PFO Global, Inc. - FORM 10-Q

Attached files

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EX-32.1 - 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.	energyexh321.htm
EX-31.1 - 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.	energyexh311.htm
EXCEL - IDEA: XBRL DOCUMENT - PFO Global, Inc.	Financial_Report.xls
EX-31.2 - 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.	energyexh312.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 June 30, 2014

¨ 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 o No x

Note: The Company is a voluntary filer but has filed all reports it would have been required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months if it was a mandatory filer.

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 August 14, 2014, there were 10,127,874 and 600,000 shares of registrant’s class A and B common stock outstanding, respectively.

ENERGY TELECOM, INC.

INDEX
			Page
PART I.	FINANCIAL INFORMATION

	ITEM 1	Financial Statements

		Condensed balance sheets as of June 30, 2014 (unaudited) and December 31, 2013	3

		Condensed statements of operations for the three and six months ended June 30, 2014 and 2013 (unaudited)	4

		Condensed statement of changes in stockholders’ equity for the six months ended June 30, 2014 (unaudited)	5

		Condensed statements of cash flows for the six months ended June 30, 2014 and 2013 (unaudited)	6

		Notes to condensed financial statements (unaudited)	7-12

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13-20

	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	20

	ITEM 4.	Controls and Procedures	20

PART II.	OTHER INFORMATION

	ITEM 1.	Legal Proceedings	21

	ITEM 1A.	Risk Factors	21

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

	ITEM 3.	Defaults Upon Senior Securities	21

	ITEM 4.	Mine Safety Disclosures	21

	ITEM 5.	Other Information	21

	ITEM 6.	Exhibits	22

	SIGNATURES		23

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENERGY TELECOM, INC.
CONDENSED BALANCE SHEETS

	June 30,			December 31,
	2014			2013
	(unaudited)
ASSETS

CURRENT ASSETS
Cash	$	104,352		$	199,603
Accounts receivable		1,442			-
Prepaid expenses and supplies		25,971			17,656
Total current assets		131,765			217,259

Property and equipment, net		1,303			1,903

Total assets	$	133,068		$	219,162

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	58,619		$	47,538
Stockholder notes payable		-			12,486
Total current liabilities		58,619			60,024

Long term debt:
Derivative liability		-			52,071
Total long term debt		-			52,071

Total liabilities		58,619			112,095

STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 10,000,000 shares authorized
Series A Convertible preferred stock, $0.001 par value, 5,790 shares designated, 3,947 shares issued and outstanding		4			4
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 10,087,874 and 8,984,541 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		1,009			898
Class B common stock, no par value, 10,000,000 shares authorized, 600,000 shares issued and outstanding		300,000			300,000
Additional paid in capital		5,977,072			5,653,764
Accumulated deficit		(6,203,636	)		(5,847,599	)
Total stockholders' equity		74,449			107,067

Total liabilities and stockholders' equity	$	133,068		$	219,162

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

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

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
REVENUE:
Sales	$	1,292		$	119,925		$	1,292		$	181,425

COST OF GOODS SOLD		1,271			97,680			1,271			148,383

Gross profit		21			22,245			21			33,042

OPERATING EXPENSES:
Selling, general and administrative expenses		179,141			125,052			405,004			285,766
Depreciation		250			401			600			802
Total operating expenses:		179,391			125,453			405,604			286,568

Loss from operations		(179,370	)		(103,208	)		(405,583	)		(253,526	)

OTHER INCOME (EXPENSE):
Interest income		31			69			69			147
Gain on change in fair value derivative liabilities		-			131,576			52,071			290,204
Interest expense		(1,204	)		(1,305	)		(2,594	)		(2,583	)

Total other income (expense):		(1,173	)		130,340			49,546			287,768

Net (loss) income before provision for income taxes		(180,543	)		27,132			(356,037	)		34,242

PROVISION FOR INCOME TAXES
Income tax (benefit)		-			-			-			-

NET (LOSS) INCOME	$	(180,543	)	$	27,132		$	(356,037	)	$	34,242

Net (loss) income per common share, basic	$	(0.02	)	$	0.00		$	(0.04	)	$	0.00

Net loss per common share, diluted	$	(0.02	)	$	(0.01	)	$	(0.04	)	$	(0.03	)

Weighted average number of common shares outstanding, basic		9,862,783			8,865,200			9,496,861			8,860,617

Weighted average number of common shares outstanding, diluted		9,862,783			10,003,320			9,496,861			9,998,737

