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, 20092010
or
[ ] 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 000-53002
EASY ENERGY, INC.
(Exact name of registrant as specified in its charter)
Nevada 26-0204284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 105 - 5348 Vegas Dr., Las Vegas 89108
(Address of principal executive offices) (Zip Code)
Telephone: +1 (702) 442-1166
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)number)
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
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 (ss.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 [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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]
There were 96,202,778As of August 6, 2010, the registrant's shares of common stock, $0.00001 par value
per share,$0.00001, outstanding on August 5, 2009.were 103,652,778.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1:1 - Financial Statements (unaudited) ....................................................................... 3
Balance Sheet .........................................................Sheets.......................................................... 3
Statements of Operations ..............................................Operations................................................ 4
Statements of Cash Flows ..............................................Flows................................................ 5
Statements of Stockholders' Equity .................................... 6
Notes to Financial Statements ......................................... 7Statements........................................... 6
Item 2:2 - Management's Discussion and Analysis Or Plan of Operation ..........Financial Condition and
Results of Operations.............................................. 14
Item 3:3 - Quantitative and Qualitative Disclosures aboutAbout Market Risk .......... 15Risk......... 17
Item 4T:4T - Controls and Procedures ........................................... 16Procedures........................................... 17
PART II - OTHER INFORMATION
Item 2:2 - Unregistered Sales of Equity Securities and Use of Proceeds ........ 17Proceeds........ 18
Item 6: Exhibits ........................................................... 17
Signatures .................................................................6 - Exhibits........................................................... 18
References in this Form 10-Q to "we", "us", "our", the "Company" and "Easy
Energy" refers to Easy Energy, Inc. unless otherwise noted.Signatures.................................................................. 19
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EASY ENERGY, INC
(A Development Stage Company)STATEMENTS.
Easy Energy, Inc.
Balance Sheets
June 30, 2010 December 31, 2009
2008
----------- ------------------------ -----------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:ASSETS
Cash in bank $ 9,16421,532 $ 124,533105,438
Available for sale marketable securities 2,580 --
Inventory 11,844 --
Prepaid expenses -- 12,500
Prepaid expenses - stock related 62,709 112,5004,031 3,721
Deposits 134,713 447,865
----------- -----------
Total current assets 83,717 249,533
OTHER ASSETS:
Patent 8,500 --TOTAL CURRENT ASSETS 162,856 557,024
----------- -----------
Total other assetsOTHER ASSETS
Patent -- 8,500
----------- -----------
TOTAL OTHER ASSETS -- 8,500
----------- -----------
TOTAL ASSETS $ 92,217162,856 $ 249,533565,524
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITYDEFICIT
CURRENT LIABILITIES:LIABILITIES
Accounts payable and accrued liabilities $ 51623,992 $ 300
Due to director 324,4565,996
Customer deposits 43,617 271,509
Loans payable - related party 153,148 485,199
----------- -----------
TOTAL CURRENT LIABILITIES 220,757 762,704
LONG TERM LIABILITIES
Loans payable - related parties 220,000 --
----------- -----------
Total current liabilities 324,972 300
COMMITMENTS AND CONTINGENCIESTOTAL LIABILITIES 440,757 762,704
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)DEFICIT
Preferred stock, $0.0001 par value $0.0001per share,value; 50,000,000 shares authorized,authorized;
none issued and outstanding -- --
Common stock, $0.00001 par value, $0.00001 per share, 185,000,000 shares authorized;
95,202,778103,652,778 and 93,302,778101,702,778 shares issued and outstanding respectively 952 9331,037 1,017
Additional paid-inpaid in capital 2,778,385 2,653,404
Deferred offering costs - stock related (211,765) (211,765)
(Deficit) accumulated during the development stage (2,800,327) (2,193,339)3,474,645 3,347,352
Accumulated Deficit (3,753,582) (3,545,549)
----------- -----------
Total stockholders' equity (deficit) (232,755) 249,233TOTAL STOCKHOLDERS' DEFICIT (277,901) (197,180)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)DEFICIT $ 92,217162,856 $ 249,533565,524
=========== ===========
TheSee accompanying notes are an integral part of theseto financial statements
3
EASY ENERGY, INC.
(A Development Stage Company)Easy Energy, Inc.
Statements of Operations
(Unaudited)
Cumulative
Three Months Ended June 30, Six Months Ended From
June 30,
June 30, Inception
----------------------------- ------------------------------ (May 17,2010 2009 20082010 2009 2008 2007)
------------
------------ ------------ ------------ ------------
REVENUESSALES $ 49,000 $ -- $ --574,587 $ --
$COST OF GOODS SOLD 32,837 -- $381,922 --
------------ ------------ ------------ ------------
------------
EXPENSES:
General and administrative 744 4,475 1,945 4,475 17,006
Filing fees 605 1,600 12,116 1,600 19,614
Product development 169,722 130,000 294,114 330,000 1,017,336
MarketingGROSS PROFIT 16,163 -- -- 75,000 -- 75,000
Professional fees 52,620 143,910 223,264 1,113,190 1,680,050
------------ ------------ ------------ ------------ ------------
Total general and administrative
expenses 223,691 279,985 606,439 1,449,265 2,809,006
------------ ------------ ------------ ------------ ------------
(LOSS) FROM OPERATIONS (223,691) (279,985) (606,439) (1,449,265) (2,809,006)
OTHER INCOME (EXPENSE) (39) 3,763 (549) 5,023 8,678
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES (223,730) (276,222) (606,988) (1,444,242) (2,800,328)
PROVISION FOR INCOME TAXES -- -- -- --192,665 --
------------ ------------ ------------ ------------
OPERATING EXPENSES
Research and development - primarily related party 70,449 169,722 172,145 294,114
General and administrative expenses 68,639 53,969 228,405 312,325
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 139,088 223,691 400,550 606,439
INTEREST INCOME (427) (39) (148) (549)
------------ ------------ ------------ ------------
NET (LOSS)LOSS $ (123,352) $ (223,730) $ (276,222)(208,033) $ (606,988) $ (1,444,242) $ (2,800,328)
============ ============ ============ ============
============
(LOSS)NET LOSS PER COMMON SHARE:
(Loss) per common shareSHARE - Basic
and DilutedBASIC AND DILUTED $ (0.00) $ (0.002) $ (0.00) $ (0.01) $ (0.02)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
DURING THE PERIOD - BASIC AND DILUTED 103,652,777 95,202,777 93,186,070102,859,959 94,128,744 87,783,730
============ ============ ============ ============
TheSee accompanying notes are an integral part of theseto financial statements
4
EASY ENERGY, INC.
(A Development Stage Company)Easy Energy, Inc.
