UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549   
 

FormFORM 10-Q
 
 
☒Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended SeptemberJune 30, 20162017

☐Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______

000-55152
(Commission file number)
 
ZNERGY, INC.
(Exact name of registrant as specified in its charter)

Nevada
 
46-1845946
(State or other jurisdiction of incorporation
or organization)
 (I.R.S. Employer Identification No.)

6102 South MacDill Avenue, Suite G
Tampa, FL 33611
 
33611
(Address of principal executive offices) (Zip Code)

813-902-9000800-931-5662
(Registrant’s telephone number, including area code)

MAZZAL HOLDING CORP.
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒                                No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐
 
Accelerated filer                    ☐
Non-accelerated filer ☐(Do not check if a smaller reporting company)
 
Smaller reporting company   ☒
(Do not check if a smaller reporting company)
Emerging growth company ☐
  

If an emerging growth company, indicate by check mark if he registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provide pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes ☐                                No ☒

On November 10, 2016, 185,550,000August 9, 2017, there were 226,024,960 shares of the registrant'sregistrant’s common stock were outstanding.

 
TABLE OF CONTENTS
 
PART I - FINANCIAL INFORMATION3
 Item 1.
Condensed Consolidated Financial Statements
3
 Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1012
 Item 3.
Quantitative and Qualitative Disclosures About Market Risk
1316
 Item 4.
Controls and Procedures
1316
  
Part II - OTHER INFORMATION1518
 Item 1.
Legal Proceedings
1518
 Item 5.
Other Information
1518
 Item 6.
Exhibits
1619
    
SIGNATURES
1720

 




PART I - FINANCIAL INFORMATION

Item 1.          Condensed Consolidated Financial Statements


ZNERGY, INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS: 
  
Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20162017 (unaudited), and December 31, 20152016
4
  
Condensed Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 20162017 and 20152016 (unaudited)
5
Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the six months ended June 30, 2017 (unaudited)
6
  
Condensed Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20162017 and 20152016 (unaudited)
67
  
Notes to Condensed Consolidated Unaudited Interim Financial Statements
78




3

ZNERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
as of

 September 30,  December 31,  June 30,  December 31, 
 2016  2015  2017  2016 
 (unaudited)     (UNAUDITED)    
ASSETS            
CURRENT ASSETS            
Cash $8,961  $1,279  $645,607  $40,507 
Accounts receivable  23,480   -   284,043   79,612 
Prepaid expenses  1,250   3,750 
Inventory  19,341   -   226,231   192,105 
Total current assets  51,782   1,279   1,157,131   315,974 
                
Properties under development  -   1,897,000 
Intangible assets  1,845   4,345 
        
Furniture & equipment, net  2,100   2,567 
Intangible assets, net  1,845   1,845 
TOTAL ASSETS $53,627  $1,902,624  $1,161,076  $320,386 
                
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)        
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
CURRENT LIABILITIES                
Accounts payable $21,811  $20,799  $106,901  $284,930 
Accrued expenses  105,377   61,354   108,119   139,336 
Customer deposits  33,000   -   3,545   6,605 
Loan with related party  97,449   860,743 
Advances  -   60,000 
Loan from related party  100,967   135,749 
Total current liabilities  257,637   942,896   319,532   626,620 
                
COMMITMENTS AND CONTINGENCIES                
                
STOCKHOLDERS' EQUITY (DEFICIT)        
STOCKHOLDERS’ EQUITY (DEFICIT)        
        
Preferred stock, $0.0001 par value, 100,000,000
authorized shares; no shares issued and outstanding
  -   -   -   - 
Common stock, $0.0001 par value; 500,000,000 shares
authorized; 185,550,000 and 330,000,000 shares issued and
outstanding at September 30, 2016 and December 31, 2015
  18,555   33,000 
Common stock, $0.0001 par value; 500,000,000 shares
authorized; 221,324,960 and 193,150,000 shares issued
and outstanding at June 30, 2017 and December 31, 2016
  22,132   19,315 
Additional paid-in-capital  7,432,893   7,897,200   10,929,761   7,626,099 
Deferred compensation  (333,333)  - 
Accumulated deficit  
(7,322,125
)  (6,970,472)  (10,110,349)  (7,951,648)
Total stockholders' equity (deficit)  (204,010)  959,728 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $53,627  $1,902,624 
Total stockholders’ equity (deficit)  841,544   (306,234)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $1,161,076  $320,386 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Table of Contents

ZNERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)(Unaudited)
  For the Three Months Ended  For the Six Months Ended 
  June 30,  June 30,  June 30,  June 30, 
  2017  2016  2017  2016 
             
Revenue $284,562  $6,160  $428,241  $12,240 
Cost of revenue  115,281   -   173,327   - 
Gross profit  169,281   6,160   254,914   12,240 
                 
Selling, general and administrative expenses  1,549,969   562,749   2,413,615   600,069 
                 
Loss from operations  (1,380,688)  (556,589)  (2,158,701)  (587,829)
                 
Provision for income taxes  -   -   -   - 
                 
Net loss $(1,380,688) $(556,589) $(2,158,701) $(587,829)
                 
Net loss per common share - basic and diluted $(0.01) $(0.00) $(0.01) $(0.00)
                 
Weighted average number of shares outstanding
   - basic and diluted
  204,266,206   181,423,626   201,269,197   213,509,016 

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
  For the Three Months Ended  For the Nine Months Ended 
  September 30,  September 30,  September 30,  September 30, 
  2016  2015  2016  2015 
             
Revenue $2,461  $-  $14,701  $25,900 
                 
Selling, general and administrative expenses  231,754   2,839   373,490   20,441 
                 
Income (loss) from operations  
(229,293
)  (2,839)  
(358,789
)  5,459 
                 
Other income (expense)                
  Other income  -   -   7,136   - 
  Total other income (expense)  -   -   7,136   - 
Provision for income taxes  -   -   -   - 
                 
Net income (loss) $
(229,293
) $(2,839) $
(351,653
) $5,459 
                 
Net income (loss) per common share - basic and diluted $(0.00) $(0.00) $(0.00) $0.00 
                ��
Weighted average number of shares outstanding - basic and diluted  185,060,753   
200,000,000
   203,991,818   
200,000,000
 