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

ENERGY TELECOM, INC.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2014
(unaudited)


													Additional					Total
	Series A Convertible Preferred Stock				Class A Common Stock				Class B Common Stock				Paid in		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Equity

Balance, January 1, 2014		3,947	$	4		8,984,541	$	898		600,000	$	300,000	$	5,653,764	$	(5,847,599	)	$	107,067
Common stock issued for services rendered		-		-		105,000		11		-		-		52,951		-			52,962
Common stock issued for officer's compensation		-		-		633,333		63				-		187,835		-			187,898
Sale of common stock		-		-		365,000		37		-		-		57,963		-			58,000
Common stock issuable for officers compensation		-		-		-		-				-		24,559		-			24,559
Net loss		-		-		-		-		-		-		-		(356,037	)		(356,037	)
Balance, June 30, 2014		3,947	$	4		10,087,874	$	1,009		600,000	$	300,000	$	5,977,072	$	(6,203,636	)	$	74,449

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

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

	Six months ended June 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(356,037	)	$	34,242
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation expense		600			802
Common stock issued for services rendered		44,313			34,942
Common stock issued or issuable for officer compensation		212,457			83,468
Change in fair value of derivative liability		(52,071	)		(290,204	)
Changes in operating assets and liabilities:
Accounts receivable		(1,442	)		(99,043	)
Prepaid supplies		334			-
Advances to suppliers		-			33,300
Accounts payable and accrued liabilities		11,081			(3,769	)
Net cash used in operating activities		(140,765	)		(206,262	)

CASH FLOWS FROM INVESTING ACTIVITIES:		-			-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		58,000			-
Proceeds from sale of Series A convertible preferred stock		-			152,000
Repayments of shareholder loans		(12,486	)		(1,000	)
Net cash provided by financing activities		45,514			151,000

Net decrease in cash		(95,251	)		(55,262	)

Cash beginning of period		199,603			216,479
Cash end of period	$	104,352		$	161,217

Supplemental disclosures of cash flow information:
Interest paid	$	14		$	-
Income taxes paid	$	-		$	-

Supplemental disclosures for non-cash investing and financing activities:
Common stock issued for Series A convertible preferred stock	$	-		$	8
Class A common stock issued for prepaid services	$	8,650		$	-

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

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014 AND 2013

(unaudited)

NOTE 1 — NATURE OF OPERATIONS/BASIS OF PRESENTATION

Energy Telecom, Inc. (the “Company”) 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 intelligent eyewear (IE) that is hands-free, has wireless communication and provides quality sound and noise attenuation. 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 OTC Markets under the symbol “ENRG”.

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 six 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, 2013 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, 2013.

NOTE 2 - LIQUIDITY

The Company incurred various non-recurring expenses in 2013 and for the six months ended June 30, 2014 in connection with non-recurring patent expenses. As of June 30, 2014, the Company had working capital of $73,146. Of the outstanding current liabilities of $58,619, 79% represent liabilities due to Tom Rickards, the Company’s Chief Executive Officer (See Note 6). During the six months ended June 30, 2014, the Company received proceeds of $58,000 from the sale of its Class A common stock. As a result, the Company has sufficient capital resources to meet its projected cash flow requirements to conduct its proposed operations for at least the next five months.

The Company will require additional financing in order to execute its operating plan. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, the Company may be unable to implement its current plans for expansion or respond to competitive pressures, any of these circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the 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.

Concentration of Credit Risks

The Company’s financial instrument that is exposed to a concentration of credit risk is cash. 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.

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014 AND 2013

(unaudited)

Patents

The Company’s patents (U.S. 5,717,479, U.S. 6,012,812, U.S. 6,950,531, U.S. 7,133,532, U.S. 8,243,973 and other international patents) which describe the general means for delivering sound through disposable sound attenuating components, are capitalized at the original cost, if purchased, or at the carrying basis of the transferor if contributed by an entity under common control. Patent costs are amortized using the straight-line method over their estimated period of benefit remaining. The Company evaluates the recoverability of patents annually taking into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. Costs of developing patents that are not specifically identifiable, that have indeterminate lives, or that are inherent in the continuation of the Company’s business are recognized as an expense when incurred.

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 (3) and (4) are 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 generally recognized upon shipment.

Revenue recognized during the three and six months ended June 30, 2014 and 2013 related to sales of product.

Accounts Receivable

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. At June 30, 2014 and December 31, 2013, the Company has deemed that no allowance for doubtful accounts was necessary.

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.

