Energy Edge Technologies 10Q 2013 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2013

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

Commission file number 333-167853

ENERGY EDGE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

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

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

(561) 962-4258

(Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in 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 T

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

The number of shares of Common Stock, $0.00001 par value, outstanding on August 26, 2013 was 155,873,829

ENERGY EDGE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

	Part I – Financial Information
Item 1	Financial Statements
	Consolidated Balance Sheets, June 30, 2013 and December 31, 2012 (Unaudited)	F-1
	Consolidated Statements of Operations for the three months and six months ended June 30, 2013 and 2012 (Unaudited)	F-2
	Consolidated Statement of Stockholders’ Equity (Deficit) as of June 30, 2013 (Unaudited)	F-3
	Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012 (Unaudited)	F-4
	Notes to the Consolidated Financial Statements	F-5 – F-12
Item 2	Management’s Discussion and Analysis or Plan of Operation	3
Item 3	Quantitative and Qualitative Disclosures about Market Risk	6
Item 4	Controls and Procedures	6

	Part II – Other Information
Item 1	Legal Proceedings	7
Item 2	Unregistered Sales Of Equity Securities And Use Of Proceeds	7
Item 3	Defaults Upon Senior Securities	7
Item 4	Mine Safety Disclosures	7
Item 5	Other Information	7
Item 6	Exhibits	7

PART 1, FINANCIAL STATEMENTS

ENERGY EDGE TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEETS (Unaudited)

AS OF JUNE 30, 2013 AND DECEMBER 31, 2012

ASSETS	June 30, 2013			December 31, 2012
Current Assets
Cash and cash equivalents	$	25,527		$	18,553
Accounts receivable – other		348			348
Prepaid expenses		369,201			300,442
Total Current Assets		395,076			319,343

Property and Equipment
Computers and equipment		10,640			10,640
Less: accumulated depreciation		(6,452	)		(5,595	)
Property and Equipment – net		4,188			5,045

Other Assets
Franchise costs		3,566			—
Deferred financing costs - net		7,070			—
Total Other Assets		10,636			—

TOTAL ASSETS	$	409,900		$	324,388

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Liabilities
Current Liabilities
Accounts payable	$	131,934		$	343,334
Accrued expenses and other current liabilities		97,632			125,830
Due to related parties		15,615			30,696
Total Current Liabilities		245,181			499,860

Long Term Liabilities
Convertible note payable, net of discounts of $46,875 and $0, respectively		3,125			—
Derivative liability		91,177			—
Total Long Term Liabilities		94,302			—
Total Liabilities		339,483			499,860

Stockholders’ Equity (Deficit)
Common stock, $.00001 par value, 250,000,000 shares authorized, 155,873,829 shares issued and outstanding (78,667,872 – December 31, 2012)		1,555			782
Additional paid in capital		3,780,780			2,616,359
Subscription receivable		(1,000	)		(1,000	)
Treasury stock		(5,000	)		(5,000	)
Accumulated deficit		(3,706,311	)		(2,746,648	)
Total Stockholders’ Equity (Deficit)		70,024			(135,507	)
Non-controlling interests		393			(39,965	)
Total Equity (Deficit)		70,417			(175,472	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	409,900		$	324,388

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

F-1

ENERGY EDGE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

	Three months ended June 30, 2013			Three months ended June 30, 2012			Six months ended June 30, 2013			Six months ended June 30, 2012

CONTRACT REVENUES	$	—		$	207,975		$	2,040		$	354,046

CONTRACT COSTS		—			117,624			2,472			235,611

GROSS PROFIT		—			90,351			(432	)		118,435

OPERATING EXPENSES
Compensation		488,275			—			505,441			6,088
Consulting services		102,532			47,455			203,451			58,182
Professional fees		12,508			22,528			32,042			26,548
Director fees		400			—			2,400			—
General & administrative expenses		8,917			25,158			127,713			44,794
TOTAL OPERATING EXPENSES		612,632			95,141			871,047			135,612

LOSS FROM OPERATIONS		(612,632	)		(4,790	)		(871,479	)		(17,177	)

OTHER INCOME (EXPENSE)
Interest expense		(3,711	)		(1,500	)		(4,661	)		(2,774	)
Amortization		(430	)		—			(430	)		—
Depreciation		(429	)		(430	)		(858	)		(860	)
Derivative expense		(3,348	)		—			(3,348	)		—
Change in fair value of derivative liability		(37,829	)		—			(37,829	)		—
TOTAL OTHER INCOME (EXPENSE)		(45,747	)		(1,930	)		(47,126	)		(3,634	)

