UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2008
[ ] 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.
(Name of registrant as specified in its charter)
Nevada 26-0204284
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 105 - 5348 Vegas Dr., Las Vegas 89108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number +1 (702) 442-1166
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.00001
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" 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 Act). Yes [ ] No [X]
As of June 30, 2008, approximately 93,186,070 shares of common stock were
outstanding. The aggregate market value of the common stock held by
non-affiliates of the registrant, as of June 30, 2008, the last business day of
the 2nd fiscal quarter, was approximately $15,955,821 based on the closing price
of $0.30 for the registrant's common stock as quoted on the Over-the-Counter
Bulletin Board on that date. Shares of common stock held by each director, each
officer and each person who owns 10% or more of the outstanding common stock
have been excluded from this calculation in that such persons may be deemed to
be affiliates. The determination of affiliate status is not necessarily
conclusive. Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
93,552,778 shares of common stock as of March 27, 2009.
EASY ENERGY, INC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K that are not
historical facts are "forward-looking statements." Such forward-looking
statements may be identified by, among other things, the use of forward-looking
terminology such as "believes," "intends," "plan" "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, and similar expressions are intended to identify
forward-looking statements. We remind readers that forward-looking statements
are merely predictions and therefore inherently subject to uncertainties and
other factors and involve known and unknown risks that could cause the actual
results, performance, levels of activity, or our achievements, or industry
results, to be materially different from any future results, performance, levels
of activity, or our achievements, or industry results, expressed or implied by
such forward-looking statements. Such forward-looking statements appear in Item
1 - "Business" and Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations," as well as elsewhere in this Annual Report
and include statements regarding the following: the efficiency of our products,
the expected development and potential benefits from our products to consumers,
our marketing strategy, progress in our efforts to develop our facilities and
our products and to achieve and maintain regulatory approvals, the potential
market demand for our products, our expectations regarding our short- and
long-term capital requirements, our outlook for the coming months and
information with respect to any other plans and strategies for our business.
The factors discussed herein, including those risks described in Item 1A - "Risk
Factors", and expressed from time to time in our filings with the Securities and
Exchange Commission could cause actual results and developments to be materially
different from those expressed in or implied by such statements. The
forward-looking statements are made only as of the date of this filing, and
except as required by law, we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
INTRODUCTION
Unless otherwise specified or required by context, as used in this annual
report, the terms "we," "our," "us" and the "Company", each refer to Easy
Energy, Inc.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles (U.S. GAAP).
In this annual report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to "common shares" refer
to the common shares in our capital stock.
On February 8, 2008, the Company affected a ten for one stock split of our
common stock outstanding. The numbers and share prices of our outstanding stock
referred to in this annual report reflect such stock split.
1
TABLE OF CONTENTS
Page
----
PART I
Item 1 Business 3
Item 1A Risk Factors 7
Item 1B Unresolved Staff Comments 13
Item 2 Properties 13
Item 3 Legal Proceedings 13
Item 4 Submission of Matters to a Vote of Security Holders 13
PART II
Item 5 Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 14
Item 6 Selected Financial Data 14
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operation 14
Item 7A Quantitative and Qualitative Disclosures About Market Risk 18
Item 8 Financial Statements and Supplementary Data 18
Item 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 18
Item 9A(T) Controls and Procedures 18
Item 9B Other Information 19
PART III
Item 10 Directors, Executive Officers and Corporate Governance 19
Item 11 Executive Compensation 20
Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 21
Item 13 Certain Relationships and Related Transactions, and Director
Independence 22
Item 14 Principal Accountant Fees and Services 22
PART IV
Item 15 Exhibits, Financial Statement Schedules 24
SIGNATURES 38
2
PART I
ITEM 1. BUSINESS
OVERVIEW OF THE COMPANY
We are a development stage company in the business of developing battery
charging solutions for small hand-carried devices. We were incorporated on May
17, 2007 in the State of Nevada.
CORPORATE BACKGROUND
Easy Energy, Inc. 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 two board members who act
as our officers. We are developing a novel, man-powered charger solution for the
problems related to the ongoing power requirements of small hand-carried
battery-powered personal electronic devices. The development of our products is
not done by us, but through Pipera Technologies Ltd., or "Pipera" a company
wholly owned and fully funded by our president, chief executive officer and
director, Mr. Ofir.
Our principal executive office is located at Suite 105 - 5348 Vegas Dr., Las
Vegas, Nevada 89108. Our telephone number is (702) 442-1166. We also have
offices in Israel at 26 Haga'aton Blvd., Nahariya 22401 Israel, Tel. No.
+972-4-988 8314. We do not have any subsidiaries.
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 a 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.
Due to the uncertainty of our ability to meet our current operating and capital
expenses, in their report on our audited financial statements for the period
ended December 31, 2008, our independent auditors included an explanatory
paragraph regarding concerns about our ability to continue as a going concern.
Our financial statements contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent auditors.
OUR PRODUCTS
We are the sole owner of the YoGen(R) product suite of compact man-powered
generators, which are designed to provide an innovative and effective solution
to the currently underserved need of the almost limitless users of portable
electronics devices for a power source that will ensure those devices' ability
to operate in circumstances in which conventional recharging sources are
unavailable. Included in the product line are the basic YoGen(R), a slim,
pocket-sized charger for small devices such as cell phones, GPS, iPods, etc.,
which is operated by a convenient pull-cord; the YoGen Max(TM), a compact,
fold-up foot-driven charger for laptop computer sized devices which also
includes its own battery pack; and the most recently prototyped YoGen Max(TM),
which is intended to replace a conventional cell phone battery and provide
pull-cord charging capability without the need for a stand-alone charger. All of
our products have been developed and created by Pipera.
YOGEN(R)
A slim pocket-sized, durable, hand powered electric charger that produces a
previously unmatched level of charging power when driven by the repeated pulling
of a cord, in a way which somewhat resembles the action of a Yo-Yo. When the
convenient T-handle on the self-returning cord is repeatedly pulled by the user,
an internal alternator spins continuously, generating power for recharging the
batteries of your cell phone or any other like-sized portable electronic device.
The YoGen(R) is offered in two versions, one as a pure generator and one as a
generator with a 650 mAh 3.7V back-up battery which will provide charging power
either when mechanically activated or via the battery when it is carrying a
charge. The version with the battery also includes a convenient state of charge
indicator, which monitors the state of the battery's charge.
We have completed finalization of the design of the smaller of two models of
YoGen(R) chargers and finalized and executed an agreement with a Chinese
manufacturing firm to begin mass production of the two YoGen(R) products. We
anticipate the first assembly pilot run of 500 units to begin on April 15, 2009,
followed by an assembly pilot run of 5,000 units beginning on May 15, 2009. We
also completed the development of a prototype of our YoGen Max(TM).
3
DESCRIPTION OF YOGEN(R)`S CELLULAR CHARGING CAPACITY
Cellular phones consume electric power at a rate which fits to cell antennas,
and the like. For example, cell phone power consumption for conversation mode
(50% talking / 50% listening) near to a cellular antenna is approximately 0.5
watts. Since the nominal power of the YoGen(R) output is 5 watts (ten times
higher), for every five minutes of cell phone usage under these conditions, we
believe that our device can replace the energy consumed in 30 seconds. This data
only applies to short conversations (typically up to 5 minutes) because during
short conversations, a cell phone battery's state-of-charge does not change
significantly. For example, a half hour conversation under these conditions
would require about 3 minutes to be brought to its pre-conversation charge
state. In all cases, the charge is proportional to incremental levels of effort.
The efficiency with which our YoGen(R) device recharges cell phone is
significantly dependent on the phone's dedicated built-in charging controller
which regulates maximum charging current. For a majority of up-to-date cellular
phone models, these controllers permit a charging current supplying about 5
watts, which is the output of our device. A few older cellular phone models
permit less of a charge. For those phones, YoGen(R) is equipped with a switch
for a "lower power" mode.
We believe that our YoGen(R) device will generate 20 watts of peak power for
each cord pull. 20 watts is a peak instant power which an internal alternator
can generate when the cord is pulled very quickly. It is a pure technical
characteristic which was possible to measure only in a laboratory by accessing
YoGen(R)'s internal points. We have not used any external third party testing in
connection with this process. YoGen(R) is based on a novel axial-field
synchronous generator (alternator) producing an alternating voltage of frequency
and amplitude which are proportional to its rotation speed. Since it is driven
by reciprocating pull-release hand movement and is outputting energy during
rotation, its voltage and frequency vary considerably through the period.
Cellular phone battery controllers require a definite voltage and internal
impedance of chargers to allow them to charge the batteries. YoGen(R) includes
an electronic converter outputting a stabilized direct current voltage. YoGen(R)
has 2 modes: "nominal power" (with nominal impedance) and "lower power" (with
higher impedance).
One version of our YoGen(R) includes an internal 400/800 mAh Li-ion buffer
(back-up) battery considerably widening the stabilized power output from zero
pulling speed (the battery gives power) up to pulling high speed (the battery
receives power).
The foregoing statistics are based solely on our own limited internal testing
and have not been verified by an outside testing agency. We are now working to
validate these results in external laboratories. To date, we have produced three
prototypes of our device, each with an internal battery but without a "lower
power" option. These prototypes have been tested in our laboratory with
approximately 15 cellular phone models. Our results confirm the statistics
contained above, provided that the pulling process is done correctly.
YOGEN MAX(TM)
The YoGen Max(TM) is designed to be conveniently foot operated. A user would be
able to produce sufficient power to operate his or her laptop or similar device
(currently capable of handling portable electronic devices of 50-60 watts) and
charge its internal battery, in a fashion that will not distract from their
primary task, by pressing down on a springy, suspended, self-returning pedal.
Additionally, this design would allow for extended operation at the required
wattage without significant user fatigue.
When not in use, the YoGen Max(TM) folds up into a compact book sized package
comprised of 3 swing-jointed components: two identical thin folder covers and a
narrow base which contains the pedal mechanism. This "book" is easily
transformed between its two configurations: one for traveling, which is quite
compact and easily carried in a computer bag; and the other, unfolded for
operation, which is configured to accommodate any shoe size. The two folder
covers contain the operating "hearts" of the YoGen Max(TM), each of which is an
independent charger based on a unique, proprietary, extremely slim alternator
connected to a high ratio micro-transmission.
We have just finalized the design of YoGen Max(TM).
YOGEN-BAT(TM)
YoGen Bat(TM) is a compact hand-powered electromechanical generator that is
integrated inside of a cell phone battery. YoGen Bat(TM) employs a pull cord
with handle hand charging mechanism, similar to but smaller than that of the
original YoGen(R) charger. We are in the development stage of our first
prototype.
4
MARKETING STRATEGY
We plan to market our product in the United States by establishing a network of
wholesalers who can promote our product to the retail market such as CVS chain
stores, 7-Eleven, Target, AT&T, Sprint, T-Mobile and other high-traffic
locations and points-of-sale which cater to electronic accessories such as
Office Depot and Radio Shack.
