 2013, our internal control over financial reporting was not effective.

 

Management’s assessment report was not subject to attestation by the Company’s independent registered public accounting firm and as such, no attestation was performed pursuant to SEC Final Rule Release Nos. 33-8934; 34-58028.

 

Changes in Internal Control over Financial Reporting  

 

There has been no change in our internal control over financial reporting that occurred in three months ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II--OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest. The Company is involved in a possible legal action regarding an account payable in the amount of $13,500 in dispute.  

 

ITEM 1A. RISK FACTORS

 

Not applicable.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

Following are the Company’s equity transactions during the nine months ended September 30, 2013:

 

On January 8, 2013, the Company sold 2,500,000 shares of common stock at $.03 per share under a private placement to an unrelated third party for total proceeds of $75,000.

 

On January 11, 2013, the Company sold 1,500,000 shares of common stock at $.0167 per share under a private placement to an unrelated third party for total proceeds of $25,000.

 

On January 16, 2013, the Company sold 3,500,000 shares of common stock at $.0167 per share under a private placement to an unrelated third party for total proceeds of $58,113.

 

On January 23, 2013, the Company issued 1,455,820 shares of common stock at $.08 per share in cancellation of debt in the amount of $116,134.

 

On January 29, 2013, the Company sold 10,000,000 shares of common stock at $.01 per share under a private placement to an unrelated third party for total proceeds of $100,000.

 

On January 30, 2013, the Company issued 200,000 shares of common stock valued at $6,000 for business consulting services.

 

On January 30, 2013, the Company sold 200,000 shares of common stock at $.03 per share under a private placement to an unrelated third party for total proceeds of $6,000.

 

On January 31, 2013, the Company sold 833,334 shares of common stock at $.03 per share under a private placement to an unrelated third party for total proceeds of $25,000.

 

On February 26, 2013, the Company issued 1,500,000 shares of common stock valued at $75,000 for prepaid legal services.

 

On April 5, 2013, the Company issued 1,016,803 shares of common stock at $.01 per share in cancellation of debt in the amount of $40,672.

 

On April 17, 2013, the Company issued 1,500,000 shares of common stock valued at $22,275 for business consulting services.

 

On May 6, 2013, the Company issued 1,000,000 shares of common stock valued at $15,400 for business consulting services

 

On May 7, 2013, the Company issued 52,000,000 shares of common stock valued at $600,600 for stock based compensation.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our securities during the quarter ended September 30, 2013.

 

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
31.1		Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer furnished 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.

 

ENERGY EDGE TECHNOLOGIES CORPORATION

(Registrant)

 

By:          /s/ James Boyd                                           

James Boyd

Chief Executive Officer, President, and Director

 

Date: November 14, 2013