LOSS BEFORE NON-CONTROLLING INTERESTS AND INCOME TAXES		(658,379	)		(6,290	)		(918,605	)		(19,951	)

LESS: LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		—			—			(50,408	)		—

LOSS BEFORE PROVISION FOR INCOME TAXES		(658,379	)		(6,290	)		(868,197	)		(19,951	)

PROVISION FOR INCOME TAXES		—			—			—			—

NET LOSS ATTRIBUTABLE TO ENERGY EDGE TECHNOLOGIES CORPORATION	$	(658,379	)	$	(6,290	)	$	(868,197	)	$	(19,951	)

LOSS PER SHARE:BASIC AND DILUTED	($	.01	)	($	0.00	)	($	.01	)	($	0.00	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:BASIC AND DILUTED		114,489,343			88,571,645			97,481,315			85,487,579

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

F-2

ENERGY EDGE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

	Common Stock						Additional Paid in Capital			Subscription Receivable			Treasury Stock			Non-Controlling Interests			Accumulated Deficit			Total Stockholders’ Equity (Deficit)
	Shares			Amount

Balance, December 31, 2011		81,261,205			813			1,828,953			—			—			—			(2,003,677	)		(173,911	)

Issuance of shares for cash		10,916,667			109			122,891			—			—			—			—			123,000
Issuance of shares for services		16,000,000			160			668,215			—			—			—			—			668,375
Shares retired per merger agreement		(28,000,000	)		(280	)		280			—			—			—			—			—
Shares returned by consultants		(2,010,000	)		(20	)		(3,980	)		—			—			—			—			(4,000	)
Purchase of treasury stock		—			—			—			—			(5,000	)		—			—			(5,000	)
Acquisition of stock in subsidiaries		—			—			—			(1,000	)		—			1,190			—			190
Net loss for the year ended December 31, 2012		—			—			—			—			—			(41,155	)		(742,971	)		(784,126	)

Balance, December 31, 2012		78,167,872			782			2,616,359			(1,000	)		(5,000	)		(39,965	)		(2,746,648	)		(175,472	)

Issuance of shares for cash		18,533,334			185			288,928			—			—			—			—			289,113
Issuance of shares for services		56,200,000			563			718,713			—			—			—			—			719,276
Issuance of shares for cancellation of debt		2,972,623			25			156,780			—			—			—			—			156,805
Acquisition of non-controlling interest		—			—			—			—			—			(700	)		—			(700	)
Termination of non-controlling interest		—			—			—			—			—			91,466			(91,466	)		—
Net loss for the 6 months ended June 30, 2013		—			—			—			—			—			(50,408	)		(868,197	)		(918,605	)

Balance June 30, 2013		155,873,829		$	1,555		$	3,780,780		$	(1,000	)	$	(5,000	)	$	393		$	(3,706,311	)	$	70,417

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

F-3

ENERGY EDGE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

	Six months ended June 30
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) for the period	$	(918,605	)	$	(19,951	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based services& compensation		719,276			—
Change in fair value of derivative liability		37,829			—
Derivative expense		3,348			—
Amortization of debt discount		3,125			—
Depreciation		857			860
Change in operating assets and liabilities:
Accounts receivable		—			(874,440	)
Costs and estimated earnings in excess of billings on uncompleted contracts		—			19,321
Accounts receivable - other		—			7,789
Prepaid consulting fees		(68,759	)		8,331
Accounts payable		(54,595	)		56,060
Billings in excess of costs and estimated earnings on uncompleted contracts		—			784,811
Sales tax payable		—			—
Accrued expenses and other current liabilities		(28,198	)		(8,339	)
Cash flows used in operating activities		(305,722	)		(25,558	)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of non-controlling interest		(700	)		—
Increase in franchise costs		(3,566	)		—
Net increase in deferred financing costs		(7,070	)		—
Cash flows used in investing activities		(11,336	)		—

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in related party loans		—			—
Repayment of notes receivable - stockholders		(15,081	)		—
Proceeds from loan		50,000			—
Proceeds from the sale of common stock		289,113			62,500
Repayment of loan from related party		—			(2,638	)
Purchase of treasury shares		—			(5,000	)
Cash flows provided by financing activities		324,032			54,862

Net increase (decrease) in cash and cash equivalents		6,974			29,304
Cash and cash equivalents, beginning of the period		18,553			3,243
Cash and cash equivalents, end of the period	$	25,527		$	32,547

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	4,661		$	2,774
Income taxes paid	$	—		$	—

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for prepaid consulting services	$	—		$	9,700
Issuance of stock in payment of accounts payable	$	156,805		$	0
Debt discount from fair value of embedded derivative	$	50,000		$	0

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

F-4

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 1 – NATURE OF OPERATIONS

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

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

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

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

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

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

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

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the accounts of Energy Edge Technologies Corporation, The Gourmet Wing Company, Inc., and Energy Edge Solutions, Inc.(collectively, the “Company”). All material intercompany transactions have been eliminated.