5
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ZNERGY, INC.
CONSOLIDATED STATEMENT OF CHANGE IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2017
(Unaudited)
              Total 
        Additional     Stockholders’ 
   Common Stock  Paid in  Accumulated  Equity 
   Shares  Amount  Capital  Deficit  (Deficit) 
                
Balance at December 31, 2016  193,150,000  $19,315  $7,626,099  $(7,951,648) $(306,234)
                     
Common Shares and Options issued for services  13,250,000   1,325   1,666,696   -   1,668,021 
                     
506b Offering:                    
Common Shares and Warrants issued for cash  10,600,000   1,059   793,941   -   795,000 
Common Shares and Warrants issued for debt conversion  4,324,960   433   843,025   -   843,458 
                     
Net loss              (2,158,701)  (2,158,701)
                     
Balance at June 30, 2017 $221,324,960  $22,132  $10,929,761  $(10,110,349) $841,544 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

56
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ZNERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

  For the Nine Months Ended 
  September 30,  September 30, 
  2016  2015 
CASH FLOWS USED IN OPERATING ACTIVITIES:      
          Net cash used in operating activities $(114,631) $(77,392)
         
CASH FLOWS USED IN INVESTING ACTIVITIES:        
          Net cash used in  investing activities  (1,213)  (800,000)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
          Net cash provided by financing activities  123,526   875,650 
         
INCREASE (DECREASE) IN CASH  7,682   (1,742)
         
CASH, BEGINNING OF PERIOD  1,279   3,000 
         
CASH, END OF PERIOD $8,961  $1,258 
         
Supplemental Disclosures        
Non-cash investing and financing activities:        
    Transfer of assets and liabilities to related party
                for return of common shares
 $1,018,679  $- 

  For the Six  For the Six 
  Months Ended  Months Ended 
  June 30,  June 30, 
  2017  2016 
       
CASH FLOWS USED IN OPERATING ACTIVITIES:      
Net loss $(2,158,701) $(587,829)
Adjustments to reconcile net loss to net cash
used in operating activities:
        
Depreciation and amortization  467   2,500 
Common stock and options issued for services  1,668,021   500,000 
Accounts receivable  (204,431)  (9,440)
Prepaid expenses  2,500   - 
Inventory  (34,126)  - 
Accounts payable & accrued expenses  318,940   47,436 
Customer deposits  (3,060)  - 
          Net cash used in operating activities  (410,390)  (47,333)
         
CASH FLOWS USED IN INVESTING ACTIVITIES:        
Equipment & furniture  -   (1,213)
          Net cash used in  investing activities  -   (1,213)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from common stock  795,000   - 
        Repayment of advances from third parties  (6,000)    
        Payments of Loan from Related Parties  (260)    
        Advances from third parties  226,750   48,900 
          Net cash provided by financing activities  1,015,490   48,900 
         
INCREASE IN CASH  605,100   354 
         
CASH, BEGINNING OF PERIOD  40,507   1,279 
         
CASH, END OF PERIOD $645,607  $1,633 
         
Supplemental Disclosures
    
Non-cash investing and financing activities:    
Transfer of assets and liabilities to related party
for return of common shares
 $-  $1,018,679 
Common Stock and warrants issued for the Conversion of Debt $843,458  $- 
The accompanying notes are an integral part of these condensed consolidated financial statements.

67
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ZNERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBERJUNE 30, 20162017 (UNAUDITED)

NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

Znergy, Inc., (formerly Mazzal Holding Corp., formerly Boston Investment and Development Corp.), is a Nevada corporation (the “Company”), incorporated under the laws of the State of Nevada on January 23, 2013. The original business plan of the Company was the construction and management of multi-family home developments and the subsequent sale thereof. On October 23, 2014, the Company incorporated Command Control Center Corp. as a wholly owned subsidiary. The Company and its subsidiary planned to establish a luxury boutique hotel catering to the local religious community and religious tourists in Boston and to create a multi-use software platform which could manage every aspect of a user’s online profile.

On October 26, 2015 the Company acquired Global ITS, Inc., and its wholly owned subsidiary, Znergy, Inc., in order to expand into the Energy Efficiency (EE) marketplace, focusing on commercial lighting and green project financing. On February 9, 2016, the Company agreed to sell to the Mazzal Trust the real property which the Trust had previously sold to the Company and the Trust returned to the Company 149,950,000 of the 150,000,000 shares of the Company’s common stock owned by the Trust.  The Company is now focused solely on the EE marketplace. Additionally, Nissim Trabelsi, the founder of the Company agreed to sell his 45,800,000 shares of the Company’s common stock to Lone Cypress, LLC, resulting in a change of control of the Company. In connectionmarketplace with the sale of his shares, Mr. Trabelsi resigned from all positions with the Companyan emphasis on LED retrofitting and its subsidiary, Command Control Center Corp.relamping.

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and do not include all of the information and footnotes required by GAAP for complete financial statements. All intercompany transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in the Company’s annual audited consolidated financial statements and accompanying notes have been condensed or omitted in these interim condensed consolidated financial statements. Accordingly, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited condensed consolidated financial statements for the year ended December 31, 2015,2016, as filed with the Securities and Exchange Commission (“SEC”) on Form 10-K.

The results of operations presented in this quarterly report are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments and accruals, consisting only of normal recurring adjustments that are necessary for a fair statementpresentation of the results of all interim periods reported herein.

Consolidation
The preparation ofcondensed consolidated financial statements in conformity with accounting principles generally accepted ininclude the United States 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 dateaccounts of the financial statementsCompany and the reported amounts or revenues and expenses during the reporting period. Actual results could differ from those estimates.its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.

NOTE 2 – GOING CONCERN

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of SeptemberJune 30, 2016,2017, while the Company hadhas a working capital deficitsurplus of $205,855, insufficient cash resources$837,599, the accumulated losses from operations aggregated $10,110,349 and it continutes to meet its planned business objectives, and an accumulated deficit of $7,322,125.experience operating losses. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2016.through June 2018.