Derivative Financial Instruments

The Company accounts for derivative instruments in accordance with ASC 815, “Derivatives and Hedging”, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value. Accounting for changes in the fair value of derivative instruments depends on whether the derivatives qualify as hedge relationships, and the types of relationships designated are based on the exposures hedged. The Company's derivative financial instruments consisted of reset provisions related to Series A Convertible Preferred Stock. These embedded derivatives included certain conversion features and reset provisions. During the six months ended June 30, 2014, the reset features embedded in the Series A Convertible Preferred Stock expired. At the time of expiry, the fair value of the embedded derivative was nil.

Share-Based Compensation

The Company follows the fair value recognition provisions of Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) using the modified-prospective transition method. 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 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.

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014 AND 2013

(unaudited)

ASC 718-10 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the Company’s pro forma information required under ASC 718- 10 for the periods prior to fiscal 2006, the Company accounted for forfeitures as they occurred.

Net Earnings (Loss) Per Common Share

The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Basic loss per share is computed by dividing the net loss attributable to the common stockholders (the numerator) by the weighted average number of shares of Class A 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 Class A common stock, such as Series A Convertible Preferred Stock and Class B common stock (See Note 7), stock options and warrants (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. The effect of computing diluted loss per share is anti-dilutive and, as such, basic and diluted loss per share is the same for the three and six months ended June 30, 2014.

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 have a material impact on the Company's financial position, results of operations or cash flows.

NOTE 4 — FINANCIAL INSTRUMENTS

Fair Value Measurements

The Company measures and discloses the fair value of assets and liabilities required to be carried at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure.

ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices for identical assets or liabilities in active markets to which we have access at the measurement date.

Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the asset or liability.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

For the six months ended June 30, 2014, the Company did not have any assets or liabilities that were required to be valued using level 3 inputs. The carrying amount of the Company's assets and liabilities approximated fair value as of June 30, 2014 and December 31, 2013.

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014 AND 2013

(unaudited)

NOTE 5 — DERIVATIVE LIABILITY

The Company identified embedded derivatives related to the Series A Convertible Preferred Stock issued during the years ended December 31, 2013 and 2012. These embedded derivatives included certain reset features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Series A Convertible Preferred Stock and to adjust the fair value as of each subsequent balance sheet date. At issuance date(s) of the Series A Convertible Preferred Stock, the Company determined a fair value in the aggregate of $532,869 for the embedded derivative. The initial fair value of the embedded debt derivative of $532,869 was reclassified from equity to liability at the date of inception.

During the six months ended June 30, 2014, the embedded derivatives as described above expired. At the time of expiry, the Company adjusted the derivative to its determined fair value of nil.

At the time of expiry and at June 30, 2013, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating gains of $-0- and $131,576 for the three months ended June 30, 2014 and 2013, respectively, and $52,071 and $290,204 for the six months ended June 30, 2014 and 2013, respectively.

NOTE 6 — STOCKHOLDER NOTES PAYABLE

The Company has received financing from the Company’s founder, Chief Executive Officer, President and majority stockholder (the “officer/director”). No formal repayment terms or arrangements exist. The stockholder loans bear interest of 10% per annum, compounding annually and are due on demand.

The following table summarizes stockholder loans payable as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013

Loans payable, due on demand, interest at 10%	$	-	$	12,486
Accrued interest		46,466		43,887
	$	46,466	$	56,373

The Company recognized interest expense associated with the loans of $1,204 and $2,594 for the three and six months ended June 30, 2014, respectively; and $1,305 and $2,583 for the three and six months ended June 30, 2013, respectively.

During the six months ended June 30, 2014, the Company repaid $12,500, comprising repayments of loan of $12,486 and accrued interest of $14.

NOTE 7 — STOCKHOLDERS’ EQUITY

Common stock

Amendment to Articles of Incorporation

Effective April 25, 2014, the Company amended its First Amended and Restated Articles of Incorporation by filing the Second Amended and Restated Articles of Incorporation of the Company (the “Second A&R AOI”) with the Florida Secretary of State. The Second A&R AOI provide that each share of Class B common stock is convertible into 10 shares of Class A common stock of the Company. Previously, the Class B common stock was not convertible into Class A common stock, but was allowed to cast 10 votes per share on all matters submitted to the stockholders of the Company.

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014 AND 2013

(unaudited)

Shares issued to consultants

During the six months ended June 30, 2014, the Company issued 90,000 shares of Class A common stock to consultants in exchange for services rendered with a fair value totaling $44,313.