We are also planning to launch and operate our own retail online store where we
will sell our products directly to consumers.
We plan to market our product in the Middle East countries through our
distributor Al-Sadeef Trading Company, with whom we signed a distribution
agreement on April 20, 2008.
We also plan to sign distribution and marketing agreements with potential
distributors in Europe, Turkey, India and other countries in which we are
currently in negotiations.
We plan to offer our product at a comparable price to other re-charging systems.
We will stress advantages such as clean energy source, use with a wide array of
products and dependability. We expect that the end-user should be able to
purchase a unit for $30 to $50 depending on packaging and features.
Our President and Director, Mr. Guy Ofir, is in charge of executing our
marketing plan.
THE MARKET OPPORTUNITY
Our target market consists of the following market segments: cellular phones,
which are our main initial market, laptops and notebooks, mobile hand held
computers: PDAs, GPS devices and smart phones, and digital still cameras and
camcorders, all of which are markets with tremendous growth opportunities.
COMPETITION
Competition within the re-charger systems industry is intense. Many of our
competitors have longer operating histories, greater financial, sales, marketing
and technological resources and longer established client relationships than we
do. Solutions currently marketed for the problem we address include several
different groups of products, each with its own advantages and disadvantages.
Although there are several other ways of recharging batteries for a cell phone,
the only ones we consider to be in direct competition are the hand-held human
powered chargers. Such competitors include:
* IST Design Inc., who owns the Sidewinder hand charger that has a
crank-operated mechanism. Sidewinder is designed and produced by
ElectroHiFi, LLC as the SOS Charger. Sidewinder is claimed to generate 6
minutes of talk time for every 2 minutes of turning at 2 revolutions per
second. The unit currently sells for $19.95 to $24.95.
* Aladdinpower Inc., who developed a hand-squeeze generator, meant primarily
for cell phones, which has been on the market since 2002. Although it
claims to be useable with any rechargeable battery, it produces only 1.6
watts, which may not be effective in recharging a cell phone. It is
currently priced at around $60.
* Freeplay Energy plc, who developed Freeplay Freecharge. A Freecharge mobile
phone charger has been available in the market since 2002. This product has
ergonomic features, including reverse winding. It claims that talk time of
2-3 minutes (depending on the mobile phone used), or several hours of
standby time, can be achieved with 45 seconds of winding. Its internal
battery is a rechargeable NiMH battery pack, 3.6 Volts, 1300 mAh. It is
currently priced at $59.95 per unit.
There are other products in the market, but normally, such products are
unbranded copies of the above mentioned designs.
We seek to differentiate ourselves by providing a slimmer and lighter generator
at a competitive price.
INTELLECTUAL PROPERTY
The technologies of both the YoGen(R) and the Yogen Max(TM) and YoGen Bat(TM)
have been invented by Alexander Sromin and Michael Fridhendler. Mr. Sromin is an
alumnus of the Academy for Aviation & Space Instruments in St. Petersburg,
Russia with 22 years of research and development experience related to a wide
range of electric machines and electromechanical systems. His professional scope
covers compact permanent magnet motors, actuators (including linear, rotating,
reciprocating, multi-axis, etc.) and generators in the range from MEMS up to 100
KW. He is an author of more than 30 articles and inventor of 10 inventions. Mr.
Friedhendler graduated from The Technion University in Haifa, Israel. He has 25
years of experience in multi-disciplinary hi-tech ventures promotion and
technological support. He succeeded in numerous application projects in the
5
field of mobile and internet GPS and J2ME software projects among others. His
expertise relates to electronics, communications, cellular technology, internet
and video data transfer.
Both Mr. Sromin and Mr. Fridhendler worked for Pipera and during the course of
their work, developed these technologies. Mr. Sromin and Mr. Fridhendler have
been assisted by Mr. Roman Lanzet that serves as production manager at Pipera.
Mr. Sromin, Mr. Fridhendler, Mr. Lanzet and Pipera assigned their rights in the
technologies of these products to us.
PATENTS
YoGen(R) - Man-Powered Slim Charger
# Country Filing Date App. No. Pub. No. Status
---- ------- ----------- -------- -------- ------
1 U.S. August 20, 2007 11/841,046 US 2009-0051317 Publication Pending
Date: February 26, 2009; examination
PCT
2 (International July 2, 2008 PCT/IL2008/000908 WO/2009/024960 Publication
Application) Date: February 26, 2009
YoGen Max(TM) - Foldable Charger with Two Axial Flux Alternators
# Country Filing Date App. No. Status
---- ------- ----------- -------- ------
1 PCT
(International June 29, 2008 PCT/IL2008/000882 Awaits publication
Application)
2 Canada September 8, 2008 2,638,242 Pending examination
YoGen BatTM - Ultra Slim Hybrid Electric Energy Source
# Country Filing Date App. No. Status
---- ------- ----------- -------- ------
1 PCT
(International September 17, 2008 PCT/IL2008/001244 Pending publication
Application)
2 Canada December 4, 2008 2,646,031 Pending examination
DOMAIN NAME
We own and operate the following registered internet domain name:
www.easy-energy.biz and have launched our website. The information contained in
our website does not form part of this Annual Report in any way.
TRADEMARKS
We registered the name YoGen(R) in the United States Patent and Trademark Office
(Reg. No. 3,466,439). On November 6, 2008 we filed applications to register
YoGen Max(TM) (serial number 77/608,496) and YoGen Bat(TM) (serial number
77/608,498) with the United States Patent and Trademark Office.
SUPPLIERS
We are not reliant upon any suppliers for the materials for our product, or for
the research and development of our technology.
6
CUSTOMERS
Currently we have only no customers. However, we do have an engagement with our
sole distributor in the Middle East, Al-Sadeef Trading Company, though we have
not sold any products yet.
EMPLOYEES
Currently our only employees are our two directors, who provide us with services
for no consideration. We have no intention of hiring employees until we have
sufficient financing for the manufacturing of our products. Once we have the
cash resources, we plan to hire a marketing manager and a production manager. To
date we have not identified such people.
RESEARCH AND DEVELOPMENT
Currently we do not have any research and development capabilities and our
research and development is been done through Pipera. Currently we halted the
research and development of the YoGen Max(TM) and YoGen Bat(TM) products until
we have sufficient financing to continue with it.
From the date of our inception through December 31, 2008 and for the twelve
months period ended December 31, 2008, we spent $ 723,222 and $ 723,222,
respectively, on research and development costs, which were paid to Pipera,
since our entire research and development work has been performed by Pipera
Currently we halted the research and development of the YoGen Max(TM) and YoGen
Bat(TM) products until we have sufficient financing to continue with it.
AVAILABILITY OF SEC FILINGS
All our reports filed with the Securities and Exchange Commission, or SEC, are
available free of charge via EDGAR through the SEC website at www.sec.gov. In
addition, the public may read and copy materials we filed with the SEC at the
SEC's public reference room located at 100 F Street N.E., Washington, D.C.
20549.
ITEM 1A. RISK FACTORS
Our business faces many risks. If any of the events or circumstances described
in the following risks actually occurs, our business, financial condition, or
results of operations could suffer and our investors and prospective investors
may lose all or part of their investment due to any of these risks. Our
investors and prospective investors should consider the following risks and the
information contained under the heading "Cautionary Note Regarding
Forward-Looking Statements" before deciding to invest in our securities.
RISKS RELATED TO OUR BUSINESS
WE HAVE LIMITED OPERATING HISTORY AND HAVE SUSTAINED LOSSES SINCE INCEPTION,
WHICH WE EXPECT TO CONTINUE INTO THE FUTURE.
We were incorporated on May 17, 2007, and have very limited operations to date.
We have not realized any revenues to date. Our products are under development
and are not ready for commercial sale yet. We have no operating history at all
upon which an evaluation of our future success or failure can be made. Our net
loss from inception to December 31, 2008 is $2,193,339. Based upon our proposed
plans, we expect to incur operating losses in future periods. This will happen
because there are substantial costs and expenses associated with the
development, testing and marketing of our product. Based on arrangements made
with potential distributors and the development stage of our product, we believe
that we are at least 2-3 months away from generating our first revenues. We may
be wrong and may fail to generate revenues in the future. If we cannot attract a
significant number of customers, we will not be able to generate any significant
revenues or income. Failure to generate revenues will cause us to go out of
business because we will not have the money to pay our ongoing expenses.
In particular, additional capital may be required in the event that the actual
expenditures required to be made are at or above the higher range of our
estimated expenditures, we incur unexpected costs in completing the development
of our product or encounter any unexpected technical or other difficulties, we
incur delays and additional expenses as a result of technology failure, we are
unable to create a substantial market for our product, or we incur any
significant unanticipated expenses. The occurrence of any of the aforementioned
events could adversely affect our ability to meet our business plans and achieve
a profitable level of operations.
IF WE ARE UNABLE TO OBTAIN THE NECESSARY FINANCING TO IMPLEMENT OUR BUSINESS
PLAN WE WILL NOT HAVE THE MONEY TO PAY OUR ONGOING EXPENSES AND WE MAY GO OUT OF
BUSINESS.
7
Our budgeted expenditures for the next twelve months are $4,255,000 to fund
on-going operations, massive production of the YoGen(R) and planned research and
development programs. Because we have not generated any revenue from our
business, and we are 2-3 months away from being in a position to generate
revenues, we will need to raise additional funds for the future development of
our business and to respond to unanticipated requirements or expenses.
Management estimates that our current cash balances will be exhausted during the
second quarter of 2009 provided we do not have any unanticipated expenses. We do
not currently have any arrangements for financing and we can provide no
assurance to investors we will be able to find such financing, especially given
the credit crisis and the current market conditions.
Our ability to successfully develop our product and to eventually produce and
sell it to generate operating revenues depends on our ability to obtain the
necessary financing to implement our business plan. Given that we have no
operating history, no revenues and only losses to date, we may not be able to
achieve this goal, and if this occurs we will not be able to pay for our
operations and we may go out of business. We will likely need to issue
additional equity securities in the future to raise the necessary funds. We do
not currently have any arrangements for additional financing and we can provide
no assurance to investors we will be able to find such financing if further
funding is required. Obtaining additional financing would be subject to a number
of factors, including investor acceptance of our product and our business model
and the current credit crisis. The issuance of additional equity securities by
us would result in a significant dilution in the equity interests of our current
stockholders and may cause decrease in our share price. Obtaining loans will
increase our liabilities and future cash commitments.
There can be no assurance that capital will continue to be available if
necessary to meet future funding needs or, if the capital is available, that it
will be on terms acceptable to us. If we are unable to obtain financing in the
amounts and on terms deemed acceptable to us, we may be forced to scale back or
cease operations, which might result in the loss of some or all investment in
our common stock.
IF OUR ESTIMATES RELATED TO EXPENDITURES ARE ERRONEOUS OUR BUSINESS WILL FAIL
AND YOU WILL LOSE YOUR ENTIRE INVESTMENT.