The Company is dependent upon, among other things, obtaining additional financing to continue operations and development ofto execute its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings. No assurances can be made that management will be successful in pursuing any of these strategies.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 – INTANGIBLE ASSETS

The Company was granted a federally registered trademark for “ZNERGY”. The cost of applying for and prosecuting this trademark was $1,845 which cost was accounted for as a non-amortizing intangible asset.

78

NOTE 34 – LOANS WITHFROM RELATED PARTY

  September 30, 2016  December 31, 2015 
Loan with related party $97,449  $860,743 
  
June 30,
2017
  December 31, 2016 
Loans from related party $100,967  $135,749 

The above loans loan at September 30,December 31, 2016 are is from B2 Opportunity Fund, LLC, an affiliate,a major shareholder of the Company, and are is unsecured, bearbears no interest and areis repayable on demand.
  The loan at June 30, 2017 is from our Chairman and is secured by our inventory, bears 4% interest per annum, is due November 15, 2017 and has accrued interest of $967.
 
NOTE 45 – STOCKHOLDERS’ EQUITY

Common Stock

On February 9, 2016,January 25, 2017 the Company agreed to sell to the Mazzal Trust the real property which the Trust had previously sold to the Company, and the Trust returned to the Company 149,950,000appointed Richard Mikles as Chairman of the 150,000,000 sharesboard of the Company’s common stock owned by the Trust. These shares returneddirectors and issued to the Company were canceled (see NOTE 5).

Command Control Center Corp. (“Command Control”), a wholly owned subsidiary of the Company, filed an S-1 registration statement in March 2015 to register the sale by Command Control of up to 80,000,000Mr. Mikles 3,000,000 shares of its common stock, invalued at its trading price and vested immediately, and 4,000,000 options to purchase shares of common stock of the Company at a price of $0.10 per share said options vesting equally over eight quarters and having an initial public offering. Asexpiration of three years from the date of this Quarterly Report, Command Control had received comments from the SEC on the registration statement and plans to reply to these comments and pursue this filing until it is declared effective. No shares of Command Control’s common stock had been sold under the registration statement as of the date of this Report.

On June 1, 2016, the Company filed a registration statement under Form S-8 to register 40,000,000 common shares under its 2015 Incentive Stock Option and Restricted Stock Plan, which was adopted by the shareholders of the Company on January 15, 2015.
On June 6, 2016,issue. Concomitantly, the Company entered into a one year consulting agreement whichwith Mr. Mikles to provide marketing, strategic, and organizational services to the Company. Upon execution of this consulting agreement called for the issuance of 5,000,000Company issued 2,000,000 shares of the Company’s common stock, whichvalued at its trading price and vested immediately, and 5,000,000 options to purchase shares were issued pursuant to the above S-8. The fair valueof common stock of the shares was based on the tradingCompany at a price of $0.10 per share said options to vest quarterly in the Company’s common stock and aggregated $500,000. The valueamount of one option for every two dollars of revenue recognized by the shares is being charged to operations over the one year term and $166,667 was charged to operations during the period and $333,333 has been recorded as deferred compensation.Company.

On September 28, 2016,January 27, 2017 the Company appointed Kevin Harrington to its Board of Directors and issued 2,000,000 shares of its common stock, valued at its trading price and vested immediately, and 4,000,000 options to purchase shares of common stock of the Company at a price of $0.10 per share said options vesting equally over eight quarters and having an expiration of three years from the date of issue.

On February 2, 2017 the Company entered into a consulting agreement with Venture Legal Services, PLLC, to provide legal and strategic advisory services for the Company. In conjunction with the execution of this agreement, the Company granted Venture options to purchase up to 2,000,000 shares of its common stock at a price of $0.10 per share. The options have an expiration of three years from the date of issue and vest quarterly one option for every two dollars of revenue recognized by the Company.

On May 15, 2017, the Company entered into an employment agreement with DavidMr. Baker, to serve as our Senior Vice President, which agreement called for the issuance of 500,000CEO.  Mr. Baker was granted 5,000,000 shares of the Company’s common stock as well asof the granting ofCompany, valued at its trading price and vested immediately, and was granted 5,000,000 options to purchase sharescommon stock of the Company’s common stock.Company at $0.10 per share. These options have a strike price of $0.10 per share, a three-year term,expiration and vest quarterly two optionsone option for every dollartwo dollars of net operating income before taxrevenue recognized by the Company.  To date no

On May 15, 2017, the Company entered into an employment agreement with Mr. Floyd, our CFO.  Mr. Floyd was granted 10,000,000 options to purchase common stock of the Company at $0.10 per share. These options have been issued.  The issuancea three-year expiration and vest quarterly one option for every two dollars of revenue recognized by the 500,000Company.

On June 1, 2017, the Company entered into a service agreement with a provider of investor relations services. Under the agreement, the Company issued 1,000,000 shares of common stock to Mr. Baker was charged to operations during the quarterprovider, valued at the fair value of theits trading price, vesting 500,000 on June 1, 2017, 250,000 shares on the date of issuance, $30,500.
NOTE 5 – RELATED PARTY TRANSACTIONS AND DISPOSITION OF ASSETS
BalancesOctober 1, 2017 and transactions between the Company and its subsidiaries have been eliminated in consolidation and are not disclosed in this note.  The following persons have been identified as related parties:

Mr. Nissim Trabelsi – Former director and stockholder – no longer a related party as of February 9, 2016.
The Mazzal Living Trust – Former majority stockholder – no longer a related party as of February 9, 2016.
Lone Cypress, LLC – managed by Christopher Floyd, our CEO and director, directly owns 30.07% of our common stock.250,000 shares on January 1, 2018.

On February 9, 2016,June 13, 2017, the Company Nissim Trabelsi, Shawn Telsi,entered into a service agreement with a provider of bookkeeping, accounting, payroll and human resources services.  Under the Mazzal Living Trust, the majority shareholder ofagreement, the Company (the “Trust”), and B2 Opportunity Fund, LLC, a Nevada limited liability company (“B2”), entered into an Amended Master Stock Purchase Agreement (the “Master Agreement”).