During the six months ended June 30, 2014, the Company issued 15,000 shares of Class A common stock to consultants in exchange for prepaid services with a fair value totaling $8,650.

Shares issued or issuable as compensation

During the six months ended June 30, 2014, the Company issued 500,000 shares of Class A common stock with a fair value totaling $187,898 and was obligated under a 2014 employment contract to issue an additional 41,667 shares of Class A common stock with a fair value totaling $24,559 as officer compensation. Issuance of the 375,000 shares of Class A common stock represented a signing bonus, fully earned at the date of issuance, the remaining 125,000 Class A common stock are earned quarterly. See Note 10-Commitments and Contingencies.

Shares issued to officer

During the six months ended June 30, 2014, the Company issued 133,333 shares of Class A common stock under a 2012-2013 employment agreement. In 2013, the Company charged to operations $77,648 for the shares of Class A common stock issuable to an officer in exchange for services rendered. No additional value was recorded in the 2014 year.

Sale of shares

During the six months ended June 30, 2014, the Company sold 365,000 shares of Class A common stock for cash totaling $58,000.

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 $2,000 on a month-to-month basis. Total rent expense for the three and six months ended June 30, 2014 was $6,000 and $12,000, respectively, and $6,000 and $12,000 for the three and six months ended June 30, 2013, respectively.

As discussed in Note 6, the Company has received financing from the Company’s Chief Executive Officer, director, founder and majority stockholder. The stockholder loans bore interest of 10% per annum, compounding annually and were due on demand. As of June 30, 2014, all principal loan amounts have been repaid but the accrued interest remains outstanding.

NOTE 9 — CONCENTRATIONS

The Company’s revenues earned from sale of products for the three and six months ended June 30, 2014 and 2013 included an aggregate of 100% from one customer of the Company's total revenues. The Company’s purchases are from one manufacturer for the three and six months ended June 30, 2014 and 2013.

ENERGY TELECOM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014 AND 2013

(unaudited)

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Employment agreement

On March 1, 2014, the Company entered into a one year employment agreement with Tom Rickards, Chief Executive Officer, director and founder whereby Mr. Rickards shall receive (i) an annual salary of $36,000 which may be increased up to $72,000 by mutual agreement by Mr. Rickards and the Board of Directors and dependent on the financial strength of the Company (the “Cash Salary”) and (ii) 500,000 shares of class A common stock (the “Stock Salary”), with the Cash Salary payable in equal installments at the end of such regular payroll accounting periods as are established by Employer, or in such other installments upon which the parties shall mutually agree and the Stock Salary issuable in equal installments at the end of each three month period. In addition, Mr. Rickards received 375,000 shares of series A common stock as a signing bonus, which was fully earned upon issuance, and receives a $700 per month car allowance.

NOTE 11 — 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 12 — SUBSEQUENT EVENTS

In July 2014, the Company issued an aggregate of 15,000 shares of its Class A common stock to consultants for services valued at approximately $8,600.

In July 2014, the Company sold 25,000 shares of its Class A common stock for $5,000.

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 intelligent eyewear (IE) that is hands-free, has wireless communication and provides quality sound and noise attenuation. We consider our intellectual property in three tiers, with each tier building upon the successful claims in the prior tier. Our tiers are as follows:

Tier		Description

I		Hearing Protection and Communication Eyewear
II		Communication Eyewear with Advanced Audio Control and Option for Wireless Earpieces
III		Communication Eyewear Providing Advanced Zone of Safety Capability

In connection with our tier I and tier II intellectual property (IP), we 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. Our professional model is similar to the recreational model, but contains additional safety features and is intended to be marketed to the PPE markets 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.

Honeywell International Inc., acting through its Honeywell Safety Products business unit, has been selling our communication eyewear, primarily in the PPE markets, under its branded ‘ICOM’ name in Europe and UVEX branded ‘AcccoustiMaxx’ in the United States. In January 2014, Blaupunkt Personal Audio, LLC introduced a version of the eyewear optimized for consumer mobile entertainment and communications. The eyewear is being sold worldwide under the ‘Blaupunkt’ brand.

The eyewear sold under our tier I and tier II IP allowed us to prove our concept, take the product to market and engage in significant product testing and refinement. We will continue to market, support and upgrade our eyewear in the recreational and professional markets, as we believe it is the only communication eyewear providing superior audio capabilities. However, with the issuance of the utility patent for our tier III IP in June 2014, we are focusing on maximizing the opportunities this patent provides for the newly emerging IE market. We believe there is significant value therein and intend to monetize our IE technology.

