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 September 30, 2009
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. | 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)
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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in 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 96,202,778 shares of common stock, $0.00001 par value per share,
outstanding on November 20, 2009.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION | ||
Item 1: Financial Statements (unaudited) | 2 | |
Balance Sheet | 2 | |
Statements of Operations | 3 | |
Statements of Cash Flows | 4 | |
Statements of Stockholders' Equity | 5 | |
Notes to Financial Statements | 6 | |
Item 2: Management's Discussion and Analysis Or Plan of Operation | 12 | |
Item 3:Quantitative and Qualitative Disclosures about Market Risk | 13 | |
Item 4T: Controls and Procedures | 14 | |
PART II - OTHER INFORMATION | ||
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds | 15 | |
Item 6: Exhibits | 15 | |
Signatures | 16 |
References in this Form 10-Q to "we", "us", "our", the "Company" and "Easy Energy" refers to Easy Energy, Inc. unless otherwise noted.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EASY ENERGY, INC
(A Development Stage Company)
Balance Sheets
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash in bank | $ | 8,480 | $ | 124,533 | ||||
Inventory - work in process | 434,369 | - | ||||||
Prepaid expenses | - | 12,500 | ||||||
Prepaid expenses - stock related | 36,459 | 112,500 | ||||||
Total current assets | 479,308 | 249,533 | ||||||
Other Assets: | ||||||||
Patent | 8,500 | - | ||||||
Total other assets | 8,500 | - | ||||||
Total Assets | $ | 487,808 | $ | 249,533 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 23,062 | $ | 300 | ||||
Customer deposits | 295,400 | - | ||||||
Loan payable - related party | 141,170 | - | ||||||
Due to director | 309,830 | - | ||||||
Total current liabilities | 769,462 | 300 | ||||||
Commitments and Contingencies | ||||||||
Stockholders' Equity (Deficit) | ||||||||
Preferred stock, par value $0.0001per share, | ||||||||
50,000,000 shares authorized, none outstanding | - | - | ||||||
Common stock, par value $0.00001 per share, 185,000,000 shares | ||||||||
authorized; 96,202,778 and 93,302,778 shares | ||||||||
issued and outstanding, respectively | 962 | 933 | ||||||
Additional paid-in capital | 2,843,377 | 2,653,404 | ||||||
Deferred offering costs - stock related | (211,765 | ) | (211,765 | ) | ||||
(Deficit) accumulated during the development stage | (2,914,228 | ) | (2,193,339 | ) | ||||
Total stockholders' equity (deficit) | (281,654 | ) | 249,233 | |||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 487,808 | $ | 249,533 |
The accompanying notes are an integral part of these financial statements
2
EASY ENERGY, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
Cumulative | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | From | ||||||||||||||||||
September 30, | September 30, | Inception | ||||||||||||||||||
2009 | 2008 | 2009 | 2008 | (May 17, 2007) | ||||||||||||||||
Revenues | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Expenses: | ||||||||||||||||||||
General and administrative | 831 | 1,026 | 2,776 | 5,501 | 17,837 | |||||||||||||||
Investor relations | 3,000 | - | 13,395 | - | 13,395 | |||||||||||||||
Filing fees | 530 | 985 | 2,251 | 2,585 | 9,749 | |||||||||||||||
Product development | 62,570 | 134,000 | 356,684 | 464,000 | 1,079,906 | |||||||||||||||
Marketing | 5,250 | - | 80,250 | - | 80,250 | |||||||||||||||
Professional fees | 42,028 | 174,219 | 265,292 | 1,287,409 | 1,722,079 | |||||||||||||||
Total general and administrative expenses | 114,209 | 310,230 | 720,648 | 1,759,495 | 2,923,216 | |||||||||||||||
(Loss) from Operations | (114,209 | ) | (310,230 | ) | (720,648 | ) | (1,759,495 | ) | (2,923,216 | ) | ||||||||||