Basis of Accounting

Energy Edge uses the accrual basis of accounting for financial statement reporting. Accordingly, revenues are recognized when products are delivered and services are rendered, and expenses are recognized when the obligation is incurred. The Company recognizes revenues from contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. The Company has selected a December 31 year end.

F-5

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the year ended December 31, 2012. In the opinion of management, all adjustments necessary for the financial statements to be not misleading for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, receivables, prepaid expenses, accounts payable, accrued expenses and other current liabilities, and due to related parties. The carrying amounts of these financial instruments approximate fair value due either to length of maturity or interest rates that approximate prevailing rates unless otherwise disclosed in these financial statements.

Contract Receivables

Contract receivables are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts. The Company extends credit to customers in the normal course of business. The Company continually monitors contract receivables. When we are aware of circumstances that may impair a specific customer’s ability to meet its financial obligations, we record a specific allowance to reduce the net recognized receivable to the amount we believe will be collected. We write off uncollectible amounts against the allowance when we have exhausted our collection efforts.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of 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 date of the financial statements, and the reported amounts of revenues and expenses during the year. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of June 30, 2013, there have been no interest or penalties incurred on income taxes.

Research and Development

The Company has not incurred any research and development costs to date.

Non-Controlling Interests

As of December 31, 2012, the non-controlling interests balances were ($39,965), due to minority ownership of 35% in Gourmet Wing Company, and 49% in Energy Edge Solutions, Inc. On March 31, 2013, the Company acquired the minority interest in Gourmet Wing Company, bringing their ownership of Gourmet to 100%. As of June 30, 2013, the non-controlling interest balance was $393 due to the minority ownership of 49% in Energy Edge Solutions, Inc.

Revenue Recognition

The Company recognizes revenues from contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. That method is used because management considers total cost to be the best available measure of progress on contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.

F-6

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. No profit is recognized on change orders until they have been approved by the customer.

The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenues recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized.

Stock-Based Compensation

The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718,Compensation – Stock Compensationwhich requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.

The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined.

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders 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 for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of June 30, 2013.

Recent Accounting Pronouncements

Energy Edge does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flows.

Reclassifications

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

NOTE 3 – FRANCHISE COSTS

Franchise costs consist of aggregate costs of $3,566 incurred by The Gourmet Wing Company related to the development of sauce recipes. As the asset will be useful for a period of indefinite length in the future, no amortization has been recognized.

NOTE 4 –DEFERRED FINANCING COSTS

On May 13, 2013 the company entered into a 6% convertible redeemable note payable with a maturity date of May 14, 2015, loan costs associated with securing the loan of $7,500 were capitalized and will be amortized over the loan period. Amortization expense included for this period is $430. An unamortized balance of $7,070 remains at June 30, 2013.

F-7

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 5 – PREPAID EXPENSES

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

	June 30, 2013		December 31, 2012
Prepaid project expenses	$	29,950	$	29,950
Prepaid consulting expense		339,251		270,492
Total prepaid expenses	$	369,201	$	300,442

Prepaid Project Expenses

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

Prepaid Consulting

The Company has retained a number of consultants. These consultants are paid in cash and/or issuance of Company stock. Consultants were issued 2,500,000 shares of stock valued at $37,676 for the six months ended June 30, 2013. The consulting fees are being amortized over the terms of the contracts. As of June 30, 2013, and December 31, 2012, $339,251 and $270,492 respectively, remained in prepaid consulting.

NOTE 6 – PROPERTY AND EQUIPMENT

The Company’s policy is to depreciate the cost of property and equipment over the estimated useful lives of the assets by use of the straight-line method. The office equipment presently owned by the Company is being depreciated over an estimated useful life of five years. Depreciation expense for the three months ended June 30, 2013 and 2012 was $429 and $430, respectively.