Our Intelligent Eyewear IP

We consider intelligent eyewear as any type of glasses that incorporates computer and/or advanced electronic technologies. Intelligent eyewear can be a subset of the wearable technology industry. Our tier I and tier II IP covers delivery of sound, communication and intelligence through the ear canal. Our tier III patent covers the delivery of information relating to a physical zone of safety around the user, which can include environmental data, locational data and situational status of the user, locational data of potentially hazardous objects near the user, as well as biometric data from the wearer.

All of our patents are utility patents and provide superior protection against possible infringement. There are several major technology companies that have announced plans for intelligent eyewear, including Google Glasstm in a partnership with Luxottica, Apple, Microsoft, Samsung, Sony, and Osterhout in a partnership with Motorola. We have, through our IP counsel, put all of these companies on notice as to our intellectual property rights and made clear that we will enforce our rights against any infringing products. We have previously stopped companies from selling possibly infringing foreign-made communication eyewear.

While our tier I and tier II IP provides patent protection for in-ear delivery of sound, we purposefully did not include such claims in our tier III patents. We did not want to limit the claims to only include delivery of information in-ear, and we believe that the protections provided by our tier I and tier II patents will continue to protect against such uses in IE for the foreseeable future. Our tier III IP concentrates on intelligence including situational awareness, and the location, position, and status (including danger to, and condition) of the wearer.

Products that would potentially infringe upon our intellectual property would have the following characteristics:

Tier I and Tier II IP	Tier III IP

1.A frame;	1.A frame;
2.At least one shield in front of the eyes;	2.At least one panel in front of the eyes capable of displaying information;
3.Ability to communicate; and	3.Intelligence that determines the conditions of the wearer and the environment around wear; and
4.In-ear delivery of information.	4.Ability to communicate that information to at least the wearer.

One particular market channel, out of many wearable technology markets covered by our patents, that we believe our tier III IP can have a significant impact on is those who are sight or hearing impaired. We believe that our IE eyewear, alone or with applications from third parties, will have the ability to do the following:

·	Read text of lectures or of ongoing conversations in a room without needing to have visual line of site;

·	Speech to text processes;

·	Real-time translation of foreign languages being spoken, with the earplugs blocking out the foreign language;

·	Processors to alert to alarm noises, honking horns and the safety related volume, urgency, proximity and vector information can be sent to audio, vibratory, and/or visual inputs;

·	Vibration devices in the eyewear can signal to blind people obstacle locations – left, right, front;

·	IE at the side of the neck to have Braille words “imprinted” (by shifting mechanical or air-puff devices) and “read” against their skin; and

·	A cell phone attachment to have a braille reader screen for text messages.

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:

·	The Company is undertaking an initiative to seek to maximize and monetize the value of its intellectual property assets through a possible sale or license of its patent portfolio;
·	We have multiple patent applications pending in the United States and with the European Patent Office, and our patent counsel responds to their comments on regular basis to insure timely actions and filings. In addition, we have made the necessary filings to allow us to file patent applications in certain European and Asian counties if our pending patent applications are granted by the USPTO; 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 unaudited condensed 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 June 30, 2014 compared to the three months ended June 30, 2013

Revenue, Cost of Sales and Gross Profit

Revenue for the three months ended June 30, 2014 was $1,292 as compared to $119,925 for the three months ended June 30, 2013. Revenue for three months ended June 30, 2014 and 2013 were comprised completely of sales. Revenue decreased as our primary efforts are moving away from sales in the traditional PPE market and towards monetizing our intellectual property in the newly developing intelligent eyewear market. Our cost of sales was $1,271 for the three months ended June 30, 2014 netting us a gross profit of $21, or a 1.6% gross profit margin as compared to cost of sales of $97,680 for the three months ended June 30, 2013, netting us a gross profit of $22,245 or a 18.5% gross profit margin. Cost of sales relating to product sales include various product introduction costs, such as eyewear that was given away for free to potential vendors and distributors and sales made at a loss or at cost to obtain customer feedback.

Operating Expenses

For the three months ended June 30, 2014 and 2013, general and administrative expenses totaled $179,141 and $125,052, respectively, representing a period to period increase of $54,089. The primary increase in our general and administrative expenses was stock-based compensation expense (non-cash) of $74,316 for the three months ended June 30, 2014 compared to $28,181 for the three months ended June 30, 2013, an increase of $46,135.