Our success is dependent in part upon the accuracy of our management's estimates
of expenditures, which are currently budgeted at $4,255,000 to fund on-going
operations, massive production of the YoGen(R) and planned research and
development programs (See "Liquidity and Capital Resources".) If such estimates
are erroneous or inaccurate we may not be able to carry out our business plan,
which could, in a worst-case scenario, result in the failure of our business and
you losing your entire investment.
WE HAVE NO RESEARCH AND DEVELOPMENT CAPABILITIES AND OUR RESEARCH AND
DEVELOPMENT IS BEING ENTIRELY OUTSOURCED.
We currently have no in-house research and development capabilities and Pipera
provides us with research and development services. If Pipera, which is
currently controlled by our chief executive officer, president and director, Mr.
Ofir, ceases to provide us research and development services, our business could
be adversely affected and there is no assurance that we will be able to perform
our research and development in-house or identify other third parties who may be
able to provide us such services within a reasonable time without adversely
affecting our business.
OUR SUCCESS IS HEAVILY DEPENDENT ON PROTECTING OUR INTELLECTUAL PROPERTY RIGHTS.
We rely on a combination of patent, trade secret, copyright and trademark
protections to protect our proprietary technology. Our success will, in part,
depend on our ability to obtain trademarks and patents. We cannot assure that
patents will be issued to us and even if they are, we cannot guarantee that the
patents issued to us will not be challenged, invalidated, or circumvented, or
that the rights granted under those registrations will provide competitive
advantages to us.
We also rely on trade secrets and new technologies to maintain our competitive
position. Although we have entered into confidentiality agreements with our
employees and consultants, we cannot be certain that others will not gain access
to these trade secrets, especially since our research and development is being
done through Pipera and not our Company. Others may independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets.
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, THIRD PARTIES
MAY BE ABLE TO USE OUR TECHNOLOGY, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO
COMPETE IN THE MARKET.
Our commercial success will depend in part on our ability to obtain and maintain
patent protection on our products, and successfully defend these patents and
technologies against third-party challenges. In doing so, we have secured filing
dates in the United States Trademark and Patent Office by filing provisional
patent applications and filed international patent applications via the Patent
Cooperation Treaty, or PCT. There is no certainty that such applications will be
approved. In addition, even if such applications are approved, they may not be
sufficiently broad to prevent others from practicing our technologies or from
developing competing products. Furthermore, others may independently develop
similar or alternative technologies or design around our patented technologies.
Patents we use may be challenged or invalidated or may fail to provide us with
any competitive advantage. Moreover, in certain parts of the world, such as in
China, western companies are adversely affected by poor enforcement of
intellectual property rights.
8
WE MAY BE EXPOSED TO LIABILITY FOR INFRINGING INTELLECTUAL PROPERTY RIGHTS OF
OTHER COMPANIES.
Our success will, in part, depend on our ability to operate without infringing
on the proprietary rights of others. Although we have conducted searches and are
not aware of any patents and trademarks which our products or their use might
infringe, we cannot be certain that infringement has not occurred or will not
occur. We could incur substantial costs, in addition to the great amount of time
lost, in defending any patent or trademark infringement suits or in asserting
any patent or trademark rights, in a suit with another.
OUR BUSINESS MODEL MAY NOT BE SUFFICIENT TO ENSURE OUR SUCCESS IN OUR INTENDED
MARKET.
Our survival is currently dependent upon the success of our efforts to gain
market acceptance of one product that ultimately represents a small sector in
the overall charger industry. Should our services be too narrowly focused or
should the target market not be as responsive as we anticipate, we may not have
in place alternate products or services that we can offer to ensure our
survival.
IF WE ARE UNABLE TO COMPLETE THE DEVELOPMENT OF OUR PRODUCT WE WILL NOT BE ABLE
TO GENERATE REVENUES AND YOU WILL LOSE YOUR INVESTMENT.
We have not completed the development of our proposed products and we have no
definitive contracts or licenses for the sale or use of our product, except for
one distribution agreement that is still dependent on our ability to manufacture
our products. The success of our proposed business will depend on the completion
and the acceptance of our products by the general public. Achieving such
acceptance will require significant marketing investment. Our products, once
developed and tested, may not be accepted by our customers at sufficient levels
to support our operations and build our business. If the proposed products that
we will develop is not accepted at sufficient levels, our business will fail.
WE ARE DEPENDENT ON REVENUES TO BE GENERATED BY A SOLE LINE OF PRODUCTS AND THUS
WE ARE SUBJECT TO MANY ASSOCIATED RISKS.
Our revenue will be generated through the sale of our man-powered charger.
Unless we expand our product offerings to include related or other products, our
likely source of revenues for the foreseeable future will continue to be
generated by the man-powered charger. Accordingly, 100% of our revenue will be
dependent upon the sale of our sole line of products.
If potential users are satisfied with other means for charging their cell phone
battery or other electronic device's battery we may not be able to sell our
products. If technological developments render man-powered chargers obsolete,
our business could fail. Thus, we may expand our financial resources on
marketing and advertising without generating concomitant revenues. If we cannot
generate sufficient revenues to cover our overhead, manufacturing and operating
costs, we may go out of business.
THERE ARE LOW BARRIERS TO ENTRY INTO THE MAN-POWERED CHARGER INDUSTRY AND, AS A
RESULT, MANY COMPANIES MAY BE ABLE TO COMPETE WITH US ON LIMITED FINANCIAL
RESOURCES.
Our products do not require large capital expenditures for their development or
manufacture. As a result, barriers to entering this industry may be low. If the
intellectual property protection with respect to the man-powered charger
products do not prove effective, a competitor with limited financial resources
may be able to successfully compete with us.
BECAUSE OUR EXECUTIVE OFFICERS ARE EMPLOYED ELSEWHERE, THEY WILL BE UNABLE TO
DEVOTE THEIR SERVICES TO OUR COMPANY ON A FULL TIME BASIS AND THE PERFORMANCE OF
OUR BUSINESS MAY SUFFER, OUR BUSINESS COULD FAIL AND INVESTORS COULD LOSE THEIR
ENTIRE INVESTMENT.
Though Mr. Guy Ofir, our President, Chief Executive Officer and director,
currently devotes approximately 48 hours a week to our Company. Mr. Emanuel
Cohen, our Secretary, Chief Financial Officer, Treasurer and a director, is
employed elsewhere and he devotes 10 to 15 hours a week to our Company. As a
result of Mr. Cohen's partial engagement, the management of our Company could
under-perform, our business could fail and investors could lose their entire
investment.
OUR EXECUTIVE OFFICERS HAVE NO EXPERIENCE OR TECHNICAL TRAINING IN THE
DEVELOPMENT, MAINTENANCE AND MARKETING OF MAN-POWERED CHARGER OR IN OPERATING
BUSINESSES THAT SELL PRODUCTS OR SERVICES TO WHOLESALES. THIS COULD CAUSE THEM
TO MAKE INEXPERIENCED OR UNINFORMED DECISIONS THAT HAVE BAD RESULTS FOR OUR
COMPANY. AS A RESULT, OUR OPERATIONS COULD SUFFER IRREPARABLE HARM AND MAY CAUSE
US TO SUSPEND OR CEASE OPERATIONS, WHICH COULD CAUSE INVESTORS TO LOSE THEIR
ENTIRE INVESTMENT.
Mr. Guy Ofir, our President, Chief Executive Officer and director and Mr.
Emanuel Cohen, our Secretary, Treasurer, Chief Financial Officer and director,
have no experience or technical training in the development, maintenance and
marketing of man-powered charger or in operating businesses that sell products
or services to wholesales. Due to their lack of experience and knowledge in
these areas, our executive officers could make the wrong decisions regarding the
development, operation and marketing of our products and the operation of our
business, which could lead to irreparable damage to our business. Consequently,
our operations could suffer irreparable harm from mistakes made by our executive
officers and we may have to suspend or cease operations, which could cause
investors to lose their entire investment.
9
WE DEPEND HEAVILY ON MR. GUY OFIR AND MR. EMANUEL COHEN. THE LOSS OF EITHER
PERSON WILL HAVE A SUBSTANTIAL NEGATIVE EFFECT ON OUR BUSINESS AND MAY CAUSE OUR
BUSINESS TO FAIL.
We depend entirely on Mr. Ofir and Mr. Cohen for all of our operations. The loss
of either person will have a substantial negative effect on the Company and may
cause our business to fail. Our officers did not receive any compensation for
their services and it is highly unlikely that they will receive any compensation
unless and until we generate substantial revenues.
We do not have any employment agreements or maintain key person life insurance
policies on our officers. If our officers do not devote sufficient time towards
our business, we may never be able to effectuate our business plan.
BECAUSE OUR EXECUTIVE OFFICERS CONTROL A LARGE PERCENTAGE OF OUR COMMON STOCK,
THEY HAVE THE ABILITY TO INFLUENCE MATTERS AFFECTING OUR STOCKHOLDERS.
Our executive officers, in the aggregate, beneficially own approximately 50.8%
of the issued and outstanding shares of our common stock. As a result, they have
the ability to influence matters affecting our stockholders, including the
election of our directors, the acquisition or disposition of our assets, and the
future issuance of our shares. Because our executive officers control such
shares, investors may find it difficult to replace our management if they
disagree with the way our business is being operated.
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS EXPRESSED SUBSTANTIAL
DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN, WHICH MAY HINDER OUR
ABILITY TO OBTAIN FUTURE FINANCING.
For the period from May 17, 2007 (inception) to December 31, 2008, our
independent registered public accounting firm has expressed substantial doubt
about our ability to continue as a going concern. Such doubt was expressed as a
result of our recurring losses and cash flow deficiencies since our inception.
We continue to experience net losses. Our ability to continue as a going concern
is subject to our ability to generate a profit and/or obtain necessary funding
from outside sources, including obtaining additional funding from the sale of
our securities, future sales of our product or obtaining loans and grants from
various financial institutions whenever possible. If we continue to incur
losses, it will become increasingly difficult for us to achieve our goals and
there can be no assurance that our business plan will materialize.
WE WILL BE HEAVILY DEPENDENT ON CONTRACTING WITH THIRD PARTY FIRM(S) TO
MANUFACTURE COMPONENTS FOR US. IF WE ARE UNABLE TO LOCATE, HIRE AND RETAIN THESE
FIRM(S), OUR BUSINESS WILL FAIL.
We intend to hire a third party firm(s) to manufacture the components of our
product. Should we be unable to contract qualified third parties firm(s) to
manufacture because we are unable to find them, are unable to attract them to
our company or are unable to afford them, we will never become profitable and
our business will fail.
WE ARE SUBJECT TO THE REQUIREMENTS OF SECTION 404 OF THE SARBANES-OXLEY ACT. IF
WE ARE UNABLE TO COMPLY WITH THE REQUIREMENTS IN A TIMELY MANNER THE MARKET
PRICE OF OUR STOCK COULD DECLINE.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective
disclosure controls and procedures. Our management has concluded that our
disclosure controls and procedures were not effective as of December 31, 2008.