Pursuant to the Master Agreement, Mr. Trabelsi and Mr. Telsi agreed to sell all of the shares of the Company’s common stock owned by them, 45,800,000 shares and 9,500,000 shares, respectively, to B2 or B2’s designees. In connection with the Master Agreement, B2 paid $315,000 to Mr. Trabelsi for his and Mr. Telsi’s shares.

Also in connection with the Master Agreement, the Company agreed to sell to the Trust all of its real property with a carrying value of $1,897,000, and the Trust assumed a related party loan with a carrying value of $853,521 and accounts payable and accrued expenses with a carrying value of $24,500. In exchange the Trust returned to the Company 149,950,000 of the 150,000,000 shares of the Company’s common stock owned by the Trust. In connection with the execution of the Master Agreement, the Company canceled the 149,950,000issued 250,000 shares of common stock conveyed byto the Trust.provider, valued at its trading price and vested immediately, and 1,000,000 options to purchase common stock of the Company at $0.10 per share.  These options have a three-year expiration and vest evenly over two years.
Private Offerings of Common Stock and Warrants
During the period ended June 30, 2017 the Company completed a private offering of common stock and warrants to accredited and unaccredited investors for gross proceeds of $1,119,372 which securities were offered under Regulation D, Rule 506(b) of the Securities and Exchange Act of 1933. The Company accepted subscriptions, in the aggregate, for 14,924,960 shares of common stock and one-year warrants to purchase 14,924,960 shares of common stock of which 10,600,000 shares of its common stock and 10,600,000 warrants were issued for $795,000 in cash and 4,324,960 shares of its common stock and 4,324,960 warrants were issued for $324,372 in the conversion of debt. Investors received one-year fully vested warrant to purchase up to 100% of the number of shares purchased in the offering. The warrants have an exercise price of $0.15 per share. The purchase price for each share of common stock together with the warrants was $0.075.

89

In connection withOptions

There were 7,400,000 options issued and outstanding as of December 31, 2016. The following table shows the salestock option activity during the period ended June 30, 2017:

     Weighted 
  Number  Average 
  Of  Exercise 
  Options  Price 
       
Options outstanding at beginning of year  7,400,000  $0.10 
Changes during the period:        
Granted - at market price  31,600,000  $0.10 
Exercised  -     
Expired  -     
Options outstanding at end of period  39,000,000  $0.10 
Options exercisable at end of period  4,850,149  $0.10 
Weighted average fair value of options granted during the period $3,073,200  $0.10 
Options issued were valued using the Black-Sholes model assuming zero dividends, a $0.10 strike price, 3-year expiration, 1.47% average risk-free rate and 238% average volatility. Costs incurred in respect of hisstock based compensation for employees, advisors and Mr. Telsi’s shares, Mr. Trabelsi appointed Christopher J. Floydconsultants for the three and six-month periods ended June 30, 2017 were $215,374 and $274,563, respectively. Costs incurred in respect of stock based compensation for employees, advisors and consultants for the three and six-month periods ended June 30, 2016 were $-0- and $-0-, respectively.

Unrecognized compensation costs related to options was $3,631,029 which is expected to be recognized ratably over approximately 17 months.

Warrants

There were no warrants were issued and outstanding as of December 31, 2016. The following table shows the Boardwarrant activity during the period ended June 30, 2017:

     Weighted 
  Number  Average 
  Of  Exercise 
  Warrants  Price 
       
Warrants outstanding at beginning of year  -    
Changes during the period:       
Granted  14,924,960  $0.15 
Exercised  -     
Expired  -     
Warrants outstanding at end of period  14,924,960  $0.15 
Warrants exercisable at end of period  14,924,960     
Weighted average fair value of warrants granted during the period $367,662     
         
Total warrant costs incurred during the period $367,662     

Warrants issued were valued using the Black-Sholes model assuming zero dividends, a $0.15 strike price, 1-year expiration, 1.49% risk-free rate and volatility of Directors238%. Costs incurred in respect of warrants issued to investors for the Company and to the Boardperiod ended June 30, 2017 was $367,662.

10

NOTE 6 – LITIGATION

16(b) Litigation
On September 26, 2016, the CompanyRegistrant filed in the United States District Court for the Middle District of Florida a Complaint against defendants The Mazzal Trust, Nissim S. Trabelsi and Shawn Telsi (collectively the "Defendants"“Defendants”), seeking the disgorgement of profits obtained by Defendants and certain of their shareholder affiliates defined under Rule 16a-1(a)(1) under the Exchange Act defined below (collectively, the "Group"“Group”) through "short“short swing profits"profits” in violation of Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”). Specifically, the CompanyRegistrant alleged that the Group acted under the guidance and control of the Defendants, whose individual defendants had filed forms 3 and 4 with the Securities and Exchange Commission (the "SEC"“SEC”), declaring themselves to be "insiders"“insiders” for the purpose of Section 16(b).

The Group owned 100% of the shares of Registrant at the time that members of the Groupgroup were engaged in the sale and purchase of such shares. The sales and purchases referenced all occurred within six months of other sales and purchases, subjecting Defendants to disgorge to the CompanyRegistrant all profits made by the Group in such sales and purchases.

As detailed in paragraphs 16-22 of the Complaint, the total profits received by the Group is $1,695,689. Accordingly, the CompanyRegistrant has demanded the return of all such profits to the CompanyRegistrant plus the statutory payment of attorneys'attorneys’ fees.

VStock Transfer Communications
On January 26, 2017, the Company received an email from its transfer agent, VStock Transfer, LLC, (“VStock”) informing the Company that it had been served with a Summons and Complaint (B2 Opportunity Fund (“B2”) v. Trabelsi et al. - Index No.:17-CV-10043, the “Claim”) and further stating that the Company was obligated to indemnify VStock for fees and expenses incurred in defending the Claim.  The returnCompany responded on February 24, 2017 stating that (1) we reviewed the Transfer Agent and Registrar Agreement between Mazzal and VStock dated May 20, 2014 and that in Article VI(c) of such profits from Defendantsthat agreement it states that indemnification will not be offered if the acts of VStock constitute bad faith or gross negligence, (2) we reviewed the lawsuit filed by B2 against VStock and others and find that VStock’s actions constitute gross negligence and perhaps bad faith, and we therefore deny indemnification of VStock relating to the Claim, and (3) should VStock take any action to seek indemnification by Znergy in any manner, Znergy will either join B2 in its lawsuit or will file an action on its own.  The Company would materially improveterminated its agreement with VStock.  Management cannot at this time estimate what, if any, financial impact this matter will have on the financial conditionCompany.