Statements of Cash Flows
(Unaudited)
Cumulative
Six Months Ended From
June 30,
Inception
------------------------------ (May 17,2010 2009
2008 2007)
----------- ----------- -------------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:ACTIVITIES
Net (loss) $ (606,988) $(1,444,242) $(2,800,328)loss $(208,033) $(606,988)
Adjustments to reconcile net (loss)loss to net cash
(used in)used in operating activities:
Contributed capital -- 3,000 --
Stock and warrants issued for services 25,000 105,000
957,083 849,583Options issued for services 22,562 --
Changes in netoperating assets and liabilities -
Inventory (11,844)liabilities:
Impairment loss 8,500 -- (11,844)
Prepaid expenses -- 62,291
(37,500) (62,708)Inventory (310) (11,844)
Deposits 313,152 --
Accounts payable and accrued liabilities17,996 216
19,416 516
----------- ----------- -----------
NETCustomer deposits (227,892) --
--------- ---------
Net Cash Used In Operating Activities (49,025) (451,325)
--------- ---------
CASH USED IN OPERATINGFLOWS FROM INVESTING ACTIVITIES
(451,325) (502,243) (2,024,781)
----------- ----------- -----------
INVESTING ACTIVITIES:
PatentIncrease in patent costs (8,500) -- (8,500)
----------- ----------- -----------
NETIncrease in available for sale marketable securities (2,580) --
--------- ---------
Net Cash Used In Investing Activities (2,580) (8,500)
--------- ---------
CASH USED IN INVESTING ACTIVITIES (8,500) -- (8,500)
----------- ----------- -----------
FINANCING ACTIVITIES:
Issuance of common stock and warrants 20,000 1,025,001 1,717,989
Due to director 324,456 -- 324,456
----------- ----------- -----------
NET CASH PROVIDED BYFLOWS FROM FINANCING ACTIVITIES
Proceeds from related party loans 383,182 324,456
Repayments on related party loans (495,233) --
Proceeds from stock issued for cash 79,750 20,000
--------- ---------
Net Cash Provided By (Used In) Financing Activities (32,301) 344,456
1,025,001 2,042,445
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH--------- ---------
Net decrease in cash (83,906) (115,369)
522,758 9,164
CASHCash - BEGINNING OF PERIODbeginning of period 105,438 124,533
72,688 --
----------- ----------- -----------
CASH--------- ---------
Cash - END OF PERIODend of period $ 21,532 $ 9,164
$ 595,446 $ 9,164
=========== =========== ==================== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:INFORMATION
Cash paid during the period for:
Interest $ -- $ --
$ --
=========== =========== ===========
Income taxes========= =========
Taxes $ -- $ --
$ --
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Contributed capital $ -- $ 3,000 $ --
=========== =========== ===========
Stock issued for services $ 105,000 $ 957,083 $ 849,583
=========== =========== ==================== =========
TheSee accompanying notes are an integral part of theseto financial statements
5
EASY ENERGY, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
(Deficit)
Accumulated
Common Stock Additional Deferred During the
------------------ Paid-in Offering Development
Shares Amount Capital Costs Stage Totals
------ ------ ------- ----- ----- ------
BALANCE - MAY 17, 2007 -- $ -- $ -- $ -- $ -- $ --
Issued to founders on May 17, 2007
@ 0.0005 40,000,000 400 1,600 -- -- 2,000
Private placement May 17, 2007
@ 0.0002 10,000,000 100 1,900 -- -- 2,000
Private placement August 27, 2007
@ 0.003 30,333,190 303 90,697 -- -- 91,000
Contributed capital -- -- 7,500 -- -- 7,500
Net (loss) for the period -- -- -- -- (30,112) (30,112)
---------- ----- ---------- ---------- ----------- -----------
BALANCE - DECEMBER 31, 2007 80,333,190 803 101,697 -- (30,112) 72,388
Private placement January 16, 2008
@ 0.07 4,285,714 43 299,957 -- -- 300,000
Private placement February 28, 2008
@ 0.17 3,676,480 37 624,964 -- -- 625,001
Private placement February 28, 2008
@ 0.24 208,333 2 49,998 -- -- 50,000
Shares for services March 3, 2008
@ 0.24 300,000 3 71,997 -- -- 72,000
Shares for services March 10, 2008
@ 0.24 882,353 9 211,756 (211,765) -- (0)
Private placement March 25, 2008
@ 0.02 2,000,000 20 599,980 -- -- 600,000
Shares for services March 27, 2008
@ 0.07 1,500,000 15 449,985 -- -- 450,000
Private placement September 15, 2008
@ 0.015 116,707 1 17,487 -- -- 17,488
Contributed capital -- -- 3,000 -- -- 3,000
Fair value of warrants granted -- -- 222,583 -- -- 222,583
Net (loss) for the year -- -- -- -- (2,163,227) (2,163,227)
---------- ----- ---------- ---------- ----------- -----------
BALANCE - DECEMBER 31, 2008 93,302,777 933 2,653,404 (211,765) (2,193,339) 249,233
Shares for services February 23, 2009
@ 0.07 250,000 3 17,498 -- -- 17,500
Shares for services March 27, 2009
@ 0.07 1,250,000 13 87,488 -- -- 87,500
Private placement April 1, 2009
@ 0.05 400,000 4 19,996 -- -- 20,000
Net (loss) for the period -- -- -- -- (606,988) (606,988)
---------- ----- ---------- ---------- ----------- -----------
BALANCE - JUNE 30, 2009 95,202,777 $ 952 $2,778,385 $ (211,765) $(2,800,327) $ (232,755)
========== ===== ========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements
6
EASY ENERGY , INC.
(A Development Stage Company)Easy Energy, Inc.
Notes to Financial Statements
June 30, 2010
Unaudited
NOTE 1 - NATUREBASIS OF OPERATIONSPRESENTATION
The Company was incorporated under the laws of the state of Nevada on May 17,
2007. The Company has limited operations and in accordance with Statements of
Financial Accounting Standards ("SFAS") No. 7 - Accounting and Reporting by
Development Stage Enterprises, is considered a development stage company, and
has had no revenues from operations to date.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS
Theseaccompanying unaudited condensed interim financial statements arehave been
prepared on the accrual basis of accounting in conformityaccordance with accounting principles generally accepted in the
United States of America.
UNAUDITED INTERIM FINANCIAL STATEMENTS
TheAmerica and the rules and regulations of the United States
Securities and Exchange Commission for interim financial statementsinformation and with
the instructions to Form 10-Q and Article 10 of the CompanyRegulation S-X.
The financial information as of June 30,December 31, 2009 andis derived from the audited
financial statements presented in the Company's Annual Report on Form 10-K for
the periodsyear ended and cumulative from inception, are unaudited. However, in the
opinion of management, the interim financial statements include all adjustments,
consisting of only normal recurring adjustments, necessary to present fairly the
Company's financial position as of June 30, 2009, and the results of its
operations and its cash flows for the periods ended June 30, 2009, and
cumulative from inception. These results are not necessarily indicative of the
results expected for the calendar year ending December 31, 2009. The accompanyingunaudited condensed interim financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-K, which contains the audited financial statements and notes thereto,
do not reflect alltogether with the Management's Discussion and Analysis, for the year ended
December 31, 2009.
Certain information or footnote disclosures required undernormally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States. ReferStates of America have been condensed or omitted, pursuant to the
Company's auditedrules and regulations of the Securities and Exchange Commission for interim
financial statements as of
December 31, 2008, filed withreporting. Accordingly, they do not include all the SEC,information and
footnotes necessary for additional information, including
significant accounting policies.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128 - Earnings Per Share, which specifies the computation, presentation and
disclosure requirements for earnings (loss) per share for entities with publicly
held common stock. SFAS No. 128 supersedes the provisions of Accounting
Principles Board ("APB") No. 15 - Earnings Per Share, and requires thea comprehensive presentation of basic earnings (loss) per share and diluted earnings (loss) per
share.financial position,
results of operations, or cash flows. It is management's opinion, however, that
all material adjustments (consisting of normal recurring adjustments) have been
made which are necessary for a fair financial statement presentation. The
interim results for the period ended June 30, 2010 are not necessarily
indicative of results for the full fiscal year.