Our compliance with Section 404 will require that we incur substantial expense
and expend significant management efforts. If we are not able to comply with
such requirements of Section 404 in a timely manner, the market price of our
stock could decline and we could be subject to sanctions or investigations by
the SEC or other regulatory authorities.
OUR INTERNAL CONTROL OVER FINANCIAL REPORTING WAS NOT CONSIDERED EFFECTIVE AS OF
DECEMBER 31, 2008 AND MAY CONTINUE TO BE INEFFECTIVE IN THE FUTURE, WHICH COULD
RESULT IN OUR FINANCIAL STATEMENTS BEING UNRELIABLE, GOVERNMENT INVESTIGATION OR
LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL REPORTS.
Our management has concluded that our internal control over financial reporting
was not effective as of December 31, 2008, as a result of several material
weaknesses. Descriptions of the material weaknesses are included in Item 9A(T),
"Control and Procedures", in this Annual Report on Form 10-K. The material
weaknesses could result in a misstatement of substantially all accounts and
disclosures, which would result in a material misstatement of annual or interim
financial statements that would not be prevented or detected. Errors in our
financial statements could require a restatement or prevent us from timely
filing our periodic reports with the SEC. Additionally, ineffective internal
control over financial reporting could cause investors to lose confidence in our
reported financial information.
While we are planning to take actions to remediate the material weaknesses, we
cannot be certain that any remedial measures we plan to take will be effective
in remedying all identified deficiencies in our internal control over financial
reporting or result in the design, implementation and maintenance of adequate
controls over our financial processes and reporting in the future. Our inability
to remediate the material weaknesses or any additional material weaknesses that
may be identified in the future could, among other things, cause us to fail to
timely file our periodic reports with the SEC and require us to incur additional
costs and divert management resources. Additionally, the effectiveness of our or
any system of disclosure controls and procedures is subject to inherent
10
limitations, and therefore we cannot be certain that our internal control over
financial reporting or our disclosure controls and procedures will prevent or
detect future errors or fraud in connection with our financial statements.
BECAUSE OUR EXECUTIVE OFFICERS AND DIRECTORS LIVE OUTSIDE OF THE UNITED STATES,
YOU MAY HAVE NO EFFECTIVE RECOURSE AGAINST THEM FOR MISCONDUCT AND MAY NOT BE
ABLE TO ENFORCE JUDGMENT AND CIVIL LIABILITIES AGAINST THEM. INVESTORS MAY NOT
BE ABLE TO RECEIVE COMPENSATION FOR DAMAGES TO THE VALUE OF THEIR INVESTMENT
CAUSED BY WRONGFUL ACTIONS BY OUR DIRECTORS AND OFFICERS.
Both of our directors and officers live outside of the United States. Mr. Guy
Ofir, our President, Chief Executive Officer and a director is a national and a
resident of Israel, and all or a substantial portion of his assets are located
outside of the United States. Mr. Emanuel Cohen, our Chief Financial Officer,
Secretary, Treasurer and a director is a national and a resident of Israel, and
all or a substantial portion of his assets are located outside of the United
States. As a result, it may be difficult for investors to enforce within the
United States any judgments obtained against our directors or officers, or
obtain judgments against them outside of the United States that are predicated
upon the civil liability provisions of the securities laws of the United States
or any state thereof. Investors may not be able to receive compensation for
damages to the value of their investment caused by wrongful actions by our
directors and officers.
BECAUSE WE HAVE TWO DIRECTORS, DEADLOCKS MAY OCCUR IN OUR BOARD'S
DECISION-MAKING PROCESS, WHICH MAY DELAY OR PREVENT CRITICAL DECISIONS FROM
BEING MADE.
Since we currently only have an even number of directors, deadlocks may occur
when such directors disagree on a particular decision or course of action. Our
Articles of Incorporation and By-Laws do not contain any mechanisms for
resolving potential deadlocks. While our directors are under a duty to act in
the best interest of our Company, any deadlocks may impede the further
development of our business in that such deadlocks may delay or prevent critical
decisions regarding our development.
POTENTIAL POLITICAL, ECONOMIC AND MILITARY INSTABILITY IN ISRAEL MAY ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.
Our principal offices and operations are located in Israel. Accordingly,
political, economic and military conditions in Israel directly affect our
operations. Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors. A state
of hostility, varying in degree and intensity, has led to security and economic
problems for Israel. Since October 2000, there has been an increase in
hostilities between Israel and the Palestinians, which has adversely affected
the peace process and has negatively influenced Israel's relationship with its
Arab citizens and several Arab countries. Such ongoing hostilities may hinder
Israel's international trade relations and may limit the geographic markets,
where we can sell our products as well. Furthermore, the United States
Department of State has issued advisories regarding travel to Israel, impeding
the ability of travelers to attain travel insurance. Furthermore, during July
and August of 2006 there have been hostilities between Israel and the Hezbollah
terrorist organization operating in Lebanon, and the north of Israel has been
hit by rockets launched from Lebanon. In December 2008 Israel launched a
military operation against armed forces of the Hamas terror organization in the
Gaza strip, in order to stop the firing of missiles and rockets from the Gaza
strip to Israeli territories. Any hostilities involving Israel or threatening
Israel, or the interruption or curtailment of trade between Israel and its
present trading partners, could adversely affect our operations.
RISKS ASSOCIATED WITH OUR COMMON STOCK
BECAUSE WE CAN ISSUE ADDITIONAL COMMON SHARES, PURCHASERS OF OUR COMMON STOCK
MAY INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION.
We are authorized to issue up to 185,000,000 common shares, of which 93,552,778
are issued and outstanding. Our board of directors has the authority to cause
our Company to issue additional shares of common stock without the consent of
any of our stockholders. Consequently, our stockholders may experience dilution
in their ownership of our Company in the future.
A DECLINE IN THE PRICE OF OUR COMMON STOCK COULD AFFECT OUR ABILITY TO RAISE
FURTHER WORKING CAPITAL AND ADVERSELY IMPACT OUR ABILITY TO CONTINUE OPERATIONS.
A prolonged decline in the price of our common stock could result in a reduction
in the liquidity of our common stock and a reduction in our ability to raise
capital. Because a significant portion of our operations has been and will be
financed through the sale of equity securities, a decline in the price of our
common stock could be especially detrimental to our liquidity and our
operations. Such reductions may force us to reallocate funds from other planned
uses and may have a significant negative effect on our business plans and
operations, including our ability to develop new products and continue our
current operations. If our stock price declines, we can offer no assurance that
we will be able to raise additional capital or generate funds from operations
sufficient to meet our obligations. If we are unable to raise sufficient capital
in the future, we may not be able to have the resources to continue our normal
operations.
The market price for our common stock may also be affected by our ability to
meet or exceed expectations of analysts or investors. Any failure to meet these
expectations, even if minor, may have a material adverse effect on the market
price of our common stock.
TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS,
WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
11
The SEC has adopted regulations which generally define "penny stock" to be any
equity security that has a market price (as defined) less than $5.00 per share
or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and "accredited investors". The term
"accredited investor" including, among others, institutions with assets in
excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 jointly with their spouse. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document in a form prepared by the SEC, which provides information
about penny stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.
FINANCIAL INDUSTRY REGULATION AUTHORITY SALES PRACTICE REQUIREMENTS MAY ALSO
LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
In addition to the "penny stock" rules described above, the Financial Industry
Regulation Authority, or FINRA has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
OUR COMMON STOCK IS ILLIQUID AND THE PRICE OF OUR COMMON STOCK MAY BE NEGATIVELY
IMPACTED BY FACTORS WHICH ARE UNRELATED TO OUR OPERATIONS.
Our common stock currently trades on a limited basis on the OTC Bulletin Board.
Trading of our stock through the OTC Bulletin Board is frequently thin and
highly volatile. There is no assurance that a sufficient market will develop in
the stock, in which case it could be difficult for stockholders to sell their
stock. The market price of our common stock could fluctuate substantially due to
a variety of factors, including market perception of our ability to achieve our
planned growth, quarterly operating results of our competitors, trading volume
in our common stock, changes in general conditions in the economy and the
financial markets or other developments affecting our competitors or us. In
addition, the stock market is subject to extreme price and volume fluctuations.
This volatility has had a significant effect on the market price of securities
issued by many companies for reasons unrelated to their operating performance
and could have the same effect on our common stock.
WE DO NOT INTEND TO PAY DIVIDENDS ON ANY INVESTMENT IN THE SHARES OF STOCK OF
OUR COMPANY AND THERE WILL BE FEWER WAYS FOR INVESTORS TO MAKE A GAIN ON ANY
INVESTMENT IN OUR COMPANY.
We have never paid any cash dividends and currently do not intend to pay any
dividends for the foreseeable future. To the extent that we require additional
funding currently not provided for in our financing plan, our funding sources
may prohibit the payment of a dividend. Because we do not intend to declare
dividends, any gain on an investment in our Company will need to come through an
increase in the stock's price. This may never happen and investors may lose all
of their investment in our Company.
12
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our executive and head office is located at Suite 105 - 5348 Vegas Dr., Las
Vegas, NV 89108. Our office is rented on a month to month sub-lease at a cost of
$50 per month. We also have an office in Israel at 26 Haga'aton Blvd., Nahariya
22401, which is provided to us free of charge by our directors. We believe that
our office space and facilities are sufficient to meet our present needs and do
not anticipate any difficulty securing alternative or additional space, as
needed, on terms acceptable to us.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three month period ended December 31, 2008, there has not been any
matter which was submitted to a vote of the Company's stockholders through the
solicitation of proxies or otherwise.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER
PURCHASES OF EQUITY SECURITIES
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our stock is listed for quotation on the OTC Bulletin Board under the trading
symbol "ESYE.OB". Our common shares initially began trading on the OTC Bulletin
Board on December 26, 2007. The following table sets forth, for the periods
indicated, the high and low bid prices for the end of 2007 and for each quarter
within the fiscal year ended December 31, 2008 as reported by the quotation
service operated by the OTC Bulletin Board. All quotations for the OTC Bulletin
Board reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
Year 2007 High Low
--------- ---- ---
Fourth Quarter* $0.30 $0.15
Year 2008 High Low
--------- ---- ---
First Quarter $0.30 $0.15
Second Quarter $0.30 $0.12
Third Quarter $0.30 $0.16
Fourth Quarter $0.17 $0.02
- ----------
* From December 26, 2007 through December 31, 2007.
On March 27, 2009, the closing bid price of our common stock as reported on the
OTC Bulletin Board was $0.07 per share.
Holladay Stock Transfer is the registrar and transfer agent for our common
shares. Their address is 2939 North 67th Place, Scottsdale, Arizona 85251,
U.S.A., telephone: +1 (480) 481-3940.
HOLDERS
On March 27, 2009, we had 58 holders of record of our common stock and
93,552,778 shares of our common stock were issued and outstanding, plus an
additional 15,029,440 shares of common stock issuable upon the exercise of
outstanding warrants. Some of our shares are held in brokers' accounts, so we
are unable to give an accurate statement of the number of beneficial
stockholders.