NOTE 7 – SUBSEQUENT EVENTS

On July 10, 2017 the Company entered into an employment agreement with Ryan Smith, 60, to serve as Senior Vice President of the Company; however, itCompany. The agreement has a term of three years, and Mr. Smith’s employment with the Company is uncertainon an at-will basis.  The agreement specifies an annual base salary of $100,000 and a performance based bonus within 45 days from the end of the Company’s fiscal year as determined by the Compensation Committee of the Board of Directors. In addition, Mr. Smith was granted 3,000,000 shares of common stock of the Company, vested immediately, and was granted 7,000,000 options to purchase common stock of the Company at $0.10 per share (the “Options”). The Options have a three-year expiration and vest quarterly one option for every two dollars of revenue recognized by the dateCompany.
On July 13, 2017, the Company entered into a service agreement with a provider of this filingtax services.  Under the actual amount, if any,agreement, the Company issued 100,000 shares of common stock to be recoveredthe provider, valued at its trading price and when such recovery might occur.  As such,vested immediately, and 400,000 options to purchase common stock of the Company at $0.10 per share.  These options have a three-year expiration and vest evenly over two years.
On July 13, 2017, the Company amended and extended a consulting agreement, originally executed on January 23, 2017, with its Chairman, Rick Mikles.  Under the amended and extended agreement, the Company issued 1,600,000 shares of common stock to Mr. Mikles, valued at its trading price and vested immediately.
On July 22nd, 2017, the Company entered into a purchase agreement for a property located at 808 A South Huntington Street, Syracuse, Indiana.  The agreement stipulates a purchase price of $255,000 of which $30,000 was paid on July 22, 2017 with the balance of $225,000 due 180 days after closing.  There is no provision for any recovery has been recognizedinterest payable on the company’s financial statements.

balance due.  The square footage of the building is approximately 2,348.  The property also includes 27 storage units generating approximately $19,000 per year rental income.  The Company expects to close on the property in August 2017.

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CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  We have based these forward-looking statements on our current expectations and projections about future events, and they are applicable on as of the dates of such statement.  These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “forecast,” “expect,” “plan,” anticipate,” believe,” estimate,” continue,” or the negative of such terms or other similar expressions.  Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our other SEC filings. You should not put undue reliance on any forward-looking statements.  These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available on our website or otherwise, and we undertake no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.  The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report. Throughout this Quarterly Report on Form 10-Q we will refer to Znergy, Inc., together with its subsidiaries, as the “Company,” “we,” “us,” and “our.”

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

Overview

The Company was formed in January 2013 as a Nevada corporation.  The original business plan of the Company was to build and sell multi-family housing projects. The Company acquired a parcel of land in Taunton, Massachusetts, from The Mazzal Trust, a trust of which the founder of the Company, Nissim Trabelsi, was the Trustee, in exchange for shares of the Company’s common stock, and began development of the project and construction of multi-family units.

Subsequently, on October 26, 2015, the Company acquired Global ITS, Inc., a Wyoming corporation (“Global”), and its wholly owned subsidiary, Znergy, Inc., a Florida corporation (“Znergy”), in order to expand into the Energy Efficiency (EE) marketplace, focusing on commercial lighting and green project financing.

On February 9, 2016, the Company agreed to sell to The Mazzal Trust the real property which the Trust had previously sold to the Company, and the Trust returned to the Company 149,950,000 of the 150,000,000 shares of the Company’s common stock owned by the Trust, which shares were cancelled. The Company is now focused solely on the EE marketplace.  Both of these transactions are discussed in more detail below.

Recent Developments

Global ITS Transaction

Share Exchange Agreement

On October 26, 2015, the Company entered into a Share Exchange Agreement (the “Agreement”) with Global ITS, Inc., a Wyoming corporation (“Global”), and the shareholders of Global, pursuant to which we exchanged 120,000,000 of our common shares (the “Company Shares”) for 24,000,000 Global common shares held by Global’s shareholders representing 100% of Global’s outstanding shares (the “Share Exchange”). The transaction was reported in, and the Agreement was filed as an exhibit to, a Current Report filed with the SEC on October 27, 2015.

Change in Control Transaction

On February 9, 2016, the Company, Nissim Trabelsi, Shawn Telsi, the Mazzal Living Trust, the majority shareholder of the Company (the “Trust”), and B2 Opportunity Fund, LLC, a Nevada limited liability company (“B2”), entered into an Amended Master Stock Purchase Agreement (the “Master Agreement”).

Pursuant to the Master Agreement, Mr. Trabelsi and Mr. Telsi agreed to sell all of the shares of the Company’s common stock owned by them, 45,800,000 shares and 9,500,000 shares, respectively, to B2 or B2’s designees. In connection with the Master Agreement, B2 paid $315,000 to Mr. Trabelsi for his and Mr. Telsi’s shares.


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Also in connection with the Master Agreement, the Company agreed to sell to the Trust all of its real property with a carrying value of $1,897,000, and the Trust assumed the related party loan with a carrying value of $853,521 and accounts payable and accrued expenses with a carrying value of $24,500. In exchange, the Trust returned to the Company 149,950,000 of the 150,000,000 shares of the Company’s common stock owned by the Trust. In connection with the execution of the Master Agreement, the Company canceled the 149,950,000 shares of common stock conveyed by the Trust.

In connection with his sale of his and Mr. Telsi’s shares, Mr. Trabelsi appointed Christopher J. Floyd to the Board of Directors of the Company and to the Board of Directors of Command Control Center Corp. (“Command Control”), a wholly owned subsidiary of the Company. Mr. Trabelsi also appointed Mr. Floyd as the CEO, CFO, and Secretary of both the Company and of Command Control. Following Mr. Trabelsi’s appointment of Mr. Floyd to the boards of directors and as an officer of the Company and Command Control, Mr. Trabelsi resigned from all positions with the Company and with Command Control, effective immediately.