NOTE 2 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Easy Energy, Inc. (the "Company") was incorporated under the laws of the State
of Nevada on May 17, 2007. The Company has adopted the provisions of SFAS No. 128 effective upon its
inception.
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common stockholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common stockholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
DIVIDENDSheadquartered in Karmiel, Israel.
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.
7
EASY ENERGY , INC.
(A Development Stage Company)
Notes to Financial Statements
REVENUE RECOGNITION
Revenue from product sales is generally recognized at the time the product is
shipped, with provisions established for price reduction programs and for
estimated returns. Upon shipment, the company also provides for estimated cost
that may be incurred for products warranties and post sales support.
INVENTORY
Inventories are stated at the lower of cost or market value with cost determined
using primarily the first-in, first-out method.
INCOME TAXES
The Company provides for income taxes under SFAS No. 109 - Accounting for Income
Taxes, and FASB Interpretation Number ("FIN") 48 - Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109, SFAS No. 109
requires the use of an asset and liability approach in accounting for income
taxes.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. No
provision for income taxes is included in the statement due to its immaterial
amount, netbusiness of the allowance account, based on the likelihood ofdeveloping and manufacturing battery charging
solutions for portable electronic devices.
During 2010, the Company to
utilizeemerged from the loss carry-forward.development stage as operations began.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles
generally accepted in the United States of America, or U.S. GAAP, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
ADVERTISING COSTS6
Easy Energy, Inc.
Notes to Financial Statements
June 30, 2010
Unaudited
RISKS AND UNCERTAINTIES
The Company's policyoperations are subject to significant risk and uncertainties
including financial, operational, technological, intense competition, and
regulatory risks including the potential risk of business failure. The risk of
social and governmental factors is also a concern since the Company operates in
Israel and its sole supplier is based in China.
See Note 3 regarding advertisinggoing concern matters.
INVESTMENTS
(A) CLASSIFICATION OF SECURITIES
ASC 320, "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES"
("ASC 320"), as amended and interpreted, requires that at the time of purchase,
designation of a security as held-to-maturity, available-for-sale or trading
depending on ability and intent to hold such security to maturity. Securities
classified as trading and available-for-sale are reported at fair value, while
securities classified as held-to-maturity are reported at amortized cost. The
Company may sell securities as part of the management of the investment
portfolio. Accordingly, all securities held at June 30, 2010 are designated as
available for sale. Any unrealized gains and losses are reported as other
comprehensive income as a component in the statement of stockholders' equity.
(B) OTHER THAN TEMPORARY IMPAIRMENT
ASC 320 provides guidance on determining when an investment is other than
temporarily impaired. The Company reviews its equity investment portfolio for
any unrealized losses that would be deemed other-than-temporary and require the
recognition of an impairment loss in income. If the cost of an investment
exceeds its fair value, the Company evaluates, among other factors, general
market conditions, the duration and extent to expense advertisingwhich the fair value is less than
cost, and the Company's intent and ability to hold the investments. Management
also considers the type of security, related-industry and sector performance, as
well as published investment ratings and analyst reports, to evaluate its
portfolio. Once a decline in fair value is determined to be other than
temporary, an impairment charge is recorded and a new cost basis in the
investment is established. If market, industry, and/or investee conditions
deteriorate, the Company may incur future impairments. The Company has not
recorded any equity investment losses for the three and six months ended June
30, 2010.
INVENTORY
Inventory, consisting of finished goods, are stated at the lower of cost or
market using the first-in, first-out (FIFO) valuation method.
7
Easy Energy, Inc.
Notes to Financial Statements
June 30, 2010
Unaudited
DEPOSITS
The Company purchases its inventory from its suppliers through a letter of
credit. The funds are held in banks which are released once the product is ready
to be shipped.
REVENUE RECOGNITION AND CUSTOMER DEPOSITS
The Company records revenue when incurred.all of the following have occurred: (1)
persuasive evidence of an arrangement exists, (2) the product is delivered, (3)
the sales price to the customer is fixed or determinable, and (4) collectability
of the related customer receivable is reasonably assured. Sales are recognized
upon shipment of products to customers.
There is no stated right of return for products, however, in the event that the
Company ceases a customer relationship, the Company is obligated to re-purchase
any unsold inventory held by the customer. To date, the Company has not had any
instance of this occurrence.
In the event that there is a defective product, the Company is obligated to
replace the defect. To date, the Company has not had any instance of this
occurrence.
The Company collects a percentage of the sales price from its customers in
advance of shipment. Upon shipment, customer deposits become earned revenues.
The Company had not incurred any advertising expense$43,617 and $271,509 of such deposits on hand as of June 30,
2009.2010 and December 31, 2009, respectively.
EARNINGS PER SHARE
In accordance with accounting guidance now codified as FASB ASC Topic 260,
"EARNINGS PER SHARE," basic earnings (loss) per share is computed by dividing
net income (loss) by weighted average number of shares of common stock
outstanding during each period. Diluted earnings (loss) per share is computed by
dividing net income (loss) by the weighted average number of shares of common
stock, common stock equivalents and potentially dilutive securities outstanding
during the period.
The Company had the following potential common stock equivalents at June 30,
2010 and December 31, 2009:
June 30, 2010 December 31, 2009
------------- -----------------
Warrants 18,929,440 18,529,440
Options 1,000,000 --
---------- ----------
Total common stock equivalents 19,929,440 18,529,440
========== ==========
Since the Company reflected a net loss in for the period ended June 30, 2010 and
2009, respectively, the effect of considering any common stock equivalents, if
outstanding, would have been anti-dilutive. A separate computation of diluted
earnings (loss) per share is not presented.
8
Easy Energy, Inc.
Notes to Financial Statements
June 30, 2010
Unaudited
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update No. 2010-06, "IMPROVING DISCLOSURES ABOUT FAIR VALUE
MEASUREMENTS ("ASU 2010-06"). ASU 2010-06 amends ASC 820, "FAIR VALUE
MEASUREMENTS" ("ASC 820") to require a number of additional disclosures
regarding fair value measurements. The amended guidance requires entities to
disclose the amounts of significant transfers between Level 1 and Level 2 of the
fair value hierarchy and the reasons for these transfers, the reasons for any
transfers in or out of Level 3, and information in the reconciliation of
recurring Level 3 measurements about purchases, sales, issuances and settlements
on a gross basis. The ASU also clarifies the requirement for entities to
disclose information about both the valuation techniques and inputs used in
estimating Level 2 and Level 3 fair value measurements. The amended guidance was
effective for financial periods beginning after December 15, 2009, except the
requirement to disclose Level 3 transactions on a gross basis, which becomes
effective for financial periods beginning after December 15, 2010. ASU 2010-06
did not have a significant effect on the Company's consolidated financial
position or results of operations.
NOTE 3 - GOING CONCERN
As reflected in the accompanying unaudited condensed interim financial
statements, the Company has a net loss of $208,033 and net cash used in
operations of $49,025 for the six months ended June 30, 2010, and a working
capital deficit and stockholders' deficit of $57,901 and $277,901, respectively,
at June 30, 2010.