DIVIDEND POLICY
We have not declared or paid any cash dividends since inception. We do not
intend to pay any cash dividends in the foreseeable future. Although there are
no restrictions that limit our ability to pay dividends on our common stock, we
intend to retain future earnings for use in our operations and the expansion of
our business. Our future dividend policy will be determined from time to time by
our Board of Directors.
EQUITY COMPENSATION PLAN INFORMATION
As of March 27, 2009 and as of December 31, 2008, the end of our most recently
completed fiscal year, we did not have any equity compensation plan.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
We are a development stage company with limited operations and no revenues from
our business operations. 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 products. We have completed
finalization of the design of the smaller of our two models of YoGen(R) chargers
and finalized and executed an agreement with a Chinese manufacturing firm to
begin mass production of the two YoGen(R) products. We anticipate the first
assembly pilot run of 500 units to begin on April 15, 2009, followed by an
assembly pilot run of 5,000 units beginning on May 15, 2009. We also completed
the development of a prototype of our YoGen Max(TM).
14
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2008 COMPARED TO MAY 17, 2007
(INCEPTION) TO DECEMBER 31, 2007
During the inception through December 31, 2008 and 2007 we incurred operating
expenses of $2,220,567 and $30,780, respectively which include $723,222 and $0
of product development costs, $1,435,286 and $0 in professional fees related to
accounting, consulting and legal, $6,718 and $1,000 related to filing fees and
$37,341 and $29,780 of general and administrative expenses. Expenses increased
from the comparative period due to an overall increase in our activity and
increased expenses as a result of being a reporting company.
During the fiscal year ended December 31, 2008, we incurred operating expenses
of $2,171,787 which include $723,222 of product development costs, $1,435,286 in
professional fees related to accounting, consulting and legal, $5,718 related to
filing fees and $7,561of general and administrative expenses. Expenses increased
from the comparative period due to an overall increase in activity by the
Company and increased expenses as a result of being a reporting company.
NET LOSS
We incurred a loss of $2,193,339 and $30,112 for the inception through December
31, 2008 and 2007, respectively, compared to $2,163,227 for the fiscal year
ended December 31, 2008.
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 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 December 31, 2008, we had cash of $124,533, representing a net increase in
cash of $51,845 since December 31, 2007.
Cash generated by financing activities during the fiscal year ended December 31,
2008 amounted to $1,041,917 resulting from the sale of stock in private
placements during February, March and September of 2008. Cash used in operating
activities amounted to $990,072 represented by a loss of $2,163,227 plus a
decrease in prepaid expenses from the previous balance sheet of $12,500, offset
by non-cash adjustments for contributed capital and common stock and warrants
issued for services totaling $1,185,655.
ANTICIPATED CASH REQUIREMENTS
We estimate our minimum cash requirements until the end of fiscal year 2009 to
be as follows:
Present to April 2009 to July 2009 to October 2009 to Present to
March 2009 June 2009 September 2009 December 2009 December 2009
---------- --------- -------------- ------------- -------------
YoGen(R)molding and tooling $ 35,000 -- -- -- $ 35,000
YoGen(R)manufacturing pilot $ 10,000 -- -- -- $ 10,000
YoGen(R)manufacturing $ 75,000 $500,000 $1,000,000 $2,000,000 $3,575,000
YoGen MaxTM R&D -- -- $ 75,000 $ 75,000 $ 150,000
YoGen BatTM R&D -- -- $ 100,000 $ 150,000 $ 250,000
Legal/Accounting $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 100,000
Advertising/Marketing -- $ 25,000 $ 25,000 $ 25,000 $ 75,000
Miscellaneous Expenditure $ 15,000 $ 15,000 $ 15,000 $ 15,000 $ 60,000
-------- -------- ---------- ---------- ----------
$235,000 $640,000 $1,265,000 $2,715,000 $4,255,000
======== ======== ========== ========== ==========
For the 12 months ended December 31, 2008, we recorded a net operating loss of
$2,163,227 and have an accumulated deficit of $2,193,339 since inception. As at
December 31, 2008, we had cash on hand of $124,533 and $12,500 in prepaid
expenses. For the next 12 months, management estimates minimum cash requirements
of $4,255,000 to fund on-going operations, massive production of the YoGen(R)
and planned research and development programs. Accordingly, we do not have
sufficient funds to meet our plan of operation over the next 12 months and will
need to obtain further financing through issuance of shares, debentures or
convertible debentures. We will also endeavor to access available funding from
research and development grants or loans from various public and private
research granting agencies. Moreover, all cash operating expenses will be
carefully monitored to ensure we can meet our obligations as they become due.
15
Due to the current financial crisis, there can be no assurance that additional
financing will be available when needed or, if available, on commercially
reasonable terms. If we are not able to obtain additional financing on a timely
basis, we may not be able to meet our obligations as they become due and may be
forced to scale down or perhaps even cease business operations.
On April 20, 2008, we entered into an exclusive purchasing and marketing
agreement with Al-Sadeef Trading Company (headquartered in Jordan) and its
stockholders Mr. Tahseen Jasim Hamadi and Mr. Ali Jasim Hamadi for the purchase,
sale and marketing of our Yogen(R) product in the Middle East. Pursuant to the
terms of the agreement, the buyer agreed to purchase a minimum of 300,000 units
of the Yogen(R) product per year for a price per unit equal to the manufacturing
price plus 30%, with all shipment expenses incurred by us. We expect to receive
the first order in the coming weeks and under the agreement we will be obligated
to use reasonable efforts to manufacture and ship the products within 90 days
from acceptance of such order.
On May 17, 2007, we 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, we closed a private placement of 30,333,190 shares of common
stock at a price of $0.003 per share with aggregate proceeds of $91,000.
On February 28, 2008, we closed a private placement offering of 367,647.6 units,
each unit being offered for $1.70, for an aggregate gross proceeds of $625,001.
Each unit consisted of (i) ten shares of common stock, (ii) thirty Class A
Warrants, each entitling the holder thereof to purchase one share of common
stock at an exercise price of $0.27, expiring five years from the date of
purchase. We agreed to register the shares and warrants issued in this
transaction on a registration statement. The registration statement was declared
effective on October 31, 2008.
On February 28, 2008, we issued and sold 208,333 shares of our common stock for
a gross purchase price of US $50,000, or a purchase price of $0.24 per share.
On March 3, 2008, we issued to our former legal counsel 300,000 shares of common
stock valued at $0.24 per share reflecting an aggregate value of $72,000 in
consideration for legal services provided 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.
On March 10, 2008, we entered into a Securities Purchase Agreement and a
Registration Rights Agreement with Tailor-Made Capital Ltd., or TMC, relating to
the issuance to TMC of 882,353 shares of our common stock, par value $0.0001 per
share, and a warrant to purchase up to 3,000,000 shares of common stock at a
price of $0.27 per share, or the Warrant. The Warrants expire in March 2013. The
Securities Purchase Agreement further provided that, at the Company's demand,
TMC will purchase up to an additional $1,000,000 of shares of the Company's
common stock commencing immediately after the date that the shelf registration
of the Company's shares that are subject to the Securities Purchase Agreement is
declared effective, or the Put. We agreed to file a registration statement to
register all of the shares of common stock to be issued pursuant to the
Securities Purchase Agreement, including those shares issuable upon the exercise
of the Warrant and the Put. Such registration statement was declared effective
on October 31, 2008. The Put has not been exercised.
On March 25, 2008, the Company entered into a subscription agreement under which
it issued 2,000,000 shares for cash payment of $600,000 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 (pursuant to an agreement dated January 16, 2008) we issued
4,285,714 shares of common stock for an aggregate purchase price of $300,000,
with a purchase price of $0.07 per share. On March 27, 2008, we entered into a
consulting services agreement under which a consultant who provides us certain
investor and market relations services has been issued with 1,500,000 shares of
common stock and received 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.
On September 15, 2008, we issued 116,707 shares of our common stock to 9
subscribers at a price of $0.15 per share for gross offering proceeds of
$17,488.
GOING CONCERN
There is substantial doubt about our ability to continue as a going concern as
the continuation of our business is dependent upon obtaining further long-term
financing, successful development of our technologies into a marketable product
and successful and sufficient market acceptance of our products once developed
and, finally, achieving a profitable level of operations. The issuance of
additional equity securities by us could result in significant dilution of the
equity interests of our current stockholders. Obtaining commercial loans,
assuming those loans would be available, will increase our liabilities and
future cash commitments.
16
Due to the uncertainty of our ability to meet current operating and capital
expenses, our independent auditors included an explanatory paragraph regarding
substantial doubt about our ability to continue as a going concern in their
audit report for the period ended December 31, 2008.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not expect to purchase any significant equipment over the twelve months.
EMPLOYEES
Currently our only employees are our two directors, who provide us with services
for no consideration. We have no intention of hiring employees until we have
sufficient financing for the manufacturing of our products. Once we have the
cash resources, we plan to hire a marketing manager and a production manager. To
date we have not identified such people.
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.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
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.
17
ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in Item 15(a) of this Annual
Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A(T). CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of December 31, 2008, an evaluation was carried out under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934). These disclosures controls and procedures include,
without limitation, controls and procedures designed to ensure that information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure. Based upon that evaluation, the Chief Executive Officer and
the Chief Financial Officer concluded that, at December 31, 2008, the design and
operation of these disclosure controls and procedures were not effective at
ensuring that information required to be disclosed by us in the reports that we
file or submits under the Exchange Act of 1934, or the Exchange Act, is
recorded, processed, summarized and reported within the time periods specified
in applicable rules and forms because the material weakness identifies in
management's evaluation of our internal control over financial reporting also
cause our disclosure control and procedures to not be effective.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control system is designed to provide
reasonable assurance to our management and board of directors regarding the
reliability of financial reporting and the preparation of financial statements
for external reporting purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes those
policies and procedures that:
* Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
* Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles in the United States of America, and that
receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and
* Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets that
could have a material effect on the financial statements.
Management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2008. In making this assessment, we used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in INTERNAL CONTROL -- INTEGRATED FRAMEWORK.
Because of the material weaknesses described below, our management, under the
supervision of and with the participation of our Chief Executive Officer and
Chief Financial Officer, concluded that, as of December 31, 2008, our internal
control over financial reporting was not effective based on the criteria in
INTERNAL CONTROL -- INTEGRATED FRAMEWORK issued by the COSO. A material weakness
is a deficiency, or combination of deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material
misstatement of our annual or interim consolidated financial statements will not
be prevented or detected on a timely basis.
18
In our assessment of the effectiveness of internal control over financial
reporting as of December 31, 2008, we identified that our material weaknesses
derived from the small size of our Company. That small size makes the proper
identification and authorization of transactions difficult, as we have
essentially only two individuals overseeing this process, which and creates
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
Exchange Act.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the SEC that
permit the Company to provide only management's report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There was no change to our internal control over financial reporting that
occurred during our fourth quarter ended December 31, 2008 that has materially
affected, or is reasonably likely to materially affect the Company's internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS
All directors of our Company hold office until the next annual meeting of the
stockholders, if any, or until their successors have been elected and qualified.