Results of Operations

The Company had revenues of $14,701$428,241 and $25,900$12,240 for the nine-monthsix-month periods ended SeptemberJune 30, 2016,2017, and SeptemberJune 30, 2015,2016, respectively. The Company had revenues of $2,461$284,562 and $6,160 for the three-month periods ended June 30, 2017, and June 30, 2016, respectively. Revenues in 2017 comprise LED installation projects and associated rebates from utilities while revenues in 2016 consist of consulting services.

The Company incurred costs of revenue of $173,327 and $-0- for the six-month periods ended June 30, 2017, and June 30, 2016, respectively. The Company incurred costs of revenue of $115,281 and $-0- for the three-month periods ended SeptemberJune 30, 2017, and June 30, 2016, respectively. Costs of revenue in 2017 comprise primarily LED product and September 30, 2015, respectively.  Revenues in 2016 are comprised of consulting fees to clients using the Znergy quoting and financial platform.installation costs.

The Company had general and administrative expenses of $373,490$2,413,615 and $20,441$600,069 for the nine-monthsix-month periods ended SeptemberJune 30, 2016,2017, and SeptemberJune 30, 2015,2016, respectively. The Company had general and administrative expenses of $231,754$1,549,969 and $2,839$562,749 for the three-month periods ended SeptemberJune 30, 2016,2017, and SeptemberJune 30, 2015,2016, respectively. General and administrative expenses in 20162017 comprised primarily of Consulting expenses including a $167,667 charge$1,688,021 in June 2016common stock and options issued for services, $367,662 in warrants issued in the formconversion of the issuancedebt, $73,566 in salaries and wages, and $48,415 in legal and auditing fees. General and administrative costs in 2016 consisted primarily of stock for services.$522,401 in consulting fees and $54,730 in legal and auditing fees.

The Company had a net loss of $351,653 for the nine-month periods ended September 30, 2016 and net income of $5,459 for the nine-month period ended September 30, 2015. The Company had net losses of $229,293$2,158,701 and $2,839$587,829 for the six-month periods ended June 30, 2017 and June 30, 2016, respectively. The Company had net losses of $1,380,688 and $556,589 for the three-month periods ended SeptemberJune 30, 2017 and June 30, 2016, and September 30, 2015, respectively.

Liquidity and Capital Resources

As of SeptemberJune 30, 2016,2017, the Company had a working capital surplus of $837,599 with total current assets of $51,782$1,157,131 comprising $8,961$645,607 in cash, $23,480$284,043 in accounts receivable, $1,250 in prepaid expenses and $19,341$226,231 in inventory, and total current liabilities of $257,637$319,532 comprising $21,811$106,901 in accounts payable, $105,377$108,119 in accrued expenses, $33,000$3,545 in customer deposits and $97,449$100,967 in a loan withfrom a related party. Use of funds consistedcash for operating activities totaled $410,390 primarily for funding an increase in accounts receivable of professional fees$204,431 and inventory of $107,129 while the$34,126, and for payments on accounts payable and accrued expenses of $202,401. The primary source of funds was advancesloans from our affiliaterelated parties in the amount of $97,000.  There are no guarantees that$226,750 and proceeds from the offering of our affiliate will continue to advance funds tocommon stock in the Company to sustain our operations.amount of $795,000.

Going Concern Discussion

Our
For the year ending December 31, 2016, our auditors have issued an explanatory note regarding our ability to continue as a going concern. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months. Our auditor'sauditor’s opinion is based on our suffering recurring losses, having no material revenue generating operations, and having a working capital deficiency. The opinion results from the fact that we have not generated material revenues and no material revenues are anticipated until we acquire the required licenses and complete our initial development.losses. Accordingly, we must raise cash from sources other than operations. Our only other source for cash at this time is investments by third parties and loans from others in our company.

WeAt the time of this filing, we have twothree officers, David Baker, our CEO, Christopher Floyd, our CEO, CFO and Director,Secretary, and David Baker,Ryan Smith, our Senior Vice President, who is in charge of salesPresident. Mr. Baker and operations. Mr. Floyd isare responsible for our managerial and organizational structure which will include preparation and implementation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, Mr. Baker and Mr. Floyd, together with any other executive officers in place at that time, will be responsible for the administration of thethese controls.

As of SeptemberJune 30, 2016, we needed to raise cash to implement our business plan. The amount of funds which the Company needed to raise that2017, management believed would allow us to implement our business strategy is approximately $350,000.

As of September 30, 2016, management believedbelieves that generating revenues in the next six to twelve months wasis important to support our planned ongoing operations. However, we cannot guarantee that we will generate such growth. If we do not generate sufficient cash flow to support our operations over the next 12 to 18 months, we will need to raise additional capital by issuing capital stock in exchange for cash or obtain loans in order to continue as a going concern. There are no formal or informal agreements to attain such financing. We cannot assure you that any financing can be obtained or, if obtained, that it will be on reasonable terms. Without realization of additional capital, it would be unlikely for us to continue as a going concern. No adjustments have been made to the financial statements to reflect our doubt to continue as a going concern.


Our management does not anticipate the need to hire additional full or part-time employees of the Company or our subsidiaries over the next six months unless business development permits and requires us to, as the services provided by our two officers and our director appears sufficient at this time. We believe that our operations are currently on a small scale that is manageable by a few individuals. Further, we believe that the services provided by our officers and our director are sufficient for the operations of our subsidiary Global, and of its subsidiary Znergy. In addition, we may utilize professionals that will be considered independent contractors. We do not intend to enter into any employment agreements with any of these professionals. Thus, these persons are not intended to be employees of the Company.

Our management does not expect to incur significant research and development costs in 2016.
We currently do not own any significant property or equipment.2017.

PlanOn July 22, 2017, the Company entered into a purchase agreement for a property located at 808 A South Huntington Street, Syracuse, Indiana.  The agreement stipulates a purchase price of Operation

$255,000 of which $30,000 was paid on July 22, 2017 with the balance of $225,000 due 180 days after closing.  There is no interest payable on the balance due.  The Company’s strategic focus and business plansquare footage of the building itself is approximately 2,348.  The property also includes 27 storage units generating approximately $19,000 per year rental income.  The Company expects to close on the property in selling products and services in the Energy Efficiency (“EE”) marketplace and in financing EE projects for third parties. The Company’s management will assess the Company’s capital needs and will provide additional information relating to the Company’s planned operations going forward.August 2017.