In addition, included in general and administrative expenses for the three months ended June 30, 2014 and 2013 were professional fees totaling $74,406 and $53,068, respectively. Of the professional fees, accounting fees increased to $25,435 in the current period from $7,500 for the three months ended June 30, 2013, legal fees decreased by $6,643 to $20,962 for the three months ended June 30, 2014 from $27,605 from the three months ended June 30, 2013 and other consulting fees increased to $28,009 for the three months ended June 30, 2014 as compared to $17,963 for same period, last year. The increase in other consulting fees of $10,046 resulted primarily from the change in fair value of the stock based payments for the services provided. We also incurred patent maintenance, non-recurring engineering costs and prototype development costs in aggregate of $3,756 for the three months ended June 30, 2014 as compared to $16,218 for the same period in 2013.

Other Income and Expenses

Previously, we sold Series A convertible preferred stock that contained certain anti-dilutive provisions. As such, we are required to record the fair value of these anti-dilutive provisions at the time issuance as a liability and mark to market to each reporting period. For three months ended June 30, 2013, we recorded a gain on change in the fair value of these derivative liabilities of $131,576, compared to $-0- for the current period. As of March 31, 2014, all anti-dilutive provisions had expired.

We incurred interest expense of $1,204 and $1,305 for the three months ended June 30, 2014 and 2013, respectively. The decrease is due to reductions in related party debt obligations resulting in lower incurred interest.

Interest income was $31 and $69 for the three months ended June 30, 2014 and 2013, respectively. The change in interest income is a result of lower carrying balances in our interest bearing accounts.

Net Income (Loss)

For the three months ended June 30, 2014, we had net loss of $(180,543) (($0.02) per share of common stock) as a result of the foregoing, compared to a net income of $27,132 ($0.00 per share of common stock) for the three month ended June 30, 2013.

Six months ended June 30, 2014 compared to the six months ended June 30, 2013

Revenue, Cost of Sales and Gross Profit

Revenue for the six months ended June 30, 2014 was $1,292 as compared to $181,425 for the six months ended June 30, 2013. Revenue for six months ended June 30, 2014 and 2013 were comprised completely of sales. Revenue decreased as our primary efforts are moving away from sales in the traditional PPE market and towards monetizing our intellectual property in the newly developing intelligent eyewear market. Our cost of sales was $1,271 for the six months ended June 30, 2014 netting us a gross profit of $21, or a 1.6% gross profit margin as compared to cost of sales of $148,383 for the six months ended June 30, 2013, netting us a gross profit of $33,042 or a 18.2% gross profit margin. Cost of sales relating to product sales include various product introduction costs, such as eyewear that was given away for free to potential vendors and distributors and sales made at a loss or at cost to obtain customer feedback.

Operating Expenses

For the six months ended June 30, 2014 and 2013, general and administrative expenses totaled $405,004 and $285,766, respectively, representing a period to period increase of $119,238. The primary increase in our general and administrative expenses was stock-based compensation expense (non-cash) of $212,457 for the six months ended June 30, 2014 compared to $77,648 for the six months ended June 30, 2013, an increase of $134,809.

In addition, included in general and administrative expenses for the six months ended June 30, 2014 and 2013 were professional fees totaling $106,457 and $97,018, respectively. Accounting and legal professional fees decreased by $3,993. Consulting fees incurred for the six months ended June 30, 2014 and 2013 were $47,775 and $40,762, respectively. The increase of $7,013 resulted primarily from the change in fair value of the stock based payments for the services provided. We also incurred patent maintenance, non-recurring engineering costs and prototype development costs in aggregate of $32,269 for the six months ended June 30, 2014 as compared to $48,617 for the same period in 2013.

Other Income and Expenses

Previously, we sold Series A convertible preferred stock that contained certain anti-dilutive provisions. As such, we are required to record the fair value of these anti-dilutive provisions at the time issuance as a liability and mark to market to each reporting period. For six months ended June 30, 2014, we recorded a gain on change in the fair value of these derivative liabilities of $52,071, compared to $290,204 for the same period last year. As of March 31, 2014, all anti-dilutive provisions had expired.

We incurred interest expense of $2,594 and $2,583 for the six months ended June 30, 2014 and 2013, respectively. The increase is due to compounding of interest on related party debt obligations resulting in higher incurred interest.

Interest income was $69 and $147 for the six months ended June 30, 2014 and 2013, respectively. The change in interest income is a result of lower carrying balances in our interest bearing accounts.