The executive officers of our Company are appointed by our board of directors
and hold office until their death, resignation or removal from office. Our
directors and executive officers, their ages, positions held, and duration as
such, are as follows:
Position Held Date First Elected
Name with the Company Age or Appointed
---- ---------------- --- ------------
Guy Ofir Chief Executive Officer, President and Director 36 May 17, 2007
Emanuel Cohen Chief Financial Officer, Secretary, Treasurer and Director 59 May 17, 2007
The following is a brief account of the education and business experience of
each director and executive officer during at least the past five years,
indicating each person's business experience, principal occupation during the
period, and the name and principal business of the organization by which they
were employed.
MR. GUY OFIR has been serving as our Chief Executive Officer, President and a
member of our Board of Directors since May 17, 2007. Mr. Ofir is an attorney and
owned a law firm in Israel which specializes in corporate and international law.
His law firm employed several lawyers and represents over 100 companies. Mr.
Ofir is also the owner of Pipera. In addition to his work in our Company, he
also manages investments and companies in Romania. His wholly owned company (Guy
Ofir & Co. SRL) deals with land and properties in Bucharest.
MR. EMANUEL COHEN has been serving as our Secretary, Treasurer and a member of
our Board of Directors since May 17, 2007. Mr. Cohen is a major stockholder and
a director of several privately owned companies in Israel and in the United
States. His expertise includes land, properties & fabrics. He is the President
of Amitex & Emday Ltd., one of the largest Israeli fabric companies. Mr. Cohen
is also a shareholder in Lev Hazom Ltd., Hafia Zamin Ltd., Leved Adi Properties
Ltd, and Mashko Ltd, all of which are private companies which hold land &
properties in Israel. In addition to his activities in Europe and Israel, Mr.
Cohen is also a shareholder in the following companies which hold land and
properties in the USA - Echo investments LLC, Bilou Capital investment LLC and
Eden Associated LLC. Previously he was an officer in Israel's largest bank, Bank
Hapoalim Ltd.
There are no family relationships among our directors or executive officers.
19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and directors,
and persons who own more than 10% of a registered class of our equity securities
to file reports of ownership and changes in ownership with the SEC. These
persons are also required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review of such forms or
written representations from reporting persons, we believe that during fiscal
year ended December 31, 2008, our executive officers and directors and other
reporting persons filed on a timely basis all of the reports required by Section
16(a), with the exception of Mr. Guy Ofir who failed to timely file two Form 4s,
one reporting the purchase of 43,500 shares of Common Stock on September 30,
2008 by his wife (and filed on October 3, 2008), and the other reporting the
purchase of 170,000 shares of Common Stock between November 4 to November 24,
2008 by himself and by his wife (and filed on November 25, 2008).
AUDIT COMMITTEE, AUDIT COMMITTEE FINANCIAL EXPERT
We do not have a separately-designated standing audit committee, or a committee
performing similar functions. We believe that our board of directors is capable
of analyzing and evaluating our financial statements and understanding internal
controls and procedures for financial reporting. The board of directors of our
Company does not believe that it is necessary to have an audit committee because
management believes that the functions of an audit committee can be adequately
performed by our board of directors. In addition, our board of directors has
determined that we do not have a board member that qualifies as an "audit
committee financial expert" as defined in Item 407(d)(5) of Regulation S-K, nor
do we have a Board member that qualifies as "independent" as the term is used in
Section 10A(m)(3)(B) under the Exchange Act. We believe that retaining an
independent director who would qualify as an "audit committee financial expert"
would be overly costly and burdensome and is not warranted in our circumstances
given the stage of our development and the fact that we have not generated any
positive cash flows from operations to date.
CODE OF ETHICS
We do not currently have a Code of Ethics applicable to our principal executive,
financial or accounting officer, and are in the process of adopting such a code.
EMPLOYEES
Currently our only employees are our directors and officers.
ITEM 11. EXECUTIVE COMPENSATION
No executive officer of our Company has received any compensation during the
period from May 17, 2007 (date of inception) to December 31, 2008.
SUMMARY COMPENSATION TABLE
Non-Equity Nonqualified
Incentive Deferred All
Name and Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary($) Bonus($) Awards($) Awards($) sation($) Earnings($) sation($) Totals($)
-------- ---- --------- -------- --------- --------- --------- ----------- --------- ---------
Guy Ofir 2007 Nil Nil Nil Nil Nil Nil Nil Nil
Chief Executive 2008 Nil Nil Nil Nil Nil Nil Nil Nil
Officer, President
and director(1)
Emanuel Cohen 2007 Nil Nil Nil Nil Nil Nil Nil Nil
Secretary, Chief 2008 Nil Nil Nil Nil Nil Nil Nil Nil
Financial Officer,
Treasurer and
director(2)
- ----------
(1) Guy Ofir became our Chief Executive Officer, President and a director on
May 17, 2007.
(2) Emanuel Cohen became our Chief Financial Officer, Secretary, Treasurer and
a director on May 17, 2007.
20
EQUITY AWARDS
Since May 17, 2007 (date of inception) to the period ended December 31, 2008, we
have not adopted any stock option plans or other equity or other compensatory
plans, and we have not granted any stock options nor stock appreciation right to
any of our directors or executive officers.
COMPENSATION OF DIRECTORS
There are no arrangements pursuant to which directors are or will be compensated
in the future for any services provided as directors, unless and until we begin
to realize revenues and become profitable in our business operations.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
We have not entered into any employment agreement or consulting agreements with
our directors and executive officers. There are no arrangements or plans in
which we provide pension, retirement or similar benefits for directors or
executive officers. Our directors and executive officers may receive stock
options at the discretion of our board of directors in the future. We do not
have any material bonus or profit sharing plans pursuant to which cash or
non-cash compensation is or may be paid to our directors or executive officers,
except that stock options may be granted at the discretion of our board of
directors.
COMPENSATION COMMITTEE
We do not presently have a compensation committee. Due to the size of our
Company, our board of directors currently performs functions related to
oversight of compensation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDERS MATTERS
The following table sets forth certain information, to the best of our
knowledge, as of March 27, 2009 (unless provided herein otherwise), with respect
to holdings of our Common Stock by (1) each person known by us to be the
beneficial owner of more than 5% of the total number of shares of our Common
Stock outstanding as of such date; (2) each of our directors; (3) each of our
executive officers; and (4) all of our directors and our current executive
officers as a group. Each stockholder has sole voting and investment power with
respect to the shares of Common Stock, except as otherwise indicated. Beneficial
ownership consists of a direct interest in the shares of Common Stock, except as
otherwise indicated.
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership Class (1)
- ------------------------ -------------------- ---------
Guy Ofir (2)
40 Baz St., Karmiel 20100
Israel 23,909,800 25.5%
Emanuel Cohen (3)
51 Bilu St.,
Ra'anan, Israel 23,675,000 25.3%
Albert Glinoviecki
19 Dov Fromer St.,
Kiryat Shemuel, Israel 5,000,000 5.4%
Meir Duke (4)
12300 Highgrove Ct,
Raistertown, MD
USA 10,142,857 7.7%
Meitav Entities and TMC (5)
4 Berkowitz St., Tel Aviv
Israel 18,588,273 9.99% (6)
Directors and Executive Officers
as a Group (2 persons) 47,584,800 50.8%
21
- ----------
(1) Based on 93,552,778 shares of our common stock issued and outstanding as of
March 27, 2009. Beneficial ownership is determined in accordance with the
rules of the SEC and generally includes voting or investment power with
respect to securities. Shares of Common Stock subject to warrants currently
exercisable, or exercisable within 60 days, are reflected in the table
above and are deemed outstanding for purposes of computing the percentage
ownership of the person holding such warrants, but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person.
(2) Mr. Ofir is one of our two directors and an executive officer. Includes
3,589,800 shares owned by Mr. Ofir's wife. Mr. Ofir disclaims beneficial
ownership of these shares.
(3) Mr. Cohen is one of our two directors and an executive officer. Includes
3,675,000 shares owned by Mr. Cohen's wife. Mr. Cohen disclaims beneficial
ownership of these shares.
(4) Includes 1,000,000 shares issuable upon exercise of outstanding Common
Stock purchase warrants. This information is based solely on Schedule 13D
filed by the beneficial owner on April 16, 2008, describing the holdings of
the beneficial owner as of April 7, 2008.
(5) An entity controlled by Meitav Investment House Ltd. ("Meitav"), which as
reported on a Schedule 13G filed on March 19, 2008, is beneficially owned
by Messrs. Zvi Stepak and Shlomo Simanovsky through intermediary entities.
Messrs. Zvi Stepak and Shlomo Simanovsky may exercise shared voting and
investment powers with respect to all shares owned by Meitav and the Meitav
Entities. Includes 14,029,440 shares issuable upon exercise of outstanding
Common Stock purchase warrants. This information is based solely on
Schedule 13G filed by the beneficial owner on March 19, 2008, describing
the holdings of the beneficial owner as of March 10, 2008.
(6) In an appendix to the warrant issued by us to the Meitav Entities and TMC
the following exercise limitations have been agreed to: we shall not effect
the exercise of the warrant and the holder shall not have the right to
exercise any portion of the warrant to the extent that after giving effect
to such issuance after exercise, such holder along with its affiliates
(which include all of Meitav Entities and TMC) shall have more than 9.99%
of our outstanding Common Stock. This provision however, may be waived by
the holder at its election upon not less than 61 days' notice to us.
EQUITY COMPENSATION PLAN INFORMATION
As of March 27, 2009 and as of December 31, 2008, the end of our most recently
completed fiscal year, our Company did not have any equity compensation plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Except as described below, no director, executive officer, principal stockholder
holding at least 5% of our common shares, or any family member thereof, had any
material interest, direct or indirect, in any transaction, or proposed
transaction, during the twelve months ended December 31, 2008, in which the
amount involved in the transaction exceeded or exceeds the lesser of $120,000 or
one percent of the average of our total assets at the year end for the last
three completed fiscal years:
* During the period ended December 31, 2008, the Company paid $723,222 in
product development costs to Pipera, a company wholly owned by one of our
directors, the Chief Executive Officer and President of our Company, Mr.
Ofir.
* The Company's directors provide our Company office space free of charge.
The Company has recorded the estimated fair value of the office space of
$1,000 per month as a contribution to capital.
We have determined that neither Mr. Guy Ofir nor Mr. Emanuel Cohen are
independent directors, as that term is used in Rule 4200(a)(15) of the Nasdaq
Market Place Rules.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
The following is a summary of the fees billed to us by Moore & Associates
Chartered for professional services rendered for the past two fiscal years:
Fee Category Fiscal 2008 Fees Fiscal 2007 Fees
------------ ---------------- ----------------
Audit Fees (1) $7,750 $1,500
Audit-Related Fees (2) $ 880 Nil
Tax Fees $ 0 $ 0
All Other Fees $ 0 $ 0
- ----------
(1) Consist of fees billed for professional services rendered for the audit of
our financial statements and review of the interim financial statements
included in quarterly reports and services that are normally provided by
Moore & Associates Chartered in connection with statutory and regulatory
filings or engagements.