NOTE 7 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at June 30, 2013 and December 31, 2012:

	June 30, 2013		December 31, 2012
Credit card balances	$	29,003	$	28,596
Accrued professional fees		4,500		13,500
Accrued interest expense		395		—
Accrued payroll		—		20,000
Payroll taxes payable		48,652		48,652
Sales tax payable		15,082		15,082
Total accrued expenses and other current liabilities	$	97,632	$	125,830

NOTE 8 – RELATED PARTY TRANSACTIONS

Related party loans totaling $15,615 and $30,696 at June 30, 2013 and December 31, 2012, respectively, are owed to various related parties of the Company for reimbursement of expenses incurred on behalf of the Company.

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

NOTE 9– CONVERTIBLE NOTE PAYABLE

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

F-8

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 9– CONVERTIBLE NOTE PAYABLE (CONTINUED)

The Company evaluated the terms of the note and concluded that since the conversion price was not fixed, andthe number of shares of the Company’s common stock that are issuable upon the conversion of the convertible promissory note is indeterminable until such time as the Creditor elects to convert to common stock, the Companyconcluded that the embedded conversion option created a derivative liability.The Company measured the derivative liability using the input attributes disclosed below and recorded a derivative liability of $53,348 as of May 13, 2013. On June 30, 2013 the Company remeasured the derivative liability using the input attributes below and determined the derivative liability value to be $91,177. An expense of $37,829 was recorded as of June 30, 2013 and included in the statement of operations in order to adjust the derivative liability to the remeasured value.

	May 13, 2013			June 30, 2013
Stock price	$	.0099		$	.0142
Exercise price	$	.009044		$	.007588
Shares issuable upon conversion		5,528,527			6,589,352
Expected dividend yield		0.00	%		0.00	%
Expected life (years)		2.00			1.87
Risk-free interest rate		.24	%		.36	%
Expected volatility		313.5	%		307.6	%

A debt discount of $50,000 related to the embedded conversion option was recorded at date of note issuance, and is being expensed over the life of the loan. For the six months ended June 30, 2013, amortization of $3,125 has been recorded, resulting in a remaining unamortized discount of $46,875 at June 30, 2013.

NOTE 10– BUSINESS SEGMENTS

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

The balance sheet and income statement information of each entity for the current quarter is presented in US Dollars as follows:

	EEDG			TGWC			EES			Total
Current Assets	$	389,717		$	5,348		$	11		$	395,076
Fixed Assets		4,188			—			—			4,188
Intangibles		7,070			3,566			—			10,636
Total Assets	$	400,975		$	8,914		$	11		$	409,900
Current Liabilities	$	235,867		$	9,199		$	114		$	245,180
Long Term Liabilities		94,302									94,302
Intercompany		(300,593	)		300,178			415			0
Stockholders’ Equity		371,399			(300,463	)		(518	)		70,418
Total Liabilities and Stockholders’ Equity	$	400,975		$	8,914		$	11		$	409,900
Revenues	$	—		$	—		$	—		$	—
Costs of Sales		—			—			—			—
Gross Profit		—			—			—			—
Operating Expenses		(587,999	)		(24,633	)		—			(612,632	)
Other Expenses		(45,555	)		(192	)		—			(45,747	)
Net (loss) before non-controlling interest		(633,554	)		(24,825	)		—			(658,379	)
Non-controlling interest		—			—
Net (loss) from operations	$	(633,554	)	$	(24,825	)	$	—		$	(658,379	)

F-9

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 11 – CAPITAL STOCK

On March 26, 2010, the Company amended its Articles of Incorporation to increase the number of authorized shares to 100,000,000 with a par value of $.00001. On November 14, 2012, the Company amended its Articles of Incorporation to increase the number of authorized shares to 250,000,000 with a par value of $.00001.

On January 23, 2012, the Company issued 1,500,000 shares of stock valued at $15,000 for business consulting services.

On May 3, 2012, the Company issued 2,500,000 shares of stock valued at $39,375 for legal services.

On May 7, 2012, the Company issued 3,000,000 shares of stock valued at $105,000 for business consulting services.

On May 14, 2012, the Company issued 2,000,000 shares of stock valued at $52,500 for business consulting services.

On May 17, 2012, the Company sold 1,000,000 shares of common stock at $.01 per share under a private placement to an unrelated third party for total proceeds of $10,000.

On May 25, 2012, 10,000 shares of stock issued for consulting services in 2011 were returned to the Company.

On June 5, 2012, the Company sold 500,000 shares of common stock at $.01 per share under a private placement to an unrelated third party for total proceeds of $5,000.