Other Income (Expense) | 310 | 2,433 | (240 | ) | 7,456 | 8,988 | ||||||||||||||
Income before Income Taxes | (113,899 | ) | (307,797 | ) | (720,888 | ) | (1,752,039 | ) | (2,914,228 | ) | ||||||||||
Provision for Income Taxes | - | - | - | - | - | |||||||||||||||
Net (Loss) | $ | (113,899 | ) | $ | (307,797 | ) | $ | (720,888 | ) | $ | (1,752,039 | ) | $ | (2,914,228 | ) | |||||
(Loss) Per Common Share: | ||||||||||||||||||||
(Loss) per common share - Basic and Diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.02 | ) | ||||||||
Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 95,202,777 | 93,186,066 | 94,355,891 | 90,722,674 |
The accompanying notes are an integral part of these financial statements
3
EASY ENERGY, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
Cumulative | ||||||||||||
Nine Months Ended | From | |||||||||||
September 30, | Inception | |||||||||||
2009 | 2008 | (May 17, 2007) | ||||||||||
Operating Activities: | ||||||||||||
Net (loss) | $ | (720,888 | ) | $ | (1,752,039 | ) | $ | (2,914,228 | ) | |||
Adjustments to reconcile net (loss) to net cash | ||||||||||||
(used in) operating activities: | ||||||||||||
Contributed capital | - | 3,000 | 3,000 | |||||||||
Stock and warrants issued for services | 105,000 | 1,294,583 | 1,449,583 | |||||||||
Changes in net assets and liabilities- | ||||||||||||
Inventory - work in process | (434,369 | ) | - | (434,369 | ) | |||||||
Prepaid expenses | 88,541 | (250,000 | ) | (36,459 | ) | |||||||
Customer deposits | 295,400 | - | 295,400 | |||||||||
Accounts payable and accrued liabilities | 22,763 | 2,500 | 23,064 | |||||||||
Net Cash Used in Operating Activities | (643,553 | ) | (701,956 | ) | (1,614,009 | ) | ||||||
Investing Activities: | ||||||||||||
Patent costs | (8,500 | ) | - | (8,500 | ) | |||||||
Net Cash Used in Investing Activities | (8,500 | ) | - | (8,500 | ) | |||||||
Financing Activities: | ||||||||||||
Issuance of common stock and warrants | 85,000 | 1,042,489 | 1,179,989 | |||||||||
Loan from related party | 141,170 | - | 141,170 | |||||||||
Loans from director | 309,830 | - | 309,830 | |||||||||
Net Cash Provided by Financing Activities | 536,000 | 1,042,489 | 1,630,989 | |||||||||
Net (Decrease) Increase in Cash | (116,053 | ) | 340,533 | 8,480 | ||||||||
Cash - Beginning of Period | 124,533 | 72,688 | - | |||||||||
Cash - End of Period | $ | 8,480 | $ | 413,221 | $ | 8,480 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | - | $ | - | $ | - | ||||||
Income taxes | $ | - | $ | - | $ | - | ||||||
Supplemental schedule of noncash investing and financing activities: | ||||||||||||
Contributed capital | $ | - | $ | 3,000 | $ | - | ||||||
Stock and warrants issued for services | $ | 105,000 | $ | 1,507,379 | $ | 1,612,379 |
The accompanying notes are an integral part of these financial statements
4
EASY ENERGY, INC.
(A Development Stage Company)
Statements of Stockholders’ Equity
(Deficit) | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Deferred | During the | ||||||||||||||||||||||
Common stock | 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 | ) | - | - | |||||||||||||||||
Shares for services 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 | ||||||||||||||||||
Private placement July 23, 2009 @ 0.065 | 1,000,000 | 10 | 64,990 | - | - | 65,000 | ||||||||||||||||||
Net (loss) for the period | - | - | - | - | (720,888 | ) | (720,888 | ) | ||||||||||||||||
Balance - September 30, 2009 | 96,202,777 | $ | 962 | $ | 2,843,375 | $ | (211,765 | ) | $ | (2,914,227 | ) | $ | (281,655 | ) |
The accompanying notes are an integral part of these financial statements
5
EASY ENERGY , INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 - NATURE OF OPERATIONS
The Company was incorporated under the laws of the state of Nevada on May 17, 2007. The Company is a development stage company as it has limited operations and has had no revenues from operations to date.