The ability of the Company to continue its operations is dependent on
Management's plans, which include the raising of capital through debt and/or
equity markets with some additional funding from other traditional financing
sources, including term loans and notes, until such time that funds provided by
operations are sufficient to fund working capital requirements. The Company may
need to incur additional liabilities with certain related parties to sustain the
Company's existence.
The Company will require additional funding to finance the growth of its current
and expected future operations as well as to achieve its strategic objectives.
The Company believes its current available cash along with anticipated revenues
may be insufficient to meet its cash needs for the near future. There can be no
assurance that financing will be available in amounts or terms acceptable to the
Company, if at all.
The accompanying unaudited condensed interim financial statements have been
prepared assuming that the
Company will continue as a going concern. The Company has net losses for the
period from inception to June 30, 2009 and the Company has not established
revenue sufficient to cover its operating expenses. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plan is to complete the design of the Company's product, to engage
third party firms to manufacture the components of the product, develop and
manufacture a first product suited to cellular phone use and explore potential
distributors for the product. Management anticipates that cash on hand will not
be sufficient to pay the Company's estimated expenses for the next twelve month
period. Management expects to start generating revenue within 2-3 months but has
no assurance that such revenues shall be generated and in what amounts.
Management intends to fulfill any additional cash requirement through the sale
of either equity or debt. However, the Company has not identified the source of
additional cash and there is no guarantee that such funds will be available or
if available that the terms will be acceptable to the Company.
8
EASY ENERGY , INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 3 - GOING CONCERN (CONTINUED)
The Company's continuation as a going concern is dependent on its ability to
completebasis, which contemplates the realization of assets
and market its product and to obtain additional financing as may be
required and ultimately to attain profitability. Thethe satisfaction of liabilities in the normal course of business. These
accompanying unaudited condensed interim financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE 4 - DEFERRED OFFERING COSTS - STOCK RELATED
On March 10, 2008 the Company entered into agreements relating to the issuancerecovery of 882,353 sharesthe recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
9
Easy Energy, Inc.
Notes to Financial Statements
June 30, 2010
Unaudited
NOTE 4 INVESTMENT IN MARKETABLE SECURITIES AND FAIR VALUE
ASC 820 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. Under GAAP, fair value of such securities is determined
based upon a hierarchy that prioritizes the inputs to valuation techniques used
to measure fair values into three broad levels.
The fair value of the Company's common stock, par value $0.00001 per share,financial assets and a warrant to purchase up to 3,000,000 sharesliabilities reflects the
Company's estimate of amounts that it would have received in connection with the
sale of the assets or paid in connection with the transfer of the liabilities in
an orderly transaction between market participants at the measurement date. In
connection with measuring the fair value of its assets and liabilities, the
Company seeks to maximize the use of observable inputs (market data obtained
from sources independent from the Company) and to minimize the use of
unobservable inputs (the Company's common stockassumptions about how market participants
would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value
the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or
liabilities. An active market for an asset or liability is a
market in which transactions for the asset or liability occur
with sufficient frequency and volume to provide pricing
information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2
inputs include quoted prices in active markets for similar assets
or liabilities and quoted prices for identical assets or
liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company's assessment of the
assumptions that market participants would use in pricing the
asset or liability.
As of June 30, 2010, investment in marketable securities consisted solely of
Israeli government bonds, which are classified as available for sale marketable
securities and is carried at a price of $0.27 per share.fair value.
Level 1: Level 2:
Quoted Prices Quoted Prices
in Active in Inactive Level 3:
Markets for Markets for Significant
Identical Identical Unobservable Total at
Assets Assets Inputs June 30, 2010
------ ------ ------ -------------
Israeli Bonds $ -- $2,580 -- $2,580
----- ------ ----- ------
Total $ -- $2,580 -- $2,580
===== ====== ===== ======
10
Easy Energy, Inc.
Notes to Financial Statements
June 30, 2010
Unaudited
NOTE 5 - CAPITALSTOCKHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2010:
(A) STOCK COMMON SHARES - AUTHORIZED
The company has 185,000,000 common shares authorized at a par value of $0.00001
per share and 50,000,000 shares of preferred stock at a par value of $0.0001 per
shares. All common stock have equal voting rights, are non-assessable and have
one vote per share. Voting rights are not non-cumulative and, therefore, the
holders of more than 50% of the stock could, if they choose to do so, elect all
the directors of the company.
ISSUED AND OUTSTANDING -OPTIONS.
On May 17, 2007 (inception),January 26, 2010, the Company issued 40,000,000 shares of its common
stock to its Directors for cash of $2,000.
On May 17, 2007, the Company closed a private placement for 10,000,000 common
shares at a price of $0.0002 per share, or an aggregate of $2,000.
On August 27, 2007, the Company closed a private placement for 30,333,190 common
shares at a price of $0.003 per share, or an aggregate of $91,000.
On February 8, 2008, the Company changed its number of authorized shares of
common stock from 100,000,000 to 1,000,000,000 and provide for a ten for one
forward split of the Company's shares of common stock outstanding.
On February 28, 2008, the Company closed a private placement offering of
367,647.6 units, with each unit being offered for $1.70, for aggregate gross
proceeds of $625,001. Each unit consists of (i) ten common stock shares, (ii)
thirty Class A Warrants. Each Class A Warrant entitles the holder thereof to
purchase one share of common stock at an exercise price of $0.27 per share,
expiring five years from the date of purchase of the warrant.
On February 28, 2008, the Company completed a subscription agreement pursuant to
which it issued and sold 208,333500,000 shares of common stock for
consulting services, having a fair value of $25,000 ($0.05/share), based upon
the aggregate
purchase price of $50,000, purchase price $0.24 per share.
9
EASY ENERGY , INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 5 - CAPITAL STOCK (CONTINUED)
ISSUED AND OUTSTANDING (CONTINUED) -
On March 3, 2008,quoted closing trading price. In addition the Company signed a subscription agreement in which it issued
to its legal counsel 300,000 shares of restricted common stock valued at $0.24
per share reflecting an aggregate value of $72,000 for legal services and
warrants to purchase 1,000,000 shares ofgranted the Company's common stockconsultant
500,000 options at an exercise price of $0.15 forper share, which expire three
years from issuance. The options vest evenly over a period of five years. In accordance with SFAS 123R
- - Share-Based Payment,5 months starting
February 1, 2010. The Company determined the warrants were valued usingfair value of these 500,000 options
was $17,181. For the Black-Scholes model at
$1,031.
On March 10, 2008,six months ended June 30, 2010, the Company entered into a Securities Purchase Agreement and
a Registration Rights Agreement with Tailor-Made Capital Ltd. ("TMC") relating
to the issuance to TMC of 882,353 shares of the Company's common stock, par
value $0.0001 per share, and a warrant to purchase up to 3,000,000 shares of the
Company's common stock at a price of $0.27 per share (the "Warrant"). The shares
were issued for deferred stock offering costs and valued at $0.24 per share for
an aggregate price of $211,765. The warrant shall be in effect no later than
March 2013. In accordance with SFAS 123R - Share-Based Payment, the warrants
were valued using the Black-Scholes model at $8,770.expensed
$17,181.