On June 6, 2012, the Company sold 1,666,667 shares of common stock at $.0075 per share under a private placement to an unrelated third party for total proceeds of $12,500.

On June 6, 2012, the Company issued 500,000 shares of stock valued at $50,000 for business consulting services

On June 6, 2012, the Company sold 2,000,000 shares of common stock at $.015 per share under a private placement to an unrelated third party for total proceeds of $30,000.

On June 17, 2012, the Company issued 200,000 shares of stock valued at $9,000 for business consulting services.

On July 20, 2012, the Company issued 500,000 shares of stock valued at $65,000 for business consulting services.

On August 8, 2012, the Company issued 500,000 shares of stock valued at $50,000 for business consulting services.

On August 9, 2012, the Company issued 1,000,000 shares of stock valued at $90,000 for business consulting services.

On August 14, 2012, the Company issued 1,000,000 shares of stock valued at $67,500 for legal services.

On August 28, 2012, 2,000,000 shares of stock issued for consulting services in 2011 were returned to the Company.

On October 26, 2012, the Company sold 750,000 shares of common stock at $.0073 per share under a private placement to an unrelated third party for total proceeds of $5,500.

On November 21, 2012, 28,000,000 shares of stock previously held by former officers of the Company were surrendered.

On November 29, 2012, the Company sold 1,500,000 shares of common stock at $.0167 per share under a private placement to an unrelated third party for total proceeds of $25,000.

On November 29, 2012, the Company issued 2,000,000 shares of stock valued at $80,000 for business consulting services.

On December 10, 2012, the Company issued 300,000 shares of stock valued at $15,000 for business consulting services.

On December 12, 2012, the Company issued 1,000,000 shares of stock valued at $30,000 for business consulting services.

F-10

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 11 – CAPITAL STOCK (CONTINUED)

On December 21, 2012, the Company sold 2,000,000 shares of common stock at $.005 per share under a private placement to an unrelated third party for total proceeds of $10,000.

On December 27, 2012, the Company sold 1,500,000 shares of common stock at $.0167 per share under a private placement to an unrelated third party for total proceeds of $25,000.

As of December 31, 2012, the Company had no warrants or options outstanding.

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

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

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

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

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

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

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

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

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

On April 5, 2013, the Company issued 1,016,803 shares of common stock at $.01 per share in cancellation of debt in the amount of $40,661.64.

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

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

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

NOTE 12 – INCOME TAXES

For the three month periods ended June 30, 2013 and 2012, the Company has incurred a net loss and, therefore, has no tax liability. The net deferred tax asset was generated by the loss carry-forward of approximately $3,706,000 and will expire beginning in 2030.

The provision for federal income tax consists of the following at June 30:

	June 30, 2013			June 30, 2012
Federal income tax benefit attributable to:
Current operations	$	312,300		$	152,000
Less: valuation allowance		(312,300	)		(152,000	)
Net provision for Federal income taxes	$	0		$	0

F-11

ENERGY EDGE TECHNOLOGIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 12 – INCOME TAXES (CONTINUED)

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:

	June 30, 2013			December 31, 2012
Deferred tax asset attributable to:
Net operating loss carryover	$	1,252,900		$	940,600
Less: valuation allowance		(1,252,900	)		(940,600	)
Net deferred tax asset	$	0		$	0

As of June 30, 2013, the Company had net operating loss carry forwards of approximately $3,706,000 that may be available to reduce future years’ taxable income through 2033. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwardsof $3,706,000 for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, the net operating loss carry forwards may be limited as to use in future years.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

The Company neither owns nor leases any real property as of June 30, 2013. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein.

NOTE 14 –GOING CONCERN

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

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

NOTE 15 – SUBSEQUENT EVENTS

In accordance with ASC Topic 855-10,the Companyhas analyzed its operations subsequent to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

F-12

ENERGY EDGE TECHNOLOGIES CORPORATION

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

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

Note regarding forward-looking statements

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

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

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

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

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

our ability to obtain future financing or funds when needed;

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

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

our ability to attract and retain a qualified employee base;

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

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

our ability to maintain and execute a successful business strategy.

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

Critical Accounting Policies and Estimates

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

ENERGY EDGE TECHNOLOGIES CORPORATION

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

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

1. Persuasive evidence of an arrangement exists;

2. Delivery has occurred;

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

4. Collectability is reasonably assured.

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

Recent Accounting Pronouncements

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

ENERGY EDGE TECHNOLOGIES CORPORATION

Results of Operations – Six Months Ended June 30, 2013 as Compared to Six Months Ended June 30, 2012 and Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012

The following table summarizes the results of our operations during the three-month period ended June 30, 2013 and 2012, and provides information regarding the dollar and percentage increase (or decrease) from the respective periods.