(2) Consist of fees billed for bookkeeping.
22
POLICY ON PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT AUDITORS
We do not have an Audit Committee. Nevertheless, the Company's policy is to
pre-approve all audit and permissible non-audit services provided by the
independent auditors. These services may include audit services, audit-related
services, tax services, and other services. Pre-approval is generally provided
for up to one year, and any pre-approval is detailed as to the particular
service or category of services and is generally subject to a specific budget.
23
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) Financial Statements and Financial Statement Schedules filed as part of this
report:
Page
----
Report of Independent Registered Public Accounting Firm 26
Balance Sheets, as of December 31, 2007 and 2008 27
Statements of Operations, For the Year Ended December 31, 2008, Period 28
from May 17, 2007 to December 31, 2007 and Period from May 17, 2007 to
December 31, 2008
Statements of Cash Flows, For the Year Ended December 31, 2008, Period 29
from May 17, 2007 to December 31, 2007 and Period from May 17, 2007 to
December 31, 2008
Statements of Stockholders' Equity, For the Year Ended December 31, 30
2008
Notes to Consolidated Financial Statements 31
All other schedules for which provision is made in the applicable accounting
regulations of the SEC are not required under the related instructions, or are
inapplicable, and therefore have been omitted.
(b) Exhibits
Exhibit No. Exhibit Description
----------- -------------------
3.1* Composite copy of the Articles of Incorporation of Easy Energy,
Inc.
3.2 Bylaws of Easy Energy, Inc. (incorporated by reference to the
Company's Registration Statement on Form SB-2 (No. 333- 146895)
filed with the SEC on October 24, 2007).
4.1 Securities Purchase Agreement dated as of March 10, 2008 between
the Company and Tailor-Made Capital Ltd. (incorporated by
reference to exhibit 4.1 to the Company's Current Report on Form
8-K/A filed with the SEC on July 7, 2008).
4.2 Registration Rights Agreement dated as of March 10, 2008 between
the Company and Tailor-Made Capital Ltd. (incorporated by
reference to exhibit 4.1 to the Company's Current Report on Form
8-K filed with the SEC on March 24, 2008).
4.3 Form of a Stock Purchase Warrant dated February 28, 2008 and
Appendix (which were granted to certain Meitav Entities
(incorporated by reference to exhibit 4.2 and 4.3, respectively,
to the Company's Registration Statement on Form S-1/A (No.
333-150468) filed with the SEC on July 7, 2008).
10.1 Exclusive Purchasing and Marketing Agreement between Easy Energy,
Inc. and Al-Sadeef Trading Company dated April 20, 2008
(incorporated by reference to our Quarterly Report on Form 10-Q
filed with the SEC on November 19, 2008).
10.2 Assignment of patent application ((incorporated by reference to
Company's Registration Statement on Form SB-2 filed with the SEC
on October 24, 2007).
24
Exhibit No. Exhibit Description
----------- -------------------
31.1* Rule 13a-14(a) Certification of Principal Executive Officer.
31.2* Rule 13a-14(a) Certification of Principal Financial Officer.
32.1** Certification of Principal Executive Officer furnished pursuant
to 18 U.S.C. Section 1350.
32.2** Certification of Principal Financial Officer furnished pursuant
to 18 U.S.C. Section 1350.
- ----------
* Filed herewith.
** Furnished herewith
25
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Easy Energy, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Easy Energy, Inc. (A
Development Stage Company) as of December 31, 2008 and 2007, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
year ended December 31, 2008, for the period from inception May 17, 2007 through
December 31, 2007 and from inception on May 17, 2007 through December 31, 2008.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conduct our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Easy Energy, Inc. (A
Development Stage Company) as of December 31, 2008 and 2007, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
year ended December 31, 2008, for the period from inception May 17, 2007 through
December 31, 2007 and from inception on May 17, 2007 through December 31, 2008,
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has net losses of $2,193,339 as of December
31, 2008, which raises substantial doubt about its ability to continue as a
going concern. Management's plans concerning these matters are also described in
Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Moore & Associates, Chartered
- -----------------------------------------
Moore & Associates, Chartered
Las Vegas, Nevada
March 24, 2009
6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
26
EASY ENERGY INC.
(A Development Stage Company)
Balance Sheets
December 31, December 31,
2008 2007
----------- -----------
ASSETS
Current:
Cash and bank accounts $ 124,533 $ 72,688
Prepaid expenses 12,500 --
Prepaid expenses - stock related 112,500 --
----------- -----------
Total current assets 249,533 72,688
----------- -----------
Total Assets $ 249,533 $ 72,688
=========== ===========
CURRENT LIABILITIES
Current:
Due to director $ 300 300
----------- -----------
Total Current Liabilities 300 300
----------- -----------
STOCKHOLDERS` EQUITY
Preferred stock authorized - 50,000,000 shares with a par value of
$0.0001 None issued or outstanding
Common stock authorized -
1,000,000,000 shares with a par value of $0.00001
Common stock issued and outstanding -
93,552,778 common shares (December 31, 2007: 80,333,190) 933 803
Additional paid in capital 2,653,404 101,697
Deferred offering costs - stock related (211,765) --
Deficit accumulated during the development stage (2,193,339) (30,112)
----------- -----------
Total Stockholders' Equity 249,233 72,388
----------- -----------
Total Liabilities and Stockholders' Equity $ 249,533 $ 72,688
=========== ===========
The accompanying notes are an integral part of these financial statements
27
EASY ENERGY INC.
(A Development Stage Company)
Statements of Operations
May 17, 2007 May 17, 2007
(Inception) to (Inception) to
December 31, December 31,
2008 2007 2008
----------- ----------- -----------
Revenue $ -- $ -- $ --
Expenses
General and Administrative 7,561 29,780 37,341
Filing Fee 5,718 1,000 6,718
Product Development 723,222 -- 723,222
Professional fees 1,435,286 -- 1,435,286
----------- ----------- -----------
Total Expenses 2,171,787 30,780 2,220,567
----------- ----------- -----------
Other Income
Interest income 8,560 668 9,228
----------- ----------- -----------
Total Other Income 8,560 668 9,228
----------- ----------- -----------
Net loss before income taxes (2,163,227) (30,112) (2,193,339)
Provision for Income Taxes -- -- --
----------- ----------- -----------
Net loss for the period $(2,163,227) $ (30,112) $(2,193,339)
=========== =========== ===========
Basic and Diluted (Loss) per Share $ (0.04) a
----------- -----------
Weighted Average Number of Shares 51,005,598 50,000,000
----------- -----------
- ----------
(a) = Less than $0.01 per share
The accompanying notes are an integral part of these financial statements
28
EASY ENERGY INC.
(A Development Stage Company)
Statements of Cash Flows
May 17, 2007 May 17, 2007
(Inception) to (Inception) to
December 31, December 31,
2008 2007 2008
----------- ----------- -----------
Operating Activities
Net loss $(2,163,227) $ (30,112) $(2,193,339)
Adjustments to reconcile net loss to
cash used in operating activities:
Common stock and warrants issued for services 1,185,655 -- 1,185,655
Changes in operating assets and liabilities:
(Increase) Decrease in prepaid expenses (12,500) -- (12,500)
----------- ----------- -----------
Net Cash (Used) by Operating Activities (990,072) (30,112) (1,020,184)
----------- ----------- -----------
Financing Activities
Cash from sale of stock 1,041,917 102,500 1,144,417
Due to shareholder -- 300 300
----------- ----------- -----------
Cash Provided by Financing Activities 1,041,917 102,800 1,144,717
----------- ----------- -----------
Net Increase in Cash 51,845 75,688 124,533
Cash, Beginning of Period 72,688 -- --
----------- ----------- -----------
Cash, End of Period $ 124,533 $ 72,688 $ 124,533
=========== =========== ===========
Non-cash activities:
Contributed capital $ -- $ 3,000 $ --
Stock and warrants issued for services $ 957,083 $ 957,083 $ --
Supplemental Information:
Interest Paid $ -- $ -- $ --
Income Taxes Paid $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements
29
EASY ENERGY INC.
(A Development Stage Company)
Statements of Stockholders` Equity
Common Shares
-------------------------- Additional
Issued Paid In
Shares Amount Capital
------ ------ -------
Balance, May 17, 2007 (date of inception) -- $ -- $ --
Issued to founders on May 17, 2007 @ $0.0005 40,000,000 400 1,600
Private placement May 17, 2007 @ $0.0002 10,000,000 100 1,900
Private placement August 27, 2007 @ $0.003 30,333,190 303 90,697
Contributed capital -- -- 7,500
Net loss -- -- --
---------- ---------- ----------
Balance, December 31, 2007 80,333,190 803 101,697
Private placement January 16, 2008 @ $0.07 4,285,714 43 299,957
Private placement February 28, 2008 @ $0.17 3,676,480 37 624,964
Private placement February 28, 2008 @ $0.24 208,333 2 49,998
Shares for services March 3, 2008 @$0.24 300,000 3 71,997
Shares for services March 10, 2008 @ $0.24 882,353 9 211,756
Private placement March 25, 2008 @ $0.02 2,000,000 20 599,980
Shares for services March 27, 2008 @ $0.07 1,500,000 15 449,985
Private placement September 15, 2008 @0.15 116,707 1 17,487
Contributed capital -- -- 3,000
Fair value of warrants granted -- -- 222,583
Net loss -- -- --
---------- ---------- ----------
BALANCE, December 31, 2008 93,302,778 $ 933 $2,653,404
========== ========== ==========
Deficit
Accumulated
Deferred During
Offering Development
Costs Stage Total
----- ----- -----
Balance, May 17, 2007 (date of inception) $ -- $ -- $ --
Issued to founders on May 17, 2007 @ $0.0005 -- -- 2,000
Private placement May 17, 2007 @ $0.0002 -- -- 2,000
Private placement August 17, 2007 @ $0.003 -- -- 91,000
Contributed capital -- -- 7,500
Net loss -- (30,112) (30,112)
---------- ---------- ----------
Balance, December 31, 2007 -- (30,112) 72,388
Private placement January 16, 2008 @ $0.07 -- -- 300,000
Private placement February 28, 2008 @ $0.17 -- -- 625,001
Private placement February 28, 2008 @ $0.24 -- -- 50,000
Shares for services March 3, 2008 @$0.24 -- -- 72,000
Shares for services March 10, 2008 @ $0.24 (211,765) -- --
Private placement March 25, 2008 @ $0.02 -- -- 600,000
Shares for services March 27, 2008 @ $0.07 -- -- 450,000
Shares for services March 27, 2008 @ $0.07 -- -- 449,985
Private placement September 15, 2008 @0.15 -- -- 19,488
Contributed capital -- -- 3,000
Fair value of warrants granted -- -- 222,583
Net loss -- (2,163,227) (2,163,227)
---------- ---------- ----------
BALANCE, DECEMBER 31, 2008 $ (211,765) $(2,193,339) $ 249,233
========== ========== ==========
The accompanying notes are an integral part of these financial statements
30
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 has limited operations and in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 7 - Accounting and Reporting by
Development Stage Enterprises, is considered a development stage company, and
has had no revenues from operations to date.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS
These financial statements are prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the United States of
America. The Company was incorporated on May 17, 2007 and accordingly, the
Company is presenting the statement of operations from May 17, 2007 through
December 31, 2007 for comparison purposes.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128 - Earnings Per Share, which specifies the computation, presentation and
disclosure requirements for earnings (loss) per share for entities with publicly
held common stock. SFAS No. 128 supersedes the provisions of Accounting
Principles Board ("APB") No. 15 - Earnings Per Share, and requires the
presentation of basic earnings (loss) per share and diluted earnings (loss) per
share. The Company has adopted the provisions of SFAS No. 128 effective upon its
inception.