Net Income (Loss)

For the six months ended June 30, 2014, we had net loss of $(356,037) (($0.04) per share of common stock) as a result of the foregoing, compared to a net income of $34,242 ($0.00 per share of common stock) for the six months ended June 30, 2013.

Liquidity and Capital Resources

As of June 30, 2014, we had working capital of $73,146. For the six months ended June 30, 2014, we used $140,765 in cash in operating activities and $nil in investing activities. Cash provided by financing activities during the six months ended June 30, 2014 totaled $58,000 from the sale common stock, net with $12,486 repayments of related party loans. From time to time since our formation in 1993, we have sold shares to investors in private placement transactions.

We expect capital expenditures during the next 12 months for marketing, advertising, inventory, equipment and overhead. During the six months ended June 30, 2014, we incurred certain non-recurring expenses. As a result, we have sufficient capital resources to meet our projected cash flow requirements to conduct our proposed operations for at least the next five months. However, we will require additional financing in order to execute our operating plan. We cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. We may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, we may be unable to implement our current plans for expansion or respond to competitive pressures, any of these circumstances would have a material adverse effect on our business, prospects, financial condition and results of operations. During the six months ended June 30, 2014, we raised $45,514 (comprised of sale of common stock of $58,000, net with repayments of shareholder loan of $12,486), compared with $151,000 for the six months ended June 30, 2013 (comprised of sale of Series A convertible preferred stock of $152,000, net with repayments of shareholder loans of $1,000).

As of June 30, 2014, we had working capital of approximately $73,000. We currently 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), prototype 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 decrease over the next twelve months as we expend less money on prototype development. In addition, of our current liabilities of $58,619; $46,466 represents accrued interest due to our founder and Chief Executive Officer, Thomas Rickards.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our 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 or preferred 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.

Preferred Stock Financings

Between November 2012 and March 2013, we issued an aggregate of 3,946.3 shares of our series A convertible preferred stock (“Series A Preferred Stock”), at a price of $100 per share of Series A Preferred Stock, for aggregate cash proceeds of $366,895 and the exchange of an aggregate of 79,874 shares of our common stock (the “Financings”).

Each share of Series A Preferred Stock has a stated value of $100 (the “Stated Value”). The holders may convert, at any time, shares of Series A Preferred Stock into the number of shares of our Common Stock obtained by dividing the Stated Value by the Conversion Price then in effect. The conversion price is $0.3468, subject to adjustment (the “Conversion Price”).

Upon the occurrence of certain triggering events, the holders have the right to require us to redeem all or a portion of the shares of Series A Preferred Stock. The redemption price is the greater of (A) the number of shares of Common Stock that the Series A Preferred Stock being redeemed are convertible into multiplied by the average market price on the date of redemption or (B) the Stated Value of the Series A Preferred Stock being redeemed multiplied by a Redemption Premium. The “Redemption Premium” is (A) 125% in the event that we fail to have the Common Stock be quoted on the OTC-QB or OTC-PK for a period of 10 days during any period of 12 months; (B) 250% in the event that we (1) fails to timely file an Annual Report on Form 10-K, an Quarterly Report on Form 10-Q or a Current Report on Form 8-K in the time periods that are required of a company with securities registered under Section 12 of the Securities Exchange Act of 1934 (a “Reporting Delinquency”) within the first year from the holders acquiring Series A Preferred Stock or (2) we make any statement that we intend to not comply with proper requests for conversion of the Series A Preferred Stock; or (C) 200% in the event that we have a Reporting Delinquency after the first year from the closing date.

We have the right, at any time after two years from the closing date, to redeem all or a portion of the Series A Preferred Stock, upon 120 days prior written notice. The redemption price per share of Series A Preferred Stock shall equal 200% of the Stated Value. In addition, upon the occurrence of a change in control or a liquidation, dissolution or winding up of our company, the holders have the right to receive, at their election, either 200% of the Stated Value per share of Series A Preferred Stock, or share in our assets being distributed on a pro rata basis as if the Series A Preferred Stock had been converted into shares of Common Stock.

Pursuant to the certificate of designation for the Series A Preferred Stock, the holders may not convert Series A Preferred Stock if such conversion would result in such holder beneficially owning in excess of 4.99% of our then issued and outstanding common stock. The holders may, however, increase this limitation (but in no event exceed 9.99% of the number of shares of Common Stock issued and outstanding) by providing us with 61 days’ notice that such holder wishes to increase this limitation.