The company is in the business of developing and manufacturing battery charging solutions for small hand-carried devices. The Company has received purchase orders for its YoGen product and has begun manufacture of the product.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS
These financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim financial statements of the Company as of September 30, 2009, and for the periods 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 September 30, 2009, and the results of its operations and its cash flows for the periods ended September 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 accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited financial statements as of December 31, 2008, filed with the SEC, for additional information, including significant accounting policies.
EARNINGS PER SHARE
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.
DIVIDENDS
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.
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 FASB Accounting Standards Codification ("ASC") 740 – Income Taxes which requires the use of an asset and liability approach in accounting for income taxes.
ASC 740 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, net of the allowance account, based on the likelihood of the Company to utilize the loss carry-forward.
6
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 COSTS
The Company’s policy regarding advertising is to expense advertising when incurred. The Company had not incurred any advertising expense as of September 30, 2009.
NOTE 3 - GOING CONCERN
The accompanying 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 September 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.
The Company's continuation as a going concern is dependent on its ability to complete and market its product and to obtain additional financing as may be required and ultimately to attain profitability. The 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 issuance of 882,353 shares of the Company's common stock, par value $0.00001 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.
NOTE 5 - CAPITAL 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 -
On May 17, 2007 (inception), 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 January 16, 2008, we issued 4,285,714 common stock shares to an investor for the aggregate purchase price of US $300,000, purchase price of $0.07 per share.
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.
7
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 208,333 shares of common stock for the aggregate purchase price of $50,000, purchase price $0.24 per share.
On March 3, 2008, 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 of the Company's common stock at an exercise price of $0.15 for a period of five years. In accordance with SFAS 123R - Share-Based Payment, the warrants were valued using the Black-Scholes model at $1,031.
On March 10, 2008, 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.
On March 25, 2008, 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 of the Company's common stock at an exercise price of $0.10 for a period of three years. The shares were valued at the trading price on the date of issuance of $0.30 for an additional expense of $550,000. In accordance with SFAS 123R - Share-Based Payment, the warrants were valued using the Black-Scholes model at $213,813.
On March 27, 2008, the Company entered into a consulting services agreement with a consultant who provides the Company certain investor and market relations services in consideration for the issuance of 1,500,000 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. 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.
On July 23, 2009, the Company closed a private placement for 1,000,000 common shares at a price of $0.065 per share for an aggregate of $65,000.
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.
8
From inception through September 30, 2009, the Company paid $989,022 in product development costs to a company wholly owned by the Chief Executive Officer, President and Director of the Company.
As of September 30, 2009, loans from directors and stockholders amounted to $309,830 and represented working capital advances from a director and stockholder of the Company. The loans are unsecured, non-interest bearing, and due on demand.
As of September 30, 2009, a company owned by a director and stockholder loaned $141,170 to the Company. The loan is unsecured, non-interest bearing, and due on demand.
NOTE 7 - INCOME TAXES
The Company provides for income taxes under FASB Accounting Standards Codification ("ASC") 740 – Income Taxes which requires the use of an asset 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.
ASC 740 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 before reduction by the valuation allowance is $670,272, which is calculated by multiplying a 23% estimated tax rate by the cumulative NOL of $2,914,228.
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140” (“SFAS 166”). The provisions of SFAS 166, in part, amend the derecognition guidance in FASB Statement No. 140, eliminate the exemption from consolidation for qualifying special-purpose entities and require additional disclosures. SFAS 166 is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. The Company does not expect the provisions of SFAS 166 to have a material effect on the financial position, results of operations or cash flows of the Company.