On March 25, 2008,May 17, 2010 the Company entered into a subscription agreement under which
it issued 2,000,000 shares for cash payment of $50,000 and in consideration for
services provided, warrants to purchase 1,000,000 shares ofgranted the Company's common
stocksame consultant an additional 500,000
options at an exercise price of $0.10 for a period$0.04 per share, which expires three years from
issuance. 100,000 options vest immediately upon execution of three years. The shares were
valued at the trading pricethis agreement, and
100,000 options will vest monthly, on the datefirst day of issuanceeach month, during the
term of $0.30this agreement. The Company determined the fair value of these 500,000
options was $13,407. For the six months ended June 30, 2010, the Company
expensed $5,362.
The Company considered the following assumptions in determining fair value for
anits 2010 stock option grants:
Expected term 3 years
Expected volatility 111% - 150%
Expected dividends 0%
Risk free interest rate 1.30% - 1.40%
Expected forfeitures 0%
The consultant is also receiving $4,000/month as additional expenseconsideration.
11
Easy Energy, Inc.
Notes to Financial Statements
June 30, 2010
Unaudited
The following is a summary of $550,000. In accordance with SFAS 123R - Share-Based Payment, the warrants were valued using the Black-Scholes modelCompany's options that are outstanding and
exercisable at $213,813.June 30, 2010 as follows:
Weighted
Average
Weighted Remaining
Average Contractual
Exercise Life in Intrinsic
Options Price Years Value
------- ----- ----- -----
Balance - December 31, 2009 -- $ -- -- $ --
Granted 1,000,000 $ 0.10
Exercised -- $ --
Forfeited/Cancelled -- $ --
--------- --------
Balance - June 30, 2010 - outstanding 1,000,000 $ 0.10 2.73 $ 5,000
========= ======== ===== =======
Balance - June 30, 2010 - exercisable 700,000 $ 0.10 2.73 $ 5,000
========= ======== ===== =======
(B) WARRANTS
On March 27, 2008 (pursuant to29, 2010, the Company issued 1,450,000 shares and 400,000 warrants in a
private placement for $79,750 ($0.055/share). The warrants expire in two years
and have an agreement dated January 16, 2008), we issued
4,285,714 common stock shares to an investor for the aggregate purchaseexercise price of US $300,000, purchase price$0.12/share.
The following is a summary of $0.07 per share.the Company's warrants that are outstanding and
exercisable at June 30, 2010 is as follows:
Weighted
Average
Weighted Remaining
Average Contractual
Exercise Life in Intrinsic
Warrants Price Years Value
-------- ----- ----- -----
Balance - December 31, 2008 16,029,440 $ 0.25
Granted 2,500,000 $ 0.15
Exercised -- $ --
Forfeited/Cancelled -- $ --
---------- ------
Balance - December 31, 2009 18,529,440 $ 0.24
========== ======
Granted 400,000 $ 0.12
Exercised -- $ --
Forfeited/Cancelled -- $ --
---------- ------
Balance - June 30, 2010 - outstanding 18,929,440 $ 0.24 2.38 $ --
========== ====== ===== ======
Balance - June 30, 2010 - exercisable 18,929,440 $ 0.24 2.38 $ --
========== ====== ===== ======
12
Easy Energy, Inc.
Notes to Financial Statements
June 30, 2010
Unaudited
NOTE 6 RELATED PARTY TRANSACTIONS
(A) DEBT
During the six months ended June 30, 2010, the Company received $72,808 in
advances from its Chief Executive Officer and an affiliate. These advances were
non-interest bearing, unsecured and due on demand. During the six months ended
June 30, 2010, the Company repaid $263,689 to the Chief Executive Officer and an
affiliate. As a result, the amount due to this individual at June 30, 2010 was
$153,148.
On March 27, 2008,28, 2010, the Company entered intoreceived $220,000 from family members of a
consulting services agreement with
a consultant who providesCompany director. The loan is non-interest bearing and due January 1, 2012. In
the event of default, the Company certain investor and market relations
services in consideration for the issuance of 1,500,000would be required to issue 4,000,000 shares of
common stock and a sum of $100,000 in cash. The common shares were valued at the trading
price on the date of issuance of $0.30 per share for a total of $450,000.market price. These loans have been classified as long term.
(B) RESEARCH AND DEVELOPMENT
The expense has been amortized over the one year service agreement beginning April
1, 2008.
On September 15, 2008, the Company closed a private placement for 116,707 common
shares at a price of $0.15 per share for an aggregate of $17,488.
On February 23, 2009, the Company entered into a subscription agreement under
which it issued 250,000 shares valued at $0.07 per share reflecting an aggregate
value of $17,500 for consideration for services provided.
On March 29, 2009, (pursuant to an agreement dated February 10, 2009), the
Company issued 1,250,000 common stock shares to consultants for an aggregate
value of $87,500, purchase price of $ 0.07.
On April 1, 2009, the Company closed a private placement for 400,000 common
shares at a price of $0.05 per share for an aggregate of $20,000.
10
EASY ENERGY , INC.
(A Development Stage Company)
Notes to Financial Statements
WARRANTS OUTSTANDING -
Date Issued Number of Warrants Exercise Price Expiry Date
- ----------- ------------------ -------------- -----------
February 28, 2008 11,029,428 $ 0.27 February 28, 2013
March 3, 2008 1,000,000 $ 0.15 March 3, 2013
March 10, 2008 3,000,000 $ 0.27 March 10, 2013
March 25, 2008 1,000,000 $ 0.10 March 25, 2011
The value allocated to the warrants was estimated using the Black-Scholes option
pricing model with the following assumptions: dividend yield of 0%, expected
volatility of 100%, risk-free interest rate of 3.94% and expected lives of 3
years to 5 years. The volatility was determined based upon the weekly trading
price of the stock from the date of inception through December 31, 2008. Common
stock issued for services was valued at the price of the shares issued for cash
on or close to the date of issuance.
NOTE 6 - RELATED PARTY LOANS AND TRANSACTIONS
On May 17, 2007 (inception), the Company issued 40,000,000 shares of its common
stock to its directors for a cash payment of $2,000.
During the period ended June 30, 2009, the Company paid $235,800 in product development costs to a company wholly ownedCompany controlled by the
Company's Chief Executive Officer,
President and Director of the Company.
As ofOfficer:
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2010 June 30, 2009 loans from directors and stockholders amounted to $324,972
and represented working capital advances from a director and stockholder of the
Company. The loans are unsecured, non-interest bearing, and due on demand.June 30, 2010 June 30, 2009
------------- ------------- ------------- -------------
$61,500 $133,300 $150,500 $235,800
NOTE 7 - INCOME TAXESCONCENTRATIONS
The Company provideshas the following concentrations for income taxes under SFAS No. 109 - Accounting For Income
Taxes. SFAS No. 109 requires the use of an assetsales and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities and the tax rates in effect currently.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $644,075, which is calculated by multiplying a 23%
estimated tax rate by the cumulative NOL of $2,800,329.
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
In April 2009, the FASB issued FSP No. FAS 157-4, "Determining Fair Value When
the Volume and Level of Activitypurchases for the Asset or Liability Have Significantly
Decreasedsix
months ended June 30, 2010 and Identifying Transactions That Are Not Orderly" ("FSP FAS 157-4").
FSP FAS 157-4 provides guidance on estimating fair value when market activity
has decreased and on identifying transactions that are not orderly.
Additionally, entities are required to disclose in interim and annual periods
the inputs and valuation techniques used to measure fair value. This FSP is
effective for interim and annual periods ending after June 15, 2009. The Company
does not expect the adoption of FSP FAS 157-4 will have a material impact on its
financial condition or results of operation.