In connection with the Financings, we granted the holders a right of first refusal on any proposed sale by us of any shares of common or preferred stock, except for certain exempted issuances. The right of first refusal is for the earlier of one year from the closing date of such holder’s Financing or until such holder no longer holds any of our securities. In addition, we granted the holders piggyback registration rights for a period of two years from the closing date of such Financing.

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 loans payable as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013

Loans payable, due on demand, interest at 10%	$	-	$	12,486
Accrued interest		46,466		43,887
	$	46,466	$	56,373

During the six months ended June 30, 2014, we repaid $12,500 comprising repayments of loan of $12,486 and accrued interest of $14.

Critical Accounting Policies

Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.

We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our results of operations, financial position or liquidity for the periods presented in this report.

The accounting policies identified as critical are as follows:

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.

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 (3) and (4) are 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 generally recognized upon shipment.

Cash and Cash Equivalents

We consider financial instruments with an original maturity date of three months or less to be cash equivalents.

Patents

Our patents (U.S. 5,717,479, U.S. 6,012,812, U.S. 6,950,531, U.S. 7,133,532, U.S. 8,243,973 and other international patents) which describe the general means for delivering sound through disposable sound attenuating components, are capitalized at the original cost, if purchased, or at the carrying basis of the transferor if contributed by an entity under common control. Patent costs, if any, are amortized using the straight-line method over their estimated period of benefit remaining. We evaluate the recoverability of patents annually taking into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. Costs of developing patents that are not specifically identifiable, that have indeterminate lives, or that are inherent in the continuation of our business are recognized as an expense when incurred.

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.

We measure the fair value of shares issued as share-based compensation using the stock price observed in the arms-length private placement transaction nearest the measurement date, which was considered to be a more reliably determinable measure 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.

Income Taxes

We recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are recognized, net of a valuation allowance, for the estimated future tax effects of deductible temporary differences and tax credit carry-forwards. A valuation allowance against deferred tax assets is recorded when, and if, based upon available evidence, it is more likely than not that some or all deferred tax assets will not be realized.

There were no unrecognized tax benefits at June 30, 2014 and December 31, 2013. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There were no accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the year. We have determined we have no uncertain tax positions.

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 Class A 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 Class A common stock, such as Series A Convertible Preferred Stock and Class B common stock, stock options and warrants (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. The effect of computing diluted loss per share is anti-dilutive and, as such, basic and diluted loss per share is the same for the three and six months ended June 30, 2014.

Derivative Financial Instruments

We account for derivative instruments in accordance with ASC 815, “Derivatives and Hedging”, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value. Accounting for changes in the fair value of derivative instruments depends on whether the derivatives qualify as hedge relationships, and the types of relationships designated are based on the exposures hedged. Our derivative financial instruments consisted of reset provisions related to Series A convertible preferred stock. These embedded derivatives included certain conversion features and reset provisions. As of March 31, 2014, these embedded derivatives expired.

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 have a material impact on our financial position, results of operations or cash flows.

Management does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying financial statements.

Off-Balance Sheet Arrangements

We do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.

Inflation

The effect of inflation on our revenue and operating results was not significant.

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 June 30, 2014, 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 as soon as our finances allow for additional personnel 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 June 30, 2014 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

During the quarter ended June 30, 2014, we issued an aggregate of 60,000 shares of Class A common stock to consultants in exchange for services rendered with an aggregate fair value of $35,402. The securities were issued in transactions pursuant to Section 4(a)(2) and/or Regulation D under the Securities Act of 1933, as amended.

During the quarter ended June 30, 2014, we issued an aggregate of 258,333 shares of Class A common stock to our Chief Executive Officer pursuant to his former and current employment agreements. The securities were issued in transactions pursuant to Section 4(a)(2) and/or Regulation D under the Securities Act of 1933, as amended.

During the quarter ended June 30, 2014, we sold an aggregate of 365,000 shares of Class A common stock to investors for gross proceeds of $58,000. The securities were issued in transactions pursuant to Section 4(a)(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(a)(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 Taxonomy Extension Schema Document

101 CAL	XBRL Taxonomy Calculation Linkbase Document

101 LAB	XBRL Taxonomy Labels Linkbase Document

101 PRE	XBRL Taxonomy Presentation Linkbase Document

101 DEF	XBRL Taxonomy Extension Definition Linkbase 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: August 14, 2014	By:	/s/ THOMAS RICKARDS
		Thomas Rickards
		Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

PFO Global, Inc. - FORM 10-Q - August 14, 2014

Attached files

PFO Global, Inc. Reports