In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 amends the consolidation guidance applicable to variable interest entities. The rovisions of SFAS 167 significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R). SFAS 167 is effective as of the beginning of the first fiscal year that begins after November 15, 2009. SFAS 167 will be effective for the Company beginning in 2010. The Company does not expect the provisions of SFAS 167 to have a material effect on the financial position, results of operations or cash flows of the Company.
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (“SFAS No. 168”).
Under SFAS No. 168 the “FASB Accounting Standards Codification” (“Codification”) will become the source of authoritative U. S. GAAP to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. On the effective date, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS No. 168 is effective for the Company’s interim quarterly period beginning July 1, 2009. The Company does not expect the adoption of SFAS No. 168 to have an impact on the financial statements.
In June 2009, the Securities and Exchange Commission’s Office of the Chief Accountant and Division of Corporation Finance announced the release of Staff Accounting Bulletin (SAB) No. 112. This staff accounting bulletin amends or rescinds portions of the interpretive guidance included in the Staff Accounting Bulletin Series in order to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and Securities and Exchange Commission rules and regulations. Specifically, the staff is updating the Series in order to bring existing guidance into conformity with recent pronouncements by the Financial Accounting Standards Board, namely, Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations, and Statement of Financial Accounting Standards No. 160, Non-controlling Interests in Consolidated Financial Statements. The statements in staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission's official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws.
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In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP shall be effective for interim reporting periods ending after June 15, 2009. The Company does not have any fair value of financial instruments to disclose.
In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The FSP shall be effective for interim and annual reporting periods ending after June 15, 2009. The Company currently does not have any financial assets that are other-than-temporarily impaired.
In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, to address some of the application issues under SFAS 141(R). The FSP deals with the initial recognition and measurement of an asset acquired or a liability assumed in a business combination that arises from a contingency provided the asset or liability’s fair value on the date of acquisition can be determined. When the fair value can-not be determined, the FSP requires using the guidance under SFAS No. 5, Accounting for Contingencies, and FASB Interpretation (FIN) No. 14, Reasonable Estimation of the Amount of a Loss. This FSP was effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The adoption of this FSP has not had a material impact on our financial position, results of operations, or cash flows.
In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased 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.
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, 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 consolidated financial position and results of operations if adopted.
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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.
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.
NOTE 9 – RECLASSIFICATIONS
Certain items have been reclassified to conform to the current period presentation.
NOTE 10 – SUBSEQUENT EVENTS
The Company evaluated events occurring between the balance sheet date and November 20, 2009, the date the financial statements were issued, and found no events that require disclosure.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-Q 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’s Discussion and Analysis of Financial Condition and Results of Operations,” and include statements regarding our expectations regarding our short – and long-term capital requirements and our business plan and estimated expenses for the coming 12 months. 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. 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" of our Annual Report on Form 10-KSB 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. Readers are also urged to carefully review and consider the various disclosures we have made in this 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 development stage company. We currently have no employees other than our President and Treasurer 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, NV 89108. Our telephone number is +1 (702) 442-1166. We also have an office in Israel at 26 Ga'aton Blvd., Nahariya 22401 Israel, Tel. No. +972-4-988 8314. We do not have any subsidiaries. We do not have any subsidiaries. The address of our resident agent is Eastbiz.com Inc, 5348 Vegas Dr, Las Vegas, Nevada, U.S.A., 89108.
Our principal business plan is to manufacture and market the product and / or seek third party entities interested in licensing the rights to manufacture and market the man-powered charger. Our target market will be 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 operations 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 that 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® chargers and finalized and executed an agreement with a Chinese manufacturing firm to begin mass production of the two YoGen® products.
As of November 16, 2009 we received purchase orders for the YoGen totalling $700,000 of which $295,400 was received as deposits.