	Six Months ended June 30,
	2013			2012			Increase (decrease)			% Change
Revenue	$	2,040		$	354,046		$	(352,006	)		(99	)%
Cost of sales		2,472			235,611			(233,139	)		(99	)%
Gross profit		(432	)		118,435			(118,867	)		(0	)%
General & Administrative & Professional Fees		162,155			71,342			90,813			127	%
Wages & Consulting Fees		708,892			64,270			644,622			1003	%
Income (Loss) from operations		(871,479	)		(17,177	)		(854,302	)		(1131	)%
Other expense		(47,126	)		(2,774	)		(44,352	)		(1599	)%
Provision for taxation		—			—			—			—

Net loss	$	(918,605	)	$	(19,951	)	$	(898,654	)		(2730	)%

	Three Months ended June 30,
	2013			2012			Increase (decrease)			% Change
Revenue	$	0		$	207,975		$	(207,975	)		(100	)%
Cost of sales		0			117,624			(117,624	)		(100	)%
Gross profit		0			90,351			(90,351	)		(0	)%
General & Administrative & Professional Fees		21,825			47,686			(25,861	)		(54	)%
Wages & Consulting Fees		590,807			47,455			543,352			1145	%
Income (Loss) from operations		(612,632	)		(4,790	)		(607,842	)		(1091	)%
Other expense		(45,747	)		(1,500	)		(44,247	)		(2950	)%
Provision for taxation		—			—			—			—

Net loss	$	(658,379	)	$	(6,290	)	$	(652,089	)		(4041	)%

Revenues

Sales revenue decreased from $207,975 in the three months ended June 30, 2012 to $-0- in the same period in 2013, representing a 100% decrease. The decrease in revenue was mainly due to potential projects from the current sales pipeline not closing in the second quarter.

Cost of sales and gross margin

Cost of sales decreased from $117,624 in the three months ended June 30, 2012 to $-0- in the same period in 2013, representing a 100% decrease. The decrease was mainly attributable to the absence of projects sold in the second quarter of 2013. The gross profit percent decreased from 43.4% in the three months ended June 30, 2012 to (0)% in the same period in 2013.

Wages & Consulting Fees

Wages & Consulting Fees were $590,807 in the three months ended June 30, 2013 as compared to $47,455 in the three months ended June 30, 2012. The increase was due to an increase in the amortization of pre-paid consulting fees and stock based compensation issued in 2^nd quarter 2013.

ENERGY EDGE TECHNOLOGIES CORPORATION

General and administrative & Professional Fees

General and administrative and professional fees decreased from $47,686 in the three months ended June 30, 2012 to $21,825 for the same period in 2013, representing a decrease of $25,861 or 54%. The decrease was mainly attributable to a reduction in grand opening event expenses and marketing costs for The Gourmet Wing Company.

Net income (loss)

Net loss for the three months ended June 30, 2013 was $658,379 as compared to a net loss of $6,290 in the same period of 2012. The increase in net loss was mainly attributable to the stock based compensation for executives of the company and to the lack of revenue in 2013.

Liquidity andCapital Resources

For the six months ended June 30, 2013, we used $305,722 in cash flow for operating activities compared to the use of $25,558 in cash flow for the six months ended June 30, 2012. This increase in operating cash requirements occurred for a number of reasons. During the period the Company issued stock based compensation in the amount of $719,276. The Company recorded no change in contract receivables, in billings in excess of costs, or accounts receivable-other. The Company also recorded a decrease of $68,759 in prepaid expenses, a decrease of $54,595 in accounts payable, and a decrease of $28,198 in other current liabilities, all of which impacted cash used by operating activities. Intangible assets were acquired in the amount of $10,636 primarily relating to the loan fees associated with the convertible promissory note dated May 13, 2013. Financing activities generated $50,000 from the proceeds from the promissory note, and $289,113 proceeds from the sale of common stock.

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

Cash and cash equivalentswere $25,527 as of June 30, 2013 compared to $18,553 as of December 31, 2012.

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

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements

Inflation

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

ENERGY EDGE TECHNOLOGIES CORPORATION

Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting

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

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

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

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

Changes in Internal Control over Financial Reporting

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

ENERGY EDGE TECHNOLOGIES CORPORATION

PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

Not applicable.

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