11
EASY ENERGY , INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENT (CONTINUED)
In October 2008, the FASB issued FSP No. FAS 157-3, "Determining the Fair Value
of a Financial Asset When the Market for That Asset is Not Active," ("FSP FAS
157-3"), which clarifies application of SFAS 157 in a market that is not active.
FSP FAS 157-3 was effective upon issuance, including prior periods for which
financial statements have not been issued. The adoption of FSP FAS 157-3 had no
impact on the Company's results of operations, financial condition or cash
flows.
In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8,
"Disclosures by Public Entities (Enterprises) about Transfers of Financial
Assets and Interests in Variable Interest Entities." This disclosure-only FSP
improves the transparency of transfers of financial assets and an enterprise's
involvement with variable interest entities, including qualifying
special-purpose entities. This FSP is effective for the first reporting period
(interim or annual) ending after December 15, 2008, with earlier application
encouraged. The Company adopted this FSP effective January 1, 2009. The adoption
of the FSP had no impact on the Company's results of operations, financial
condition or cash flows.
In December 2008, the FASB issued FSP No. FAS 132(R)-1, "Employers' Disclosures
about Postretirement Benefit Plan Assets" ("FSP FAS 132(R)-1"). FSP FAS 132(R)-1
requires additional fair value disclosures about employers' pension and
postretirement benefit plan assets consistent with guidance contained in SFAS
157. Specifically, employers will be required to disclose information about how
investment allocation decisions are made, the fair value of each major category
of plan assets and information about the inputs and valuation techniques used to
develop the fair value measurements of plan assets. This FSP is effective for
fiscal years ending after December 15, 2009. The Company does not expect the
adoption of FSP FAS 132(R)-1 will have a material impact on its financial
condition or results of operation.
In September 2008, the FASB issued exposure drafts that eliminate qualifying
special purpose entities from the guidance of SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
and FASB Interpretation 46 (revised December 2003), "Consolidation of Variable
Interest Entities - an interpretation of ARB No. 51," as well as other
modifications. While the proposed revised pronouncements have not been finalized
and the proposals are subject to further public comment, the Company anticipates
the changes will not have a significant impact on the Company's financial
statements. The changes would be effective March 1,2009:
SALES 2010 on a prospective
basis.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, DETERMINING
WHETHER INSTRUMENTS GRANTED IN SHARE-BASED PAYMENT TRANSACTIONS ARE
PARTICIPATING SECURITIES, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the
computation of earnings per share under the two-class method as described in
FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share."
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited. We
are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF
03-6-1 would have material effect on our financial position and results of
operations if adopted.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation
of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company's financial position, statements of operations, or cash flows at this
time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162
sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB's amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company's financial position, statements of operations, or cash flows at
this time.
12
EASY ENERGY , INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENT (CONTINUED)
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities--an
amendment of FASB Statement No. 133. This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. SFAS No. 161 has no effect
on the Company's financial position, statements of operations, or cash flows at
this time.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular,
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behavior may not be widely available by December 31, 2007. Accordingly,
the staff will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. It is not believed that this will
have an impact on the Company's financial position, results of operations or
cash flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This statement
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This statement improves
comparability by eliminating that diversity. This statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008 (that is, January 1, 2009
for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this statement
is the same as that of the related Statement 141 (revised 2007). It is not
believed that this will have an impact on the Company's financial position,
results of operations or cash flows.
NOTE 9 - EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
On August 4,---- ----
A 68% --%
B 25% --%
PURCHASES 2010 2009
the Company entered into subscription agreements with two
investors under which it issued 1,000,000 shares for cash payment of $65,000.---- ----
A (RELATED PARTY) 47% 83%
B 45% --%
C --% 15%
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSOPERATIONS.
FORWARD LOOKING STATEMENTS
This quarterly reportQuarterly Report on Form 10-Q for the quarter ended June 30, 2010, or this
Quarterly Report, contains certain forward-looking statements. Forward-looking
statements may include our statements regarding our goals, beliefs, strategies,
objectives, plans, including product and service developments, future financial
conditions, results or projections or current expectations. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms, or other comparable
terminology. Such forward-looking statements appear in this Item 2 -
"Management'sManagement's Discussion and Analysis of Financial Condition and Results of
Operations," and include statements regarding our expectations regarding our
short -short- and long-term capital requirements, and our business plan and estimated
expenses for the coming 12 months.months, and our anticipated launch of our YoGen
Max(TM) product. These statements are subject to known and unknown risks,
uncertainties, assumptions and other factors that may cause actual results to be
materially different from those contemplated by the forward-looking statements.
The business and operations of Easy Energy, Inc. are subject to substantial
risks, which increase the uncertainty inherent in the forward-looking statements
contained in this report.
WeQuarterly Report. Except as required by law, we undertake no
obligation to release publicly the result of any revision to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Further information on potential factors that could affect our business is
described under the heading "Risks Related to Our Business" in
Part I, Item 1, "Description of Business"1A. "Risk Factors" of our Annual Report on Form 10-KSB10-K for the
fiscal year ended December 31, 2007 and in our registration statement on
Form S-1 no 333-150468, which was declared effective on October 31, 2008.2009. Readers are also urged to carefully review
and consider the various disclosures we have made in this report.Quarterly Report.
Easy Energy, Inc. (referred to in this Quarterly Report as "Easy Energy", "us",
"we" and "our") was incorporated under the laws of the State of Nevada on May
17, 2007. We have not generated any revenue to date and are a developmentan early stage company. We currently have no employees other
than our PresidentChief Executive Officer and TreasurerChief Financial Officer, who are also our
only board members. We plan to develop a novel, man-powered
charger solution for the problems related to the ongoing power requirements of
small hand-carried battery-powered personal electronic devices.
Our principal executive office is located at Suite 105 - 5348 Vegas Dr., Las
Vegas, NVNevada 89108. Our telephone number is +1 (702) 442-1166. We also have
an officeoffices in Israel at 26 Ga'aton Blvd., Nahariya 2240140 Baz St. Karmiel, Israel 20100, Tel. No. +972-4-988 8314.
We do not have any subsidiaries.
We do not have any subsidiaries. The addressare the sole owner of our
resident agentthe YoGen(R) product suite of compact man-powered
generators, which are designed to provide an innovative and effective solution
to the currently underserved need of the almost limitless users of portable
electronics devices for a power source that will ensure those devices' ability
to operate in circumstances in which conventional recharging sources are
unavailable. Included in the product line are the basic YoGen, a slim,
pocket-sized charger for small devices such as cell phones, GPS, iPods, etc.,
which is Eastbiz.com Inc, 5348 Vegas Dr, Las Vegas, Nevada, U.S.A.,
89108.operated by a convenient pull-cord, and the recently prototyped YoGen
Max, which is intended to replace a conventional cell phone battery and provide
pull-cord charging capability without the need for a stand-alone charger. We
completed the design and began to market the YoGen during 2009.
Our principal business plan is to continue to manufacture and market the YoGen
product and / orto seek third party entities interested in licensing the rights to
manufacture and market thea man-powered charger. Our target market will beconsists of
consumers of disposable and rechargeable batteries, those who heavily depend on
their portable devices, especially cell phone users, and those who are looking
for "green" energy sources. We are a development stage company with limited operationsadditionally plan to continue to develop the
YoGen Max and no revenues from
our business operations. Our auditors have issued a going concern opinion. This
means that our auditors believe there is substantial doubt thatother devices in the YoGen product line.