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common stockholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common stockholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
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.
INCOME TAXES
The Company provides for income taxes under SFAS No. 109 - Accounting for Income
Taxes, and FASB Interpretation Number ("FIN") 48 - Accounting for Uncertainty in
Income Taxes - an interpretation of FSAB Statement No. 109, SFAS No. 109
requires the use of an asset and liability approach in accounting for income
taxes.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. No
provision for income taxes is included in the statement due to its immaterial
amount, net of the allowance account, based on the likelihood of the Company to
utilize the loss carry-forward.
31
EASY ENERGY, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 December
31, 2008.
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 December 31, 2008 of $2,193,339 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.
Managements' plan is to complete the design of the Company's product, to engage
third parties firms to manufacture the components of the product, develop and
manufacture a first product suited to cellular phone use and explore potential
distributors for our product. The Company had approximately $125,000 of cash on
hand as of December 31, 2008, and management anticipates that such funds will
not be sufficient to pay our 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.
The shares issued to date as part of this agreement have been charged to Prepaid
Expenses - stock related until such time the Company exercises its option to
demand an additional $1,000,000 of financing from the financer. At such time,
the deferred financing charges will be offset against the financing.
NOTE 5 - CAPITAL STOCK
COMMON SHARES - AUTHORIZED
As of March 24 2009, 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.
32
EASY ENERGY, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 5 - CAPITAL STOCK (CONTINUED)
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 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 Registrant's shares of common stock outstanding.
On February 28, 2008, the Company closed a private placement offering of
367,647.6 units, 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 Warrant. 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.
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 provided
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 (pursuant to an agreement dated 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 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 will 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.
33
EASY ENERGY, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 5 - CAPITAL STOCK (CONTINUED)
ISSUED AND OUTSTANDING (CONTINUED) -
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 TRANSACTIONS
On May 17, 2007 (inception), the Company issued 40,000,000 shares of its common
stock to its directors for cash of $2,000.
During the period ended December 31, 2008, the Company paid $723,222 in product
development costs to a company wholly owned by the chief executive officer,
president and director of the Company.
NOTE 7 - INCOME TAXES
The Company provides for income taxes under SFAS No. 109 - Accounting For Income
Taxes. SFAS No. 109 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.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $177,296, which is calculated by multiplying a 22%
estimated tax rate by the cumulative NOL of $805,893.
34
EASY ENERGY, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
Below is a listing of the most recent accounting standards SFAS 150-162 and
their effect on the Company.
STATEMENT NO. 150 - ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY (ISSUED 5/03)
This Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. The application of SFAS No. 150 did not have any effect on the Company's
financial statements.
STATEMENT NO. 151 - INVENTORY COSTS-AN AMENDMENT OF ARB NO. 43, CHAPTER 4
(ISSUED 11/04)
This Statement amends the guidance in ARB No. 43, Chapter 4, INVENTORY PRICING,
to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43,
Chapter 4, previously stated that "...under some circumstances, items such as
idle facility expense, excessive spoilage, double freight and re-handling costs
may be so abnormal ass to require treatment as current period charges...." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. The application of SFAS No. 151 did not have any effect on the
Company's financial statements.
STATEMENT NO. 152 - ACCOUNTING FOR REAL ESTATE TIME-SHARING TRANSACTIONS (AN
AMENDMENT OF FASB STATEMENTS NO. 66 AND 67)
This Statement amends FASB Statement No. 66, ACCOUNTING FOR SALES OF REAL
ESTATE, to reference the financial accounting and reporting guidance for real
estate time-sharing transactions that is provided in AICPA Statement of Position
(SOP) 04-2, ACCOUNTING FOR REAL ESTATE TIME-SHARING TRANSACTIONS.
This Statement also amends FASB Statement No. 67, Accounting FOR COSTS AND
INITIAL RENTAL OPERATIONS OF REAL ESTATE PROJECTS, states that the guidance for
(a) incidental operations and (b) costs incurred to sell real estate projects
does not apply to real estate time-sharing transactions. The accounting for
those operations and costs is subject to the guidance in SOP 04-2. The
application of SFAS No. 152 did not have any effect on the Company's financial
statements.
STATEMENT NO. 153 - EXCHANGES OF NON-MONETARY ASSETS (AN AMENDMENT OF APB
OPINION NO. 29)
The guidance in APB Opinion No. 29, ACCOUNTING FOR NON-MONETARY TRANSACTIONS, is
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, includes certain exceptions to the principle. This Statement amends
Opinion 29 to eliminate the exception for non-monetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. A non-monetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. The Company has
applied SFAS No. 153 to the changes made in the financial statements as of March
31, 2008 and December 31, 2008.
STATEMENT NO. 154 - ACCOUNTING CHANGES AND ERROR CORRECTIONS (A REPLACEMENT OF
APB OPINION NO. 20 AND FASB STATEMENT NO. 3)
This Statement replaces APB Opinion No. 20, ACCOUNTING CHANGES, and FASB
Statement No. 3, REPORTING ACCOUNTING CHANGES IN INTERIM FINANCIAL STATEMENTS,
and changes the requirements for the accounting for and reporting of a change in
35
EASY ENERGY, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENT (CONTINUED)
accounting principle. This Statement applies to all voluntary changes in
accounting principle. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed. The Company has
applied SFAS No. 154 to the changes made in the financial statements as of March
31, 2008 and December 31, 2008.
SFAS NO. 155 - ACCOUNTING FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS-AN AMENDMENT
OF FASB STATEMENTS NO. 133 AND 140
This Statement amends SFAB Statements No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. This Statement
resolves issues addressed in Statement 133 Implementation Issue No. D1,
Application of Statement 133 to Beneficial Interests in Securitized Financial
Assets. This statement is effective for all financial instruments acquired or
issued after the beginning of an entity's first fiscal year that begins after
September 15, 2006. The application of SFAS No. 155 did not have any effect on
the Company's financial statements.
SFAS NO. 156 - ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS-AN AMENDMENT OF FASB
STATEMENT NO. 140
This Statement amends FASB Statement No. 140 with respect to the accounting for
separately recognized servicing liabilities. An entity should adopt this
Statement as of the beginning of its first fiscal year that begins after
September 15, 2006. The application of SFAS No. 156 did not have any effect on
the Company's financial statements.
SFAS NO. 157 - FAIR VALUE MEASUREMENTS
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which
defines fair value, establishes a framework for measuring fair value in GAAP,
and expands disclosures about fair value measurements. SFAS No. 157 does not
require any new fair value measurements, but provides guidance on how to measure
fair value by providing a fair value hierarchy used to classify the source of
the information. This statement is effective for us beginning May 1, 2008. The
application of SFAS No. 157 will not have any effect on the Company's financial
statements.
SFAS NO. 158 - EMPLOYERS' ACCOUNTING FOR DEFINED BENEFIT PENSION AND OTHER
POSTRETIREMENT PLANS-AN AMENDMENT OF FASB STATEMENTS NO. 87, 88, 106, AND
132(R))
This Statement improves the financial reporting by requiring an employer to
recognize the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liabilities
in its statement of financial positions and to recognize changes in that funded
status in the year in which the changes occur through comprehensive income of a
business entity. This Statement also improves financial reporting by requiring
an employer to measure the funded status of a plan as of the date of its
year-end statement of financial position, with limited exceptions. The
application of SFAS No. 158 did not have any effect on the Company's financial
statements.
SFAS NO. 159 - THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL
LIABILITIES-INCLUDING AN AMENDMENT OF FASB STATEMENT NO. 115
This Statement permits entities to choose to measure many financial instruments
and certain items at fair value. The objective is to improve the financial
reporting by providing entities with the opportunity to mitigate volatility in
36
EASY ENERGY, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENT (CONTINUED)
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. This Statement is
expected to expand the use of fair value measurement objectives for accounting
for financial instruments. This Statement is effective as of the beginning of an
entity's first fiscal year that begins after November 15, 2007. The application
of SFAS No. 159 did not have any effect on the Company's financial statements.
SFAS NO. 160 - NON-CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS- AN
AMENDMENT OF ARB NO. 51
This Statement amends ARB 51 to establish accounting and reporting standards for
the non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. It also changes the way the consolidated income statement is
presented for non-controlling interest. This statement improves comparability by
eliminating diversity of methods. This statement also requires expanded
disclosure. The application of SFAS No. 160 did not have any effect on the
Company's financial statements.
SFAS NO. 161 - DISCLOSURE ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -
AN AMENDMENT OF FASB STATEMENT NO. 133
This Statement is intended to enhance the disclosure requirements for derivative
instruments and hedging activities as required by SFAS 133. The application of
SFAS No. 161 did not have any effect on the Company's financial statements.
SFAS NO. 162 - THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLE
This Statement identifies the sources of accounting principles and the framework
for selecting the principles to be used in the preparation of financial
statements for entities that are presented in conformity with GAAP hierarchy.
The application of SFAS No. 162 did not have any effect on the Company's
financial statements.
The past and future adoption of these Statements did not have and is not
expected to have a material effect on the Company's current financial position,
results or operations, or cash flows.
NOTE 9 - SUBSEQUENT EVENTS
On January 19, 2009, holders of majority of our voting power approved the
amendment to our articles of incorporation to decrease the authorized number of
shares of our Common Stock from 1,000,000,000 to 185,000,000 by written consent.
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.
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 27, 2009 By: /s/ Guy Ofir
-----------------------------------------------
Guy Ofir
Chief Executive Officer, President and Director
Dated: March 27, 2009 By: /s/ Emanuel Cohen
-----------------------------------------------
Emanuel Cohen
Chief Financial Officer, Treasurer, Secretary
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Guy Ofir Chief Executive Officer, President March 27, 2009
- ----------------------------- and Director
Guy Ofir
/s/ Emanuel Cohen Chief Financial Officer, Treasurer, March 27, 2009
- ----------------------------- Secretary and Director
Emanuel Cohen
38