Critical Accounting Policies

The SEC has issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include:include (a) use of estimates, (b) revenue recognition, (c) going concern, and (b)(d) share based payments. The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results the Company reports in its financial statements.

(a) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“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 or revenues and expenses during the reporting period. Actual results could differ from those estimates. OurThe Company’s significant estimates, judgments and assumptions used in these consolidated financial statements include those related to revenues, accounts receivable and related public financial information are based onallowances, contingencies, and the applicationfair values of U.S. GAAP. U.S. GAAP requires the use of estimates; assumptions,stock-based compensation. These estimates, judgments, and subjective interpretationsassumptions are reviewed periodically and the effects of accounting principles that have an impact onmaterial revisions in estimates are reflected in the assets, liabilities, revenues and expenses amounts reported. These estimates can also affect supplemental information containedfinancial statements prospectively from the date of any change in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to U.S. GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.estimate.

(b) ShareRevenue Recognition

The Company accounts for revenue using the “completed contract method” in accordance with ASC 605-35. Under this method, contract costs are accumulated as deferred assets and billings and/or cash receipts are recorded to a deferred revenue liability account during the contract period but no revenues, costs or profits are recognized in operations until the completion of the contract. Costs include direct material, direct labor, subcontract labor and allocable indirect costs. All unallocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss when such loss is determined. A contract is considered complete when accepted by the customer. The Company quotes its customers the total costs of product installation and materials minus the expected rebates, if any, from a given utility. For projects larger than $10,000, rebates must be pre-approved by the utility.
(c) Going Concern

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of June 30, 2017, while the Company has a working capital surplus of $837,599, the accumulated losses from operations aggregated $10,110,349 and it continues to experience operating losses. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements through June 2018.
The Company is dependent upon, among other things, obtaining additional financing to continue operations and to execute its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings. No assurances can be made that management will be successful in pursuing any of these strategies.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


(d) Share-Based Payments

Certain employees, officers, directors, and consultants of the Company participate in incentive plans that provide for granting stock options and performance-based awards. Time based paymentsstock options generally vest in equal increments over a two -year period and expire on the third anniversary following the date of grant. Performance-based stock options vest once the applicable performance conditions are satisfied.

The Company accountsrecognizes stock-based compensation for equity awards granted to employees, officers, directors and consultants as compensation and benefits expense in the issuanceconsolidated statements of equity instruments to acquire goods and/or services based on theoperations. The fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whicheverstock options is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the Financial Accounting Standards Board (“FASB”). The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i)estimated using a Black-Scholes valuation model on the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrumentgrant. Stock-based compensation is recognized over the termrequisite service period of the consulting agreement.individual awards, which generally equals the vesting period. For performance-based stock options, compensation is recognized once the applicable performance condition is satisfied.

The Company recognizes stock-based compensation for equity awards granted as selling, general and administrative expense in the consolidated statements of operations.

The fair value of restricted stock awards is equal to the closing price of the Company’s stock on the date of grant multiplied by the number of shares awarded. Stock-based compensation is recognized over the requisite service period of the individual awards, which generally equals the vesting period.

JOBS Act

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we have the option to delay adoption of new or revised accounting standards until those standards would otherwise apply to private companies, until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period for complying with such new or revised accounting standards. We have elected to opt out of this extended transition period. As noted, this election is irrevocable.

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We suggest that ourOur significant accounting policies, as described in our financial statements in the Summary of Significant Accounting Policies included in our Form 10-K filing of December 31, 2015,2016, should be read in conjunction with this Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.

RecentRecently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2014-09, Revenue From Contracts With Customers, or ASU 2014-09. Pursuant to this update, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this update are currently effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and are to be applied retrospectively, or on a modified retrospective basis. Early application is not permitted. In July 2015, the FASB approved a one-year deferral of the effective date for annual reporting periods beginning after December 15, 2017 with early adoption permitted for annual periods beginning after December 15, 2016. We are currently evaluating the impact of adopting ASU 2014-09 on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This Update provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as, or ASU 2014-15. ASU 2014-15 explicitly requires a going concern or to provide related footnote disclosures. The amendments requirecompany’s management to assess an entity’s ability to continue as a going concern, by incorporating and expanding uponto provide related footnote disclosures in certain principles that are currentlycircumstances. The new standard became effective in U.S. auditing standards. The amendments in this Update are effective for public and nonpublic entities forthe first annual periodsperiod ending after December 15, 2016. We are currently assessingManagement has evaluated the potential impact of the adoption of this standard and believes its adoption has no material impact on our consolidated statements of financial position, results of operations or cash flows.

In July 2015, the FASB issued ASU No. 2015-11, (“ASU 2015-11”), Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 requires an entity to measure in scope inventory at the lower of cost and net realizable value. The amendment does not apply to inventory that is measured using the last-in, first-out or the retail inventory method. For public entities, ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and is to be applied prospectively. Management has evaluated the impact of the adoption of ASU No. 2014-15,this standard and we have not yet determined the effect of the standardbelieves its adoption has no material impact on our ongoingconsolidated statements of financial reporting.position, results of operations or cash flows.


On February 24, 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

On March 30, 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies various aspects related to the accounting and presentation of share-based payments. The amendments require entities to record all tax effects related to share-based payments at settlement or expiration through the income statement and the windfall tax benefit to be recorded when it arises, subject to normal valuation allowance considerations. All tax-related cash flows resulting from share-based payments are required to be reported as operating activities in the statement of cash flows. The updates relating to the income tax effects of the share-based payments including the cash flow presentation may be adopted either prospectively or retrospectively. Further, the amendments allow the entities to make an accounting policy election to either estimate forfeitures or recognize forfeitures as they occur. If an election is made, the change to recognize forfeitures as they occur must be adopted using a modified retrospective approach with a cumulative effect adjustment recorded to opening retained earnings. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this standard did not have any effect on the Company’s financial statements.