During the fiscal period ending December 31, 2009 we can continue
as an on-going business for the next twelve months. We do not anticipate that we
will generate significant revenues until we have completed the development and
manufacturing of our product. In November 2008, we completed the final version
of our Yogen product and the product is now ready for mass production. We have
completed finalization of the design of the
smaller of our two models of
YoGen(R) chargers and finalizedYoGen Max and executed an agreement with a Chinese
manufacturing firm to beginstarted mass production of the two YoGen(R) products.
DuringYoGen for sale to our
manufacturer's representatives and global distributors. In January 2010, we
officially launched the three months ended June 30, 2009 we accomplishedYoGen to the following:
1. We startedNorth American markets at the 2010
International Consumer Electronics Show in Las Vegas, Nevada. The YoGen was
given an award as "Best of CES 2010". The Company expects to execute the international marketing plan.
2. Our production line is now ready for mass production complete with
advanced Quality Control equipment consisting of two advanced test
units, one for mechanical issues and the other for the electronics.
3. A pilot run of 500 units was successful.
4. The design of a new YoGen, with a lithium battery, is now complete.
14
Our objectives for the third quarter are as follows:
1. Mass produce the YoGen.
2. Execute the comprehensive marketing plan.
3. Complete the molds and set up the production line for the Lithium
battery equipped YoGen.
4. Start manufacturingintroduce the YoGen
Max model.for sale into the global marketplace during the second half of 2010.
Due to the uncertainty of our ability to meet our current operating and capital
expenses, in its report on our audited financial statements for the period ended
December 31, 2009, our independent registered public accounting firm included an
explanatory paragraph regarding our ability to continue as a going concern. Our
financial statements contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent registered public
accounting firm.
14
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 20092010 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 20082009
REVENUES AND SIX MONTHS ENDED JUNE 30, 2009 COMPANRED TO THE
SIX MONTHS ENDED JUNE 30, 2008 AND CUMULATIVE FROM INCEPTION (MAY 17, 2007) TO
JUNE 30, 2009COSTS OF REVENUES
During the three months ended June 30, 2009 and 20082010 we incurred operating
expensesachieved sales of $223,691 and $279,985, respectively which include $169,722 and
$130,000$49,000
compared to $0 in June 30, 2009. The increase in revenues is attributable to
sales of our YoGen product to global distributors as we have emerged from our
development costs, $52,620 and $143,910 in professional fees
related to accounting, consulting and legal, $605 and $1,600 related to filing
fees, $744 and $4,475stage.
Cost of general and administrative expenses.
During six monthrevenues for the three months ended June 30, 20092010 was $32,837 compared
to $0 for the three months ended June 30, 2009. The increase is attributable to
sales of our YoGen product to global distributors.
RESEARCH AND DEVELOPMENT
Research and 2008 we incurred operating expenses of
$606, 439 and $1,449,265, respectively which include $294,114 and $330,000 of
product development costs $223,264for the three months ended June 30, 2010
decreased to $70,449 from $169,722 for the three months ended June 30, 2009. The
decrease is primarily attributable to a decrease in the amount spent on
development of our YoGen product, offset by an increase in the amount spent on
development of our new YoGen Max product and $1,113,190 in professional fees related
to accounting, consulting and legal, $12,116 and 1,600 related to filing fees,
$75,000 and $0 related to marketing, $1,945 and 4,475 of general and
administrative expenses. Expenses increased from the comparative period due toour YoGen BAT, as well as an overall
increase in our activity .
Duringpatent expenses.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the inception throughthree months ended June 30, 2009, we incurred operating2010
increased to $68,639 from $53,969 for the three months ended June 30, 2009. The
decrease is primarily attributable to a decrease in legal expenses, of
$2,809,006, which include $1,017,336 of product development costs, $1,680,050 in
professional fees related to accounting, consulting and legal, $19,614 related
to filing fees, $75,000 related to Marketing and $17,006 of general and
administrative expenses. Expenses increased from the comparative period due tooffset by an overall
increase in activity by the company.travel and accounting fees.
NET LOSS
We incurred a loss of $123,352 for the three months ended June 30, 2010 compared
to $223,730 for the three months ended June 30, 2009 compared
to $276,2222009. Net loss per share from
operations for the three months ended June 30, 2008,2010 and 2009 was $0 and $0.00,
respectively. The decrease in net loss for the three months ended June 30, 2010
is primarily attributable to the revenues from sales of our YoGen product to
global distributors and a decrease in research and development expenses, offset
by the increase in the costs of revenues.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2010 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2009
REVENUES AND COSTS OF REVENUES
During the six months ended June 30, 2010 we achieved sales of $574,587 compared
to $0 as of June 30, 2009. The increase in revenues is attributable to sales of
our YoGen product to global distributors as we have emerged from our development
stage.
Cost of revenues for the six months ended June 30, 2010 was $381,922 compared to
$0 for the six months ended June 30, 2009. The increase is attributable to sales
of our YoGen product to global distributors.
RESEARCH AND DEVELOPMENT
Research and development costs for the six months ended June 30, 2010 decreased
to $172,145 from $294,114 for the six months ended June 30, 2009. The decrease
is primarily attributable to a decrease in the amount spent on development of
our YoGen product, offset by an increase in the amount spent on development of
our new YoGen Max product and our YoGen BAT, as well as an increase in our
patent expenses.
15
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the six months ended June 30, 2010
decreased to $228,405 from $312,325 for the six months ended June 30, 2009. The
decrease is primarily attributable to a decrease in marketing, consulting and
legal expenses, offset by an increase in travel, accounting and public relation
fees.
NET LOSS
We incurred a loss of $208,033 for the six months ended June 30, 2010 compared
to $606,988 for the six months ended June 30, 2009. Net loss per share from
operations for the three months ended June 30, 2010 and 2009 compared to $1,444,242was $0 and $0.01,
respectively. The decrease in net loss for the six months ended June 30, 20082010 is
primarily attributable to the revenues from sales of our YoGen product to global
distributors, a decrease in research and $2,800,328 from Inception (May 17, 2007) through June30, 2009.development expenses and a decrease in
general and administrative expenses, offset by the increase in the costs of
revenues.
LIQUIDITY AND CAPITAL RESOURCES
To date, we have had negative cash flows from operations and we have been
dependent on sales of our equity securities and debt financing to meet our cash
requirements. We expect this situation to continue for the foreseeable future.
We anticipate that we will have negative cash flows from operations in the next
twelve month period.
As of June 30, 2009, we had2010, total current assets were $162,856 and total current
liabilities were $220,757, resulting in a working capital deficit of $57,901. We
finance our operations and plan to continue doing so with a combination of stock
issuances, loans and revenues from product sales. Our loans have come from our
Chief Executive Officer and an affiliate entity as described in Note 6 to the
financial statements. Cash on hand as of June 30, 2010 was $21,532. Our cash
resources at June 30, 2010 resulted from a long-term loan of $220,000 described
below and stock issued in a private placement transaction of $79,750 described
below, offset by a decrease in shareholder loans and net loss in the six months
ended June 30, 2010.
Operating activities used cash of $9,164, representing a net decrease in cash
of $115,369 since December 31, 2008.