During the three months ended September 30, 2009 we accomplished the following:
1. | Started mass production of the Yogen. |
2. | Start massive selling of the Yogen (we sold 11K of Yogens to our manufacturer’s representative in the UK & Ireland, Green Pulse Ltd and 39K of Yogens to our manufacturer’s representative in North America and Mexico, Fame Inc. |
3. | Fully completed the design of the Yogen Max and started to manufacturing two models of the Yogen Max. |
Our objectives for the last quarter of 2009 quarter are as follows:
1. | To complete manufacturing of Yogens and supply it to our manufacturer’s representative. |
2. | To continue our world-wide marketing plan, focus on participating in relevant exhibitions around the world. |
3. | To complete the production of two working models of the Yogen Max. |
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RESULTS OF OPERATIONS – THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPANRED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND CUMULATIVE FROM INCEPTION (MAY 17, 2007) TO SEPTEMBER 30, 2009
During the three months ended September 30, 2009 and 2008 we incurred operating expenses of $114,209 and $310,230, respectively which include $62,570 and $134,000 of product development costs, $42,028 and $174,219 in professional fees related to accounting, consulting and legal, $530 and $985 related to filing fees, $831 and $1,026 of general and administrative expenses, $3,000 and $0 in investor relations fees, $5,250 and $0 related to marketing.
During nine month ended September 30, 2009 and 2008 we incurred operating expenses of $720,648 and $1,759,495, respectively which include $356,684 and $464,000 of product development costs, $265,292 and $1,287,409 in professional fees related to accounting, consulting and legal, $2,251 and $2,585 related to filing fees, $80,250 and $0 related to marketing, $2,776 and $5,501 of general and administrative expenses, $13,395 and $0 in investor relations fees. Operating Expenses for the nine months ended September 30, 2008 were greater than in the nine months ended September 30, 2009 mainly due to shares issued for professional fees.During the inception through September 30, 2009, we incurred operating expenses of $2,923,216, which include $1,079,906 of product development costs, $1,722,079 in professional fees related to accounting, consulting and legal, $9,749 related to filing fees, $80,250 related to Marketing and $17,837 of general and administrative expenses, $13,395 in investor relations fees.
NET LOSS
We incurred a loss of $113,899 for the three months ended September 30, 2009 compared to $307,797 for the three months ended September 30, 2008, $720,888 for the nine months ended September 30, 2009 compared to $1,752,039 for the nine months ended September 30, 2008 and $2,914,228 from Inception (May 17, 2007) through September 30, 2009.
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 September 30, 2009, we had cash of $8,480, representing a net decrease in cash of $116,053 since December 31, 2008.
Cash generated by financing activities during the six months ended September 30, 2009 amounted to $536,000 resulting from issuance of common stock, from due to director and from due to related party and represented working capital advances from a director and stockholder of the Company Mr. Guy Ofir and loan from Pipera a company owned by a director and stockholder Mr. Guy Ofir. Cash used in operating activities amounted to $643,553 represented by a loss of $720,888 adjusted for a change in Inventory of $434,369, change in prepaid expenses of $88,541, change in accounts payable and accrued liabilities of $22,763, change in customer deposits of $295,400 and by a non-cash adjustment for 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.
OFF-BALANCE SHEET ARRANGEMENTS
Our Company does 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 does 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.
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ITEM 4T. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, (the “1934 Act”) as of the end of the period covered by this quarterly report, being the fiscal quarter ended September 30, 2009, 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, our disclosure controls and procedures were ineffective, as they did not provide reasonable assurance that material information related to our company is recorded, processed and reported in a timely manner.
The small size of our company makes the proper identification and authorization of transactions difficult, as the company has 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's officers are also its 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 company in the reports that it files or submits 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 September 30, 2009.
There was no change to our internal control over financial reporting that occurred during the quarter ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect the Company's internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
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**
* Furnished herewith.
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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, President | |
(Principal Executive Officer) | |
Dated: November 20, 2009 | |
By: | /s/Emanuel Cohen |
Emanuel Cohen, Secretary, Treasurer | |
(Principal Financial Officer) | |
Dated: November 20, 2009 |
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