The Company does not believe that nothere are any other recentlynew accounting pronouncements that have been issued or proposed accounting standards willthat might have a material effectimpact on ourits financial statements.position or results of operations.

Off-Balance Sheet Arrangements

None.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are the controls and other procedures that are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the principal executive and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.  Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

We have carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer who is the same person, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this Quarterly Report.

Based upon that evaluation we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to a material weakness in our internal control over financial reporting, which is described below.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934).  Management has assessed the effectiveness of our internal control over financial reporting as of September 30, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  As a result of this assessment, management concluded that, as of September 30, 2016, our internal control over financial reporting was not effective.  Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.


Although we plan to take steps to enhance and improve the design of our internal control over financial reporting, during the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2016:2017: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

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Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 

 


PART II.                 OTHER INFORMATION

Item 1. Legal Proceedings

Other than described below, we know of no pending legal proceedings to which we are a party which are material or potentially material, either individually or in the aggregate. We are from time to time, during the normal course of our business operations, subject to various litigation claims and legal disputes. We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

On September 26, 2016, the Company filed in the United States District Court for the Middle District of Florida a Complaint against defendants The Mazzal Trust, Nissim S. Trabelsi and Shawn Telsi (collectively the "Defendants"“Defendants”), seeking the disgorgement of profits obtained by Defendants and certain of their shareholder affiliates defined under Rule 16a-1(a)(1) under the Exchange Act defined below (collectively, the "Group"“Group”) through "short“short swing profits"profits” in violation of Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”). Specifically, the Company alleged that the Group acted under the guidance and control of the Defendants, whose individual defendants had filed forms 3 and 4 with the Securities and Exchange Commission (the "SEC")“SEC”, declaring themselves to be "insiders"“insiders” for the purpose of Section 16(b).

The Group owned 100% of the shares of Registrantthe Company at the time that members of the Groupgroup were engaged in the sale and purchase of such shares. The sales and purchases referenced all occurred with six months of other sales and purchases, subjecting Defendants to disgorge to the Company all profits made by the Group in such sales and purchases.

As detailed in paragraphs 16-22 of the Complaint, the total profits received by the Group is $1,695,689. Accordingly, the Company has demanded the return of all such profits to the CompanyRegistrant plus the statutory payment of attorneys'attorneys’ fees.

On January 26, 2017, the Company received an email from its transfer agent at that time, VStock Transfer, LLC, (“VStock”) informing the Company that it had been served with a Summons and Complaint (B2 Opportunity Fund (“B2”) v. Trabelsi et al. - Index No.:17-CV-10043, the “Claim”) and further stating that the Company was obligated to indemnify VStock for fees and expenses incurred in defending the Claim.  The returnCompany responded on February 24, 2017 stating that (1) we reviewed the Transfer Agent and Registrar Agreement between Mazzal and VStock dated May 20, 2014 and that in Article VI(c) of such profits from Defendantsthat agreement it states that indemnification will not be offered if the acts of VStock constitute bad faith or gross negligence, (2) we reviewed the lawsuit filed by B2 against VStock and others and find that VStock’s actions constitute gross negligence and perhaps bad faith, and we therefore deny indemnification of VStock relating to the Claim, and (3) should VStock take any action to seek indemnification by Znergy in any manner, Znergy will either join B2 in its lawsuit or will file an action on its own. The Company would materially improve the financial condition of the Company; however, it is uncertainterminated its agreement with VStock. Management cannot at the date of this filing the actual amount,time estimate what, if any, to be recovered and when such recovery might occur.  As such, no provision for any recovery has been recognizedfinancial impact this matter will have on the company’s financial statements
Company.

Item 5. Other Information.

Amendment of Articles of Incorporation; Name Change; Status

On May 31, 2016, the Company filed a definitive information statement on Schedule 14C to provide information to the Company’s stockholders relating to an action taken by the holders of a majority of the outstanding shares of common stock to amend the Company’s articles of incorporation to change the name of the Company from Mazzal Holding Company to Znergy, Inc. The Board of Directors of the Company approved the amendment and name change and recommended the amendment to the shareholders of the Company. On May 13, 2016, the holders of 94,498,335 shares of the Company’s common stock, constituting approximately 52.48% of the outstanding shares, approved the amendment and the name change.

On July 15, 2016, the Company filed its Amended and Restated Articles of Incorporation with the State of Nevada to effectuate the name change. As of the date of this Report, the Company had filed a notice of corporate action with FINRA, and was working with FINRA to complete the approval process to effectuate the name change in the trading market.


Item 6. Exhibits

(a)          Exhibits

Exhibit No. Description
3.1 Articles of Incorporation for BIDC (previously filed as an exhibit to the Company’s registration statement on Form S-1, filed with the Commission on June 10, 2013)
3.2 Bylaws of BIDC (previously filed as an exhibit to the Company’s registration statement on Form S-1, filed with the Commission on June 10, 2013)
3.3 Amended and Restated Articles of Incorporation, as filed with the Nevada Secretary of State on July 15, 2016
10.1 Share Exchange Agreement, dated as of October 26, 2015 (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on  October 27, 2015)
10.2 Master Stock Purchase Agreement (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on February 12, 2016)
10.3 Employment Agreement with Dave Baker (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on October 4, 2016)
3110.4Employment Agreement with Dave Baker (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on May 15, 2017)
10.5Employment Agreement with Christopher Floyd (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on May 15, 2017)
31.1 
Certification of the Chief Executive Officer/Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).
3232.1 
Certification of CEO and CFOChief Executive Officer pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
101 INS XBRL Instance Document*
101 SCH XBRL Schema Document*
101 CAL XBRL Calculation Linkbase Document*
101 DEF XBRL Definition Linkbase Document*
101 LAB XBRL Labels Linkbase Document*
101 PRE XBRL Presentation 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.


ZNERGY, INC.

By: /s/ Dave Baker
Dave Baker
Chief Executive Officer and Director
(Principal Executive Officer)
Date: August 14, 2017


By: /s/ Christopher J. Floyd
 
Christopher J. Floyd
President, CEO, CFO,Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer)

Date: November 16, 2016August 14, 2017

 
 
 
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