Cash generated by financing activities$49,025 during the six months ended June 30,
2009
amounted2010. Cash generated from operating activities in the six months ended June 30,
2010 resulted primarily from a $313,152 decrease in deposits maintained by the
Company with various manufacturers prior to $344,456 resultingthe completion of inventory held for
resale, due to sale of inventory by the Company, $25,000 stock issuance for
services and a $17,996 increase in accounts payable, offset by a $208,033 net
loss and a $227,892 decrease of customers' deposits, which resulted from the
increase of sales described above.
Investing activities used cash of $2,580 during the six months ended June 30,
2010 as a result of purchasing available for sale marketable debt securities.
Financing activities used cash of $32,301 during the six months ended June 30,
2010. Cash generated from financing activities for the six month period ended
June 30, 2010 resulted primarily from $383,182 in short-term and long-term
related party loans and the issuance of common stock and warrants of $79,750,
offset by $495,233 of repayments of related party loans.
On March 29, 2010, certain investors purchased 1,450,000 of our common shares at
a price of $0.055 per share and 400,000 warrants for aggregate proceeds of
$79,750. Each warrant is exercisable into one common share at an exercise price
of $0.12 for a two-year period expiring March 29, 2012.
Our current loan from a related party as of June 30, 2010 decreased to $153,148
compared to $485,199 as of December 31, 2009. The decrease is attributable to
our payment of a portion of the loan back to the related party. The outstanding
$153,148 constitutes advances from our Chief Executive Officer, which advances
are non-interest bearing, unsecured and due on demand.
Our long term loans payable to related parties as of June 30, 2010 increased to
$220,000 compared to $0 as of December 31, 2009. On March 28, 2010, the Company
received the $220,000 non-interest bearing loan due January 1, 2012 from family
members of Mr. Emanuel Cohen, a director of the Company. In the event of
default, the Company would be required to issue 4,000,000 shares of common stock
on the default date.
For a further discussion of our loans from related parties, please see the
section captioned "Management's Discussion and representedAnalysis of Financial Condition
and Results of Operations -- Related Person Transactions" in our Annual Report
on Form 10-K for the year ended December 31, 2009.
16
GOING CONCERN
We have generated revenues since inception but they were not an adequate source
of cash to fund future operations. Our current cash may not be sufficient to
meet our anticipated requirements for the next 12 months. We believe that our
future growth will depend upon the success of our sales. There is no assurance,
however, that such growth may be achieved. Our future sustainability also
depends on our ability to raise sufficient capital to meet our future expenses,
either by making additional private placement offerings of our stock, incurring
additional debt or a combination of stock and debt offerings.
It is likely that we will need to raise additional working capital advances from a directorto fund our
ongoing operations and stockholdergrowth. The amount of our future capital requirements
depends primarily on the Company Mr. Guy Ofir.rate at which we increase our revenues and
correspondingly decrease our use of cash to fund operations. Cash used for
operations will be affected by numerous known and unknown risks and
uncertainties including, but not limited to, our ability to successfully market
our products and services and the degree to which competitive products and
services are introduced to the market. As long as our cash flow from operations
remains insufficient to completely fund operations, we will continue depleting
our financial resources and seeking additional capital through equity and/or
debt financing. If we raise additional capital through the issuance of debt,
this will result in operating activities
amountedincreased interest expense. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our company held by existing stockholders will be reduced and those
stockholders may experience significant dilution. In addition, new securities
may contain rights, preferences or privileges that are senior to $451,325 represented bythose of our
common stock.
There can be no assurance that acceptable financing to fund our ongoing
operations can be obtained on suitable terms, if at all. If we are unable to
obtain the financing necessary to support our operations, we may be unable to
continue as a loss of $606,988going concern. In that event, we may be forced to cease operations
and Inventory of $11,844
adjusted for a changeour stockholders could lose their entire investment in prepaid expenses of $62,291, change in accounts payable
and accrued liabilities of $216 and by a non-cash adjustment for contributed
capital and common stock and warrants issued for services totalling
$105,000.Cash used in investing activities amounted to $8,500 represented by a
patent costs of $8,500.our Company.
OFF-BALANCE SHEET ARRANGEMENTS
Our Company doesWe do not have any off-balance sheet arrangements, including any outstanding
derivative financial statements, off-balance sheet guarantees, interest rate
swap transactions or foreign currency contracts. Our Company doesWe do not engage in trading
activities involving non-exchange traded contracts.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We believe our business is not currently subject to market risk. All of our
business is currently conducted in US dollars, which is our functional currency.
We have no debt and are not subject to any interest rate risk.
15
RISK.
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURESPROCEDURES.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as
amended, (the "1934 Act")or the 1934 Act, as of the end of the period covered by this quarterly
report,Quarterly
Report, being the fiscal quarter ended March 31, 2009,June 30, 2010, we have carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures.
This evaluation was carried out under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer. Based upon the results of that evaluation, our Chief Executive Officer
and Chief Financial Officer have concluded that, as of the end of the period
covered by this quarterly report,Quarterly Report, our disclosure controls and procedures were
ineffective, as they did not provide reasonable assurance that material
information related to our companyus is recorded, processed and reported in a timely
manner.
TheOur small size of our company makes the proper identification and authorization of transactions
difficult, as the company haswe have essentially only two individuals overseeing this process.
Given our company's small size, we also have difficulties with separation of duties for
handling, approving and coding invoices, entering transactions into the
accounts, writing checks and requests for wire transfers. Additionally, the Company'sour
officers are also itsour sole board members. This does not provide an adequate
level of layers of internal controls, which in turn make it difficult to
accumulate information required to be disclosed by our companyus in the reports that it fileswe
file or submitssubmit under the 1934 Act. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were ineffective as of June 30, 2009.2010.
There was no change to our internal control over financial reporting that
occurred during the quarter ended June 30, 20092010 that has materially affected, or
is reasonably likely to materially affect the Company'sour internal control over financial
reporting.
1617
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSPROCEEDS.
On April 1, 2009,May 17, 2010, we issued options to purchase 500,000 shares of our common
stock, at an exercise price per share of $0.04 and a determined fair value of
$13,407, to a consultant of the Company closed a private placement for 400,000 common
shares at a priceservices to us. The options expire
three years from issuance. This issuance was deemed exempt under Regulation S
and/or Regulation D under the Securities Act of $0.05 per share for an aggregate1933, as amended, or the Act,
and/or Section 4(2) of $20,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.the Act.
ITEM 6. EXHIBITSEXHIBITS.
Exhibit Number Exhibit Description
- -------------------- -------------------
31.1 - Rule 13a-14(a)/15d-14(a) Certification of Principal Executive
Officer*
31.2 - Rule 13a-14(a)/15d-14(a) Certification of Principal Financial
Officer*
32.1 - Section 1350 Certification of Principal Executive Officer**
32.2 - Section 1350 Certification of Principal Financial Officer**
- ----------
* Filed herewith.
** Furnished herewith.
1718
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.
EASY ENERGY, INC.
By: /s/ Guy Ofir
------------------------------------------------------------------------------
Guy Ofir, PresidentChief Executive Officer
(Principal Executive Officer)
Dated: August 5, 20096, 2010
By: /s/ Emanuel Cohen
-------------------------------------------------------------------------------
Emanuel Cohen, Secretary, TreasurerChief Financial
Officer (Principal Financial and
Accounting Officer)
Dated: August 5, 2009
186